It’s been a constant theme for 2021, in the wake of the rapid growth of NFTs. What’s the issue about “semi-fungible” tokens, and how do they function?
The excitement surrounding NFTs, also known as non-fungible tokens (NFTs) reached astounding levels in the first quarter of the year. The data from Non-Fungible revealed that NFT sales jumped to more than $2.4 billion during the first quarter of the year, which is 20 times more than in the prior three months. The momentum has shown no sign of slowing down in the second quarter and into the second quarter of 2019, with the top blockchain-based NFT marketplace OpenSea which saw a record-breaking trading volume that was $49 million in August. 1 – up from its daily average transaction volume of $8.3 million. The average price of CryptoPunks – one of the very first sets of NFTs to debut on the Ethereum blockchain – broke records during the same period of 66.919 Ethereum in NFT (about $220,000 as of press time).
The rapid growth of the market has triggered an era of new innovation regarding non-fungible assets. This includes the rise of a brand new kind of “semi-fungible” token (SFT) which is being fungible but eventually turns into non-fungible. The yuan pay group is quite adept in such assets. Let’s look at the terms.
The majority of the crypto assets that investors track and trade regularly are easily fungible, i.e. they are interchangeable. For instance, if two people swapped one the ether for another it would not result in a loss in value, and neither is in better shape over the other. It is because there isn’t a price difference between any two others, or any other bitcoins in general (excluding ” tainted coins” – – coins that were previously stolen or used in illegal activities).
Fiat currency such as U.S dollars can also be finite. Also, it is the capacity of a currency (or the currency) that can be traded or substituted with other tokens of the same kind which results in no change in value.
NFTs are cryptographic tokens that are used to signify the digital possession of something special and rare, such as artwork, collectibles and in-game times, music, or real estate. Because each item is unique and has unique value due to particular characteristics, like the person who created the item or how rare it is, this means NFTs can’t be exchanged as ether or U.S dollars.
For instance, a digital baseball card cannot be exchanged for an area of virtual land. Both are distinct resources. In addition that the baseball card that is digital could be part of a scarce collection, while the virtual land may be in a shady area.
Since the NFTs can be stored in a Blockchain, it means that each token is characterized by the following:
- Indivisible It’s impossible to buy fractions of NFTs.
- Indestructible It cannot be removed or destroyed
- immutably impossible in changing the content once it’s saved
- VerifiableBecause the NFTs’ data is stored on blockchains that are public their authenticity and ownership can easily be verified at any time by anyone.
How do you define semi-fungible or non-fungible tokens?
SFTs are an incredibly new type of token that can be both fungible as well as non-fungible in their lifetime. At first, they function as normal fungible tokens, in that they can be traded similar to similar SFTs.
A token, for instance, which is valid for a $10 Amazon voucher could be the same in a similar voucher with an expiration date of the same, and could therefore be interchangeable.
The distinctive feature that makes these particular kinds of coins “semi-fungible” can be found in the fact that, once they’ve been used up the tokens that are fungible have lost their value. This loss of exchange value renders the tokens in use non-fungible.
Another way to think about the concept is by acquiring the token of an actual concert ticket for The Beatles their final performance. The ticket would be worth the value of a face and be exchanged for a similar concert ticket if it was from the exact same band on the same day and in the same venue.
After the show was over and the ticket was redeemed, the token that represented the ticket would become a collectible item and acquire a completely new value. Also, the token would no longer be exchanged for a concert ticket with the same face value in order to attend an alternative artist.
The process of changing from the fungible into a non-fungible token at redemption is how semi-fungible tokens are named.
How do you create semi-fungible tokens?
It is now possible to create SFTs with the Ethereum ERC-1155 standard. This is among the Ethereum standard for tokens blueprints that allow for the creation of tokens using Ethereum’s Ethereum blockchain that work with all ERC-based projects.
It was formulated by the blockchain gaming developers Enjin, Horizon Games, and The Sandbox in the year 2017 and is essentially a mix with ERC-20 (fungible token) and ERC-20 (fungible token) and ERC-721 (non-fungible token) standards. This allows you to manage and create non-fungible and fungible tokens with the same smart contract – an application that executes itself when certain circumstances arise.
SFTs are especially useful in the gaming sector where there are fungible items like in-game currency, such as V-Bucks or gold bars, as well as non-fungible things like weapons and collectibles. Gaming companies are able to make both kinds of tokens and make sure they’re compatible so that players can trade items such as weapons with gold bars and vice versa.