🔍 SFTs: The Latest Crypto Buzzword
There's a new crypto buzzword in town and as usual we're here to break it down for you.
Damn! It’s 2022 already.
While you and I may be stuck in 2020, the world around us is moving on fast. And it's not just popping out new Covid variants, it is also introducing fancier tech buzzwords every other day.
Yes, just when we thought we were on top of things after understanding what NFTs, metaverse, the DAO and Web3 were, a new word entered the never-ending crypto vocabulary: SFTs.
And as always, we're here to share what we learned about this new crypto concept.
So… What Are SFTs?
2021 was truly the year of the NFTs or non-fungible tokens (unique pieces of peculiar stuff that are stored on a blockchain). People created NFTs of anything and everything. Heck, you could even own a movie through NFTs.
This NFT mania pushed NFT sales to a record $23 billion during the year. Crazy, right? But it was this craze that led to further innovation and paved the way for SFTs.
SFTs are semi-fungible tokens. Now before we go there, let us first understand the fundamental difference between fungible and non-fungible.
These terms existed long before NFTs even came into existence. Fungible basically means something that is easily replaceable by another identical object.
Imagine if you sneaked into your sibling's room and borrowed their favourite jeans for an outing. Unfortunately, you dropped ice cream on the jeans and ruined it. Now, what you can do is look up the brand and the size and order a similar pair of jeans. So, this pair of jeans was fungible.
But what if it was a limited-edition pair of jeans that is no longer available? Then, my friend, you're screwed because the pair of jeans is non-fungible. In a metaverse, the jeans would have been an NFT.
Okay, ReadOn. We got what fungible and non-fungible mean. But what is "semi-fungible"?
Simple, a semi-fungible token starts out as a fungible token and then becomes a non-fungible token when it is used or redeemed.
For instance, if you've bought a piece of clothing from Myntra or Amazon, you can return this piece of clothing for money or replace it with another identical piece of clothing. So it is fungible. But once you've removed the tags and worn it, it becomes non-fungible.
SFTs Use Cases
Now before we go further. Just take a moment, close your eyes and think how SFTs can be put to use.
Done?
Right now, these tokens are mainly used in game-based metaverses. These metaverses usually have two classes of tokens: a game-based currency for transactions and other collectible items that can be traded. And SFTs make exchanging these two tokens a bit easier. It works as a go-between the two.
But why not just use NFTs? What's so great about SFTs?
Well, first of all, you cannot exchange an NFT to get another NFT. Because no two NFTs are equal in value. So, you need a medium of exchange. This is where SFTs come in.
Plus, when you sell or exchange an NFT, you have to pay a huge transaction fee, which can amount to hundreds of dollars based on the transaction speed. But SFTs are created in a way that they can fit in a bundle of items. So, transferring SFTs is much cheaper. For the cost of one transaction, you can transfer multiple items. Transactions also take place much faster. And in a world where players are constantly exchanging goods and services, SFTs could be of great value.
The move will also make the work of app and game developers much easier. If more people adopt SFTs, they can make a single smart contract (a program stored on a blockchain that is executed when preset conditions are met) for a token that is fungible and non-fungible, instead of separate contracts.
And if you're thinking, “well I don't play metaverse games so why should I care about these”, think again.
Like it or not, the metaverse is coming to you in one way or the other. Not just because it is the future or because Covid has made having a virtual presence very important. But because this is a chance for companies to reinvent themselves.
You see, in the real world, the battle lines between these companies are more or less permanently drawn. If you are loyal to Adidas, you will stick to it no matter what. Nike cannot change that. But Nike can enter the metaverse, expand and become your in-game choice of shoe.
And when we're in the metaverse, we will all be buying, selling, and trading virtual assets. So, these SFTs will be of immense use to us all.
Not just that, we earlier talked about how NFTs can transform the gaming industry (you can read that article here). Well, SFTs can serve the ticketing industry better. Initially, the tickets can be SFTs, easily traded, exchanged, or returned for money. But once they've been redeemed, they turn into NFT memorabilia for you to store.
We're sure tech geniuses will come up with even more iconic and amazing uses for SFTs in the future. Let us know your thoughts about how these new crypto assets can be used!
P.S. In case you didn’t understand any of these complex words and concepts, here is our entire crypto repository to help you out.
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