What are Semi Fungible Tokens?
SFTs are a unique type of token that can be both fungible and non-fungible during the course of their lifetime. SFTs work like normal fungible tokens at first, in that they can be traded like-for-like with other SFTs.
For example, a token representing a valid $30 Amazon coupon would be interchangeable with another token representing the same voucher with the same expiration date.
The feature that distinguishes these unique forms of tokens as “semi-fungible” is that they lose their face value once they’ve been redeemed. The non-fungibility of the expiring tokens is due to their loss of exchangeable price.
Working of Semi- Fungible Tokens
Semi-fungible tokens are initially fungible and can be swapped with other identical SFTs early in their life cycle. These SFTs become non-fungible when the possessor redeems them.
For Example: Assume you have a ticket to a performance by your favorite band. If the seating is in the same area, you can swap the concert ticket for another ticket for the same show before the concert. The concert ticket is currently a fungible asset. The ticket has no traditional monetary worth after you’ve seen the concert. Instead, it becomes a collectible or memento of a different value than when it was purchased.
The best thing about SFTs is that they have both fungible and non-fungible attributes. It becomes indivisible, traceable, and indestructible when it becomes an NFT. It is also highly liquid and may be easily traded with anyone when it is fungible.
As an in-game example, you would see a token that starts out as an NFT and can be reaped to obtain 10 fungible currency dollars. The user can then sell that currency to others or use it to purchase a flintlock musket, which will turn it back into an NFT. When the player reaches level 45, the musket may be modified to an assault rifle. These adjustments are dictated by the SFT’s inbuilt smart contract, which was established by the developer, rather than external instructions.
How to Develop a Semi-Fungible Token?
The ERC-1155 multi-token standard was introduced by blockchain gaming and metaverse companies The Sandbox, Horizon Games, and Enjin in 2018. The ERC-1155 token standard was created by integrating and extending the features of the ERC-20 and ERC-721 token standards. Smart contracts based on ERC-1155 can be used to operate as an ERC-20 fungible token, an ERC-721 non-fungible token, or both together.
SFTs can now be created using Ethereum’s ERC-1155 standard. Aside from the semi-fungibility, adopting this standard gives the tokens some special functions.
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