Blockchain technology has opened doors to so many new ideas that it is difficult to keep track of how they can benefit society. In the ever-developing space of blockchain technology, the latest improvement is a Semi-Fungible Token (SFT). Coming in as a development on the foundation of Non-Fungible Tokens, SFTs allow swapping like a fungible token but once it’s redeemed or traded it turns non-fungible. Since the NFT ecosystem is on a steady rise these innovations around the space are an interesting step into the future.
What is Semi-Fungible Token and how is it different from a Non-Fungible Token?
Semi-fungibility is a classification of assets where what determines the value is based on its history and uniqueness as opposed to other types of assets where its value is determined by market forces. On the other hand, Non-fungible tokens (NFTs) are tokens that have unique properties.
The main difference between an SFT and NFT is that once a token has been traded away, it becomes non-fungible. So if someone were to trade or purchase a token from the original owner, they will have something with no value since all tokens are indistinguishable from each other in terms of monetary value. On the other hand, NFTs remain fungible even after the first trade occurs.
What are the benefits of an SFT?
There are many obvious benefits to a Semi-Fungible Token that is built on top of the Ethereum blockchain. The tokens retain their history which adds immense value to them and it can be used outside of their initial use case.
There are many possibilities for benefits that SFT can offer to the market:
1. The token remains a fungible asset even after it has been traded/traded away from its initial owner. This means it retains value and can be transferred across exchanges. This gives more liquidity to these tokens which are currently being built on the Ethereum blockchain.
2. This token can easily be used in a variety of ways by people because it is like a single-use ticket that will become non-fungible after one use. It can be used to verify the identity, age, physical attributes of a person, etc.
3. A good example for SFT over NFT would be in the game industry, where these tokens can be used to represent weapons or items in a game. Once traded from one player to another it can retain its fungibility but at the same time add history by recording that this weapon has been used 50 times and has killed 20 people.
4. According to BlockchainHub, “It is possible for an SFT to be a representation of an entire NFT, or any subset thereof. This would enable the trading of partial items in games, as well as allowing specific attributes to be assigned to tokens instead of requiring that they come from a fixed collection”.
5. The fact that these tokens are ERC-721 compliant gives them a competitive advantage as they can be traded/traded, unlike other tokens.
6. Being built on top of the Ethereum blockchain, these tokens will be able to benefit from the current infrastructure available and developers who are looking to build different use cases for these SFTs.
What is the future of Semi-Fungible Tokens?
In such times when everything is digital and multiple tokens are needed for different purposes, SFTs might be good to have. They can be used in applications where other types of fungible tokens won’t work. The fact that these single-use items once redeemed or traded away from the initial owner can’t be traded again provides a lot of value to these assets.
Depending on the use cases, these tokens can be used for a variety of purposes by different organizations and business models. Since they are built on top of Ethereum blockchain, many enterprises would find it easier to build solutions around them considering the current infrastructure available in the blockchain development world.
