Token is continuous innovation concerning various technologies for crypto-currencies that expands the possibilities for digital assets. Semi-fungible crypto currency token is one of the recent developments in this area. This term incorporates many properties in the fungibility spectrum. The term functions include characteristic traits of assets that are fungible. These assets are equal; hence, one cannot easily be interchangeable. However, we introduce microscale to partially fungible tokens for uniqueness and exchangeability.
Semi-fungible tokens are hybrids having a mixture of fungible and non-fungible tokens. The alternative approach presents a prospective way of tokenizing the semi-fungible tokens (SFTs) midway between the non-fungible tokens (NFT) and cryptographic currency-like interchangeable goods. They can also be used in the Duniya assets, adding a piece to the changing landscape of decentralized finance. They offer small adaptability fixes to the needs of the emerging crypto sphere.
Crypto Fungible tokens
A fungible token is a category of digital and cryptographically indistinguishable assets whose units are equally substitutable for another. Therefore, in other words, every fungible token is the same and may be traded equally. NFT is different because similar ones can replace no two tokens equally.
To newbies who might be questioning themselves if NFTs are a safe investment here is a guide for you
For example, crypto currency tokens such as Bitcoins and Ethereum could be classified under fungible tokens. Every token of this type of crypto currency shares the same nature as every other unique token. Hence, any exchange of one for another will have no difference. The ease of substitution renders fungible tokens compatible as a payment or savings instrument.
Fungible tokens are created via protocols like ERC-20. For instance, smart contract platforms like Ethereum make this possible. ERC-20 tokens are identical and work according to certain rules, which makes these coins interchangeable between different decentralized applications and platforms.
Non-fungible tokens
NFTs are an advanced form of non-fungible crypto currencies, which is one of them, for instance Ethereum crypto currency. Unlike fungible tokens such as cryptocurrencies, each NFT has its unique character and may be supplemented by metadata, making them non-fungible or individual items.
Digital art, collectibles, virtual real estate, and other exclusive resources are usually marked by NFTs.
Blockchain, often via platforms like Ethereum, offers a shared and immutable database across multiple participants, thus creating accountability. Given that there is a limited number of NFTs that can never be divided, coupled with the fact that ownership and provenance are recorded on the blockchain, make them unique for creators and collectors.
What is a Semi-Fungible Token?
Semi-fungible tokens are hybrids having a mixture of fungible and non-fungible tokens
. SFTs, unlike the other fungible tokens, are characterized by different features; thus, they can be interchangeable in a larger scope. Such a hybrid form offers flexibility, allowing SFTs to be applied to applications that require at least some sense of uniqueness yet need some degree of interchangeability plus valuation standardization at the same time.
The semi-fungible token model utilizes blockchain technology, mostly through smart contracts, to track property ownership and transparent transactions, thus taking the middle ground between entirely interchangeable tokens and unique, non-fungible items.
How to Create Semi-fungible Tokens
Generally, SFTs are mostly developed using blockchain networks, especially those with smart contract platforms like Ethereum. Here’s a general overview of the process:
Select a Blockchain Platform
Select a blockchain platform capable of building semi-fungible tokens. Crypto like Ethereum is a common option because it was created with an existing ecosystem, supports smart contracts, and has standards such as ERC-1155, which help people build NFTs and other fungible tokens.
Understand ERC-1155 Standard
The latter is often based on the ERC-1155 standard regarding semi-fungible tokens. This contract enables the generation of fungi, semi-fungi, and non-fungible tokens at the same time. Employ semifungibility to enable the definition of the structure and functions that ERC-1155 specifies.
Write Smart Contracts
Create smart contracts that describe the action of your semi-fungible tokens. This refers to listing the characteristics that differentiate individual tokens from one another while retaining some of the elements’ interchangeable nature. Include metadata that captures the specifics of every token.
Use a Development Framework
Some tools make it easy to write smart contracts in an accessible way through development frameworks or libraries. Provide a safe approach for smart contracts by avoiding known weaknesses using platforms such as OpenZeppelin that offer reusable and secure components.
Deploy Smart Contracts
Next, place your smart contracts on the selected blockchain. This includes working with a blockchain system, often conducted using instruments like Remix, Truffle, or Hardhat. Test thoroughly in a sandbox before mainnet deployment.
Interested in learning smart contract wallets? here is a guide for you
Interact with the Tokens
Upon deployment, users can use semi-fungible tokens via DApps or interfaces. They can create new tokens, transfer ownership, or undertake other defined operations provided for by the smart contract.
Consider User Interfaces
Develop user interfaces or integrate them to enable ease in creating and managing semi-fungible tokens. In this context, support for the ERC-1155 standard will be useful for wallets and marketplaces to increase their convenience.
Market and Community Engagement
Advertise your semi-fungible tokens among the blockchain community and look for partnerships with platforms to insert and display them. Build a community around your token ecosystem by engaging with potential users and developers.
Semi-fungible Tokens: Use Cases
SFT is an umbrella concept including the features of both standard and NFTs. Their unique characteristics make them suitable for various use cases:
Gaming Assets
SFTs are optimal when you want to represent different types of assets in a game. A token may identify only one distinct item or character, yet the same attribute might sometimes be replaceable. These semi-fungible assets in the gaming ecosystem allow gamers to trade, sell, or upgrade them amongst each other.
Real Estate Fractionalization
SFT allows investors to purchase and own a portion of real estate. In this case, every token can be a fraction of a commodity, allowing you to sell your part or divide it among several investors. It helps make it easier to participate in real estate markets.
Digital Collectibles
SFTs are suitable for rare digital assets with a certain commonality level. They also allow artists and creators to sell limited edition digital art pieces or collectibles with unique properties so that the original works of art do not lose their fungibility but create scarcity simultaneously.
Learn more about exciting NFT use cases beyond art collectibles from this ultimate guide
Supply Chain Management
In supply chain applications, SFTs identify and track unique batches or products with particular characteristics. This also makes it possible to trace the origin of quality and authentic characteristics common throughout a supply chain.
Tokenized Securities
The securities can also involve assets like shares (stocks) and bonds in which every token will represent ownership of a share of the asset. They improve liquidity, simplify trading, and increase access to conventional financing tools.
Event Tickets
In event tickets, it is possible to use semi-fungibles, which combine uniqueness and fungibility. Each token is a unique ticket with information that cannot be repeated, allowing for safe and honest ticketing.
Membership and Loyalty Programs
For instance, companies can mint semi-fungible tokens for use in their membership and loyalty program, where each such token represents a specific category or rung within such membership. This kind of token is tradable but has standard value, and users can cash it in for specific benefits or rewards.
Content Licensing
SFTs can be used as digital content licenses in the media and entertainment industry. Therefore, creators use semi-fungible tokens to authorize access to only one license per unit, with common rights being generalized and standardized.
How Are Sfts Different From Fungible and Non-fungible Tokens?
Certain features distinguish SFTs from both NFTs and fungible tokens. It is important to understand these differences to appreciate the characteristics that make SFTs what they are.
Fungible Tokens
Interchangeability: Fungible tokens can be substituted one for one with other fungible tokens.
Equal Value: Each token from every unit bears equal value with other units.
Divisibility: Fungeable tokens can be subdivided into smaller portions, facilitating the exchange of fractions.
Non-Fungible Tokens (NFTs)
Uniqueness: NFTs tokenize distinct and indistinguishable assets like digital artwork, collectibles, or real items.
Ownership and Provenance: As a result, NFT uses blockchains to certify the ownership and origin of each token to ensure its uniqueness and authenticity.
Immutability: The blockchain stores NFT ownership and attributes in a non-revisable way.
Semi-Fungible Tokens (SFTs)
Partial Interchangeability: On the other hand, SFT offers a middle ground by making some aspects variable while maintaining the uniqueness of others.
Varying Characteristics: The tokens of the SFT category can each carry features or metadata for differentiating them from various assets.
Advantages of Semi-Fungible Tokens (SFTs)
Flexibility
SFTs are a flexible framework that can be customized to have different levels of distinctiveness while retaining the utility of fungible and non-fungible tokens.
Interchangeability
SFTs are unique but also interchangeable, giving them a place in the application that allows some things to be standard and others to be different.
Cost-Efficiency
These tokens are semi-fungible, which leads to reduced prices due to cost-saving factors and development complexity, since some attributes could be standardized and reused, thereby saving on cost.
Liquidity
SFTs can play an important role in enhancing the market’s liquidity, especially in the ones that are part interchangeable, which will benefit a lot. For instance, in such applications as real estate fractionalization or tokenized securities, assets become more divisible and accessible.
Diverse Use Cases
The flexibility of SFTs makes it possible to use in many areas — gaming assets, digital collectibles, real estate, and more according to different branches of industry and users’ requirements.
Disadvantages of Semi-Fungible Tokens (SFTs)
Complexity
Running semi–fungible tokens is complicated compared to dealing with pure-fungible tokens or just plain non-fungible tokens. Each token has unique features that developers must design and handle carefully.
Potential Confusion
Semi-fungibility is not easy for users to grasp, resulting in possible confusion over exchangeable and non-exchangeable properties.
Security Concerns
Therefore, security issues are considered when dealing with different levels of uniqueness in tokens. It is necessary to ensure that the integrity of standards and unique features are not exploited for vulnerability.
Standardization Challenges
However, a common effort of standardizing some features across semifungible tokens will likely become a problem, especially regarding various attributes or metadata. It can be challenging to maintain a balance between uniformity and distinctiveness.
Market Acceptance
The SFTs are relatively new concepts that might experience slower market adoption than fungible and non-fungible tokens. Educating users and businesses on these services, their benefits, and applications is fundamental for acceptance among users and businesses.
Future implications of SFTs
Complexity
Running semi–fungible tokens is complicated compared to dealing with pure-fungible tokens or just plain non-fungible tokens. Each token has unique features that developers must design and handle carefully.
Potential Confusion
Semi-fungibility is not easy for users to grasp, resulting in possible confusion over exchangeable and non-exchangeable properties.
Security Concerns
Therefore, security issues are considered when dealing with different levels of uniqueness in tokens. It is necessary to ensure that the integrity of standards and unique features are not exploited for vulnerability.
Standardization Challenges
However, a common effort of standardizing some features across semifungible tokens will likely become a problem, especially regarding various attributes or metadata. It can be challenging to maintain a balance between uniformity and distinctiveness.
Market Acceptance
The SFTs are relatively new concepts that might experience slower market adoption than fungible and non-fungible tokens. Educating users and businesses on these services, their benefits, and their applications is fundamental for acceptance among users and businesses.
Conclusion
Unlike other tokens, semi-fungible tokens have half-fungible and half-fungible features, which can be highly useful in different environments. The capability to merge interchangeability with individuality provides opportunities for progressive virtual environments, fragmented possession plans, and advanced fiscal tools. Despite these hurdles, there is no doubt that the SFTs can transform industries and be key players in blockchain evolution towards decentralization and token-based economy in the long term.
