As the name implies, semi-fungible tokens (SBFTs) are a combination of fungible tokens and non-fungible tokens. They constitute a distinct class of tokens that display traits common to both fungible and non-fungible tokens. Meaning they can act as both fungible tokens and NFTs.

To fully comprehend semi-fungible tokens, it is important first to understand fungible and non-fungible tokens.

FUNGIBLE TOKENS

Fungible simply means interchangeable or readily changeable. Fungible tokens are digital currencies that are interchangeable, meaning every token unit is the same and may be traded one for another. Examples of fungible tokens include traditional cryptocurrencies like Bitcoin, Ethereum, BNB, and Sol. 1 BTC is equal to 1 BTC.

NON-FUNGIBLE TOKENS (NFTs)

Non-fungible tokens are unique and indivisible assets. Each token has distinct properties or attributes that differentiate it from others. NFTs are commonly used to represent digital or physical assets like art, collectibles, or real estate in a blockchain environment. Each NFT is distinct, and ownership is recorded on the blockchain.

Non-fungible tokens are unique digital assets that are indivisible. Meaning that you can’t divide an NFT. Every NFT has its unique qualities or characteristics that set it apart from the others. NFTs represent tangible or digital assets including real estate, art, and collectibles. Every NFT is unique, and the blockchain keeps a permanent record of every NFT ownership detail. Because of the uniqueness, it’s impossible to say 1 NFT is equal to another.

SEMI-FUNGIBLE TOKENS (SFTs)

SFTs are a relatively new kind of token that can be either fungible or non-fungible. At first, SFTs function similarly to standard fungible tokens in that they may be exchanged for other SFTs that are the same but after being utilized (once), they now represent a unique item. Semi-fungible tokens can be redeemed, after which they lose their “face value” and are no longer fungible. They become uninterchangeable (non-fungible).

For instance: Imagine a crypto project asking people to sign up for early access to get a surprise gift. Two weeks later, the individuals who signed up each received 1 XYZ token in their respective wallets. This fungible token represents a ticket to a blockchain event. Holders can use the token to redeem their tickets. After the event, the token becomes a collectible (NFT) with a distinct value.

What to know about semi-fungible tokens (SFTs)

SFTs can be minted over several blockchains like Solana. The token standard for creating SFTs on Ethereum is ERC 1155. This ERC standard was created by Sandbox, Enjin, and Horizon Games by combining the fungible token (ERC-20) and NFT (ERC-721) standards.

Benefits of Semi-Fungible Tokens (SFTs)

Flexibility: among the three, semi-fungible tokens are the most flexible.

Utility: SFTs have found their use cases in a variety of ways. Semi-fungible tokens can be used for exchanging assets, gaming, and other purposes.

Liquidity: Semi-fungible tokens retain their value even after trading with another token of the same worth, provided they have not been redeemed. Therefore, they offer more liquidity to the value of the asset.

Fractionalization: like fungible tokens and unlike NFTs, semi-fungible tokens can fractionalize because you can buy and sell them in fractions.

Semi-fungible tokens have use cases like gaming, ticketing, etc.