Key Points

  • NFTs are digital assets that represent ownership of unique items, with verification and storage of this data on the blockchain.#nft

  • SFT combine the characteristics of fungible and non-fungible tokens. They transform into unique non-fungible assets under certain conditions—such as after their use or activation.#sft

  • NFTs dominate the realm of rarities and collections, while SFT are perfect for fungibility and uniqueness.

  • SFT provide versatility, cost savings, and broad market appeal, easily transitioning between the roles of fungible and non-fungible assets.

Have you ever wondered how non-fungible tokens (NFTs) relate to their latest counterpart—semi-fungible tokens (SFT)? NFTs revolutionized digital ownership by introducing unique, indivisible assets into the blockchain ecosystem.

With the emergence of SFT in this space, a new level of functionality has arisen, blurring the boundaries between fungibility and exclusivity.

Here is a detailed overview that reveals the key differences between NFTs and SFTs, their main properties, and use scenarios.

What are NFTs and SFTs?

NFTs represent unique assets on the blockchain, each with distinct metadata that differentiates it. They are digital assets using blockchain technology to confirm ownership and authenticity.

Unlike cryptocurrencies, which are fungible, NFTs are unique and non-fungible. They represent ownership of specific digital items such as art, music, in-game items, or even virtual real estate.

The revolutionary aspect of NFTs lies in their ability to provide proof of ownership in a digital world where copying is usually easy. For example, Beeple's digital artwork 'Everydays: The First 5000 Days' sold for a staggering $69 million, demonstrating the potential for digital art to compete with traditional masterpieces.

However, NFTs extend beyond art—they are also actively used in gaming, fashion, clothing, and other industries. Their potential lies in providing creators with new revenue streams and allowing buyers to support and own a part of digital culture. For example, owning a specific CryptoPunk or Bored Ape NFT means you have something uniquely valuable.#CryptoPunk

SFT, on the other hand, are tokens that can be both fungible and non-fungible throughout their lifecycle. They start their journey as fungible tokens but become non-fungible after certain conditions are met, such as their use or activation. They are often applied in games or for event tickets, where initial fungibility is required, but tracking individual usage is possible later.

ERC-1155 is the standard for SFT tokens on the Ethereum blockchain. It allows a single smart contract to contain both fungible and non-fungible tokens, providing support for multi-token, batch transactions, enhanced security, and optimization of blockchain efficiency.

ERC-1155 combines the functionality of ERC-20 and ERC-721 standards, allowing the transfer of fungible and non-fungible tokens in a single transaction.

Did you know? The concept of NFTs emerged from Bitcoin-based 'colored coins' in 2012-2013. However, the first NFT called 'Quantum' was created in 2014 on the Namecoin blockchain by Kevin McCoy and Anil Dash. McCoy sold it for $4 during a live presentation at the Seven on Seven conference in New York. The technology at the time was called 'monetized graphics'.#quantum

What are the differences between NFTs and SFTs?

Understanding the differences between NFTs and SFTs is key to realizing their use cases and how they cater to different blockchain applications. While both are digital assets supported by blockchain, their fungibility, applications, and market behavior distinguish them from one another.

Fungibility

  • NFTs are inherently non-fungible; each token is unique.

  • SFT have a hybrid nature; they start as fungible but can be converted into non-fungible assets under certain conditions.

Applications

  • NFTs dominate in areas such as art, music, and digital collectibles.

  • SFT shine in gaming, ticketing systems, and scenarios that require a combination of fungibility and uniqueness, such as in-game currencies or items that become unique upon acquisition.

Market Behavior

  • The value of NFTs is usually subjective, depending on the rarity or desirability of individual tokens.

  • The value of SFT relies on their initial fungibility, making them more liquid at an early stage.

Imagine a concert ticketing system. General admission tickets might start as fungible tokens (SFT), but, for example, after an upgrade to VIP status, they can become unique non-fungible passes with perks such as backstage access, blurring the lines between the utility of NFTs and SFTs.

This adaptability of SFT makes them an appealing innovation in blockchain technology that complements the uniqueness of NFTs.

Did you know? In blockchain games like Splinterlands and Gods Unchained, base cards can be issued as SFT, but after an upgrade, they transform into unique NFTs, reducing costs and complexity.

Advantages of SFT over NFT

Let's consider what advantages SFT offer compared to NFTs:

Universality

SFT adapt to roles as both fungible and non-fungible assets, making them more flexible for multi-phase applications. At one moment they are fungible, like in-game currency. The next moment they become rare and personalized, like weapons tailored to your play style. This versatility gives them an advantage.

Imagine you are playing your favorite game. That pile of gold coins you earned? Completely interchangeable with another player's coins. But once you upgrade it to a legendary sword—it becomes yours and yours alone. This is the magic of SFT.

This ability to switch seamlessly between roles also gives developers more creative freedom in building dynamic ecosystems. In contrast, NFTs retain their non-fungibility from the moment they are created, limiting their adaptability in multi-phase projects.

Economic Benefit

Starting as fungible tokens, SFT simplify the process of initial distribution, often reducing associated costs.

This can significantly reduce costs for creation and transactions compared to NFTs, which require individual creation and verification of each token. For instance, in a ticketing system, a batch of SFT can be created and distributed as standard tickets, lowering costs, and then selectively converted into premium NFTs for VIP access. This makes SFT particularly appealing for large-scale projects.

Broad Market Appeal

The dual functionality of SFT attracts a wider range of users—from gamers to event organizers.

For example, on an e-commerce blockchain platform, SFT can be issued as standard coupons or loyalty points (fungibility phase), easily transferable among users. After their use, these points can transform into unique tokens representing personalized rewards, such as exclusive discounts or special offers. This dynamic functionality allows SFT to enhance user engagement and improve their experience.

The hybrid nature of SFT provides their function as a 'universal' token for many ecosystems, lowering barriers to entry and expanding use cases. By combining the advantages of fungible tokens (ease of distribution) and non-fungible tokens (uniqueness), SFT offer an effective solution for real-world applications requiring adaptability, efficiency, and scalability.

Future Prospects of NFTs and SFTs

As blockchain technology evolves, the lines between NFTs and SFTs continue to blur. Both types of tokens will play a crucial role in advancing tokenization: NFTs concern exclusivity, while SFT enhance scalability and accessibility.

Whether you are an artist, gamer, or blockchain enthusiast, understanding these differences will help you navigate this dynamic environment and seize new opportunities. The question is not just what to choose: NFT or SFT—but how these technologies can coexist and complement each other in a decentralized world.