An Introduction to Semi-Fungible Token (SFTs)

The gradual increase and rise of cryptocurrency in the digital market performed well in the latest years and makes blockchain technology the most used term for trading purposes.

Among all other digital assets, you are well familiar with the fungible tokens and non-fungible tokens(NFTs). There then is an innovation now known as the Semi-Fungible Tokens(SFTs). Since the evolution of NFT ecosystem, SFTs are also around the space and seem an interesting step towards the crypto future.

Let’s start with the discussion including all of these, one by one in this paper so that you guys can easily understand the SFT concept when lined with fungible and non-fungible tokens.

What are Fungible Tokens?

Fungible means any commodity that is easily interchangeable with another, or of the same kind and nature. So the fungible tokens are interchanged and swapped with other tokens of the same kind without any loss or change in the value of any token.

The major crypto assets and cryptocurrencies like Bitcoin are traded regularly as fungible tokens. Fiat money like U.S dollars is also an example of fungible assets that result in no loss of value when exchanged or replaced with the other.

To illustrate with an example, you can say that if there are ten identical packets of sugar, with no difference in taste, color, or size, they are all fungible. Likewise, if two people make an exchange of dogecoin with one another there won’t be any loss in its value.

What are Non-Fungible Tokens?

Non-fungible tokens represent your digital ownership of any unique artwork or rare collectible that is one and only of its type.

Due to this distinct feature, it makes it, the non-exchangeable asset and non-fungible token. These tokens can’t be exchanged for any other token or asset. Their trade also results in a loss of value so can’t be traded. Ownership of an NFT remains with one person only, unless it is sold to someone. The authenticity and ownership of NFTs are easily verified by anyone at any time as these are stored on public blockchains.

What are Semi-Fungible Tokens?

Semi-fungible tokens(SFTs) is another group of tokens that act as both fungible and non-fungible tokens e.g if you have bought a token that represents the $20 fashion show voucher, it would have the same value as another identical voucher with all the same details of date, time, venue, and expiration date, therefore, both of them can be exchanged with one another.

The main feature that makes it distinguished is its nature of turning into non-fungible ones once it is redeemed as it would lose its face value. When they are launched or used for one time they are no more fungible, rather turn into non-fungible.

Creating the Semi-Fungible Tokens:

The SFTs can be minted using Ethereum’s ERC-1155 which is the combination of ERC-20 (fungible token) and ERC-721 (non-fungible) standards.

In this way, it becomes easy to create and manage both fungible and non-fungible tokens by using a single contract executed by a computer program.

Closing Thoughts:

To cut the story short, SFTs are really useful in the gaming industry where there are both elements, the fungible as in-game currency like gold bars or V-Bucks and the non-fungible items like collectibles and weapons.

We hope you understand the concept well and make it applicable where you feel comfortable.

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