What Are Semi-Fungible Tokens (SFTs)?

The NFT bubble may be over, but have you heard about semi-fungible tokens (SFTs)?

Your first thoughts could be skeptical. So many investor traps started with “this time it’s different,” only to end the same way. But what if we told you SFTs have been around for over five years, and that they could solve some of the biggest problems with NFTs?

Lack of liquidity, irreversible transactions, overpriced gas fees?

What’s certain is the media eclipsed SFTs with NFTs, and it’s not until 2023 that they started to catch up. NFTs aren’t “dead,” but their trading volume is far from early 2022’s.

Will semi-fungible tokens be able to revive interest in digital assets and add to their utility? Or will they follow the same trend?

What Are Semi-Fungible Tokens?

Semi-fungible tokens (SFTs) are digital assets that sit between fully fungible tokens (FTs) and non-fungible tokens (NFTs). Built on the ERC-1155 multi-token standard, SFTs are fungible within a defined class (called a token ID) but distinguishable across different classes. Think of it this way: 500 General Admission tickets sharing one token ID are all interchangeable with each other, but none of them can be swapped for a VIP ticket under a different token ID. The ERC-1155 standard was proposed by Enjin in 2018 and formally published in 2019, allowing a single smart contract to manage multiple token types simultaneously, reducing gas costs and simplifying asset management.

Semi-fungible tokens add utility to NFTs while solving common problems such as: 

• Liquidity: There are no NFT exchanges, only peer-to-peer marketplaces (P2P). There’s no guarantee you’ll ever be able to sell or buy one.
• Cost-efficiency: NFT marketplaces have improved this with “lazy minting,” meaning that your assets don’t exist on-chain until after the first buyer. With SFTs, the cost isn’t a big barrier, because you can create infinite SFTs within the same transaction and pay gas once.
• Indivisibility: It’s too complex to implement fractional NFT ownership. But SFTs start as fungible and don’t have this problem.

In many implementations, a token’s state change, such as a ticket becoming a used stub or a loot box becoming a specific item, is designed as a one-way event. However, the ERC-1155 standard itself does not impose this restriction. Developers define the redemption and state logic in the smart contract, meaning some designs allow tokens to cycle between states or be burned and reissued as a different token ID depending on the use case.

FT vs SFT vs NFT: Which Token Type Do You Need?

👉 Quick takeaway: FTs are interchangeable like cash, NFTs are unique like a signed original, and SFTs sit in between — identical within a class but potentially unique once used or redeemed.

Key difference: ERC-1155 lets one smart contract manage multiple token IDs. Each ID has its own supply and per-address balance. Tokens within an ID are interchangeable; tokens across different IDs are not. ERC-20 and ERC-721 each require a separate contract per token type, which multiplies deployment and gas costs.

How ERC-1155 Works: A Concrete Example

Here is what a real ERC-1155 contract looks like in plain terms:

👉 Quick takeaway: Each Token ID represents a distinct ticket class with its own supply. Tokens within the same ID are interchangeable, but a General Admission ticket cannot be swapped for a VIP ticket.

Interchangeability rules:

• Any 3 units of ID 1 are interchangeable with any other 3 units of ID 1. Alice can send Bob her 3 GA tickets and receive 3 of his in return; they are identical.
• One unit of ID 1 cannot be swapped for one unit of ID 2. A General Admission ticket is not equivalent to a VIP ticket.
• All three IDs live inside one smart contract, so you deploy once and pay gas once instead of deploying three separate ERC-721 contracts.

Batch transfer advantage: ERC-1155 supports transferBatch and balanceOfBatch operations. If you need to send 50 GA tickets and 10 VIP tickets in one transaction, you do it in a single call instead of 60 separate transactions, cutting gas costs significantly.

Properties of Semi-Fungible Tokens with Examples

The three following examples describe three main properties of semi-fungible tokens and how they work for different use cases.

Property 1: SFTs Are Fungible Within Their Class (and Why That Creates Liquidity)

Semi-fungible tokens start all as identical NFTs and become unique after their redemption. 

Imagine a band is hosting a concert for 5,000 people with $100 per person. There’s the option to buy tickets as NFTs up to 10 per person. One perk for this might be a pre-sale of three days before the actual tickets are buyable.

Some people will claim spots with NFTs and others with conventional payment methods. Either way, the owner can burn ticket NFTs to ensure there are never more than 5,000 available. If 1,000 people buy physical ones and 500 buy NFTs, there shouldn’t be 4,500 NFTs left but 3,500 (delete or deactivate 1,000 listings).

Suppose hundreds of people bought, and you too have 10 tickets. But some people won’t come, and now you only need 6. You can return four NFTs to the owner for a refund until the concert day. You could also sell them at a premium if all official tickets sell out.

You can then present those tickets to access the concert. You will still keep the tickets, but they’re no longer valid once the event ends. However, the band could use them as a receipt for future loyalty programs.

E.g, Whoever owns ticket no.1, 100, or 1000 gets a discount for the next concert

E.g, If you present NFT tickets of previous concerts, you get priority for closer seats to the stage. As verification, only the first ticket owner will benefit

E.g, After the concert, ticket NFTs might change the ticket image to a picture taken in the concert.

Tickets are no longer interchangeable. But they can be sold at NFTs at custom prices, either for their utility or value as memories.

Property 2: SFTs Support Divisibility and Trait Separation

Owners of semi-fungible tokens can trade each of their traits independently.

The most visual example is the gaming use case. Metaverse games might have thousands of random items for players, each with different traits and rarities. Rare traits have less chance of generating on NFTs, and one alone can make a common item valuable.

From the first loot box example, let’s say you pulled a simple metal sword.

But this sword has a blue-flame effect, which makes it more valuable and rare than, say, a golden sword without unique items. Maybe it grants a special ability, or it just looks cool. The question is, will players buy it?

Since cosmetics don’t usually affect stats, no one may want metal swords, which is unfortunate.

But let’s say the game supports semi-fungible tokens and NFT divisibility. You could decompose your sword and sell its parts separately.

So you can put your blue-flame cosmetic for sale and probably attract more buyers, as they can equip it for any gear. For the average player, it might be worthless. But imagine someone has a full set of armor and weapons of blue diamond (whatever the rarest material is), but they don’t have rare cosmetics.

The blue-flame effect would help the collector complete the set and exponentially increase its value. So they’re willing to pay far more, and you offset the loot box cost with huge profits. Win-win.

In the reverse case, you might have got the rarest sword in the game but with mediocre traits. You could look for players with bad swords (or any gear) that got ultra-rare traits and buy them for your sword.

Property 3: SFTs Enable Shared Ownership via Fractionalization

SFT creators can lock NFTs in a smart contract wallet and share ownership via fungible NFT “shares.”

Suppose you’re an investor looking to buy a domain NFT, crypto.eth. It costs $1,000,000 worth of ETH, but you’re only willing to spend $50,000. There are also two other interested buyers willing to put in $100,000 each. Even if you three combine $250,000, the owner is still down $750,000. 

The creator can decline, but there’s a chance the $1M buyer never shows up. He could also accept, but since there’s an unpaid 75%, the owner might choose to keep the NFT and give buyers nothing. Also, why should buyers and owners trust that they won’t scam each other?

Let’s say there’s a platform similar to liquidity pools for NFTs. The creator locks the NFT in a smart contract wallet (that no one can access), and the protocol keeps track of exactly how much each person owns. Your $50,000 stands for 5% ownership, the other two investors for 10% each, and the creator for 75%.

Once locked, the creator could fractionalize this domain into $10,000 shares (1% each). As long as the NFT is locked, all shares are fungible. As for when to transfer ownership, it depends on the creators’ choice:

a. Improvise a DAO (decentralized autonomous organization) with multi-signature wallets to manage the domain based on a voting majority.

b. Whoever owns over 50% makes the decisions

If the domain is now worth $2,000,000, your own $100,000. Someone looking to spend $1M (original price) can now only get 50% ownership.

Let’s say a $2M buyer appears. Since that’s 100% ownership, the smart contract could send the NFT to the buyer wall and “liquidate” all fraction owners. That day, you instead find an extra $100,000 worth of ETH in your wallet.

Semi-Fungible Token Use Cases

By now, you may know most SFT use cases:

👉 Quick takeaway: SFTs shine wherever you need multiple identical copies within a class but distinct classes between tiers — cutting gas costs versus ERC-721 while preserving meaningful on-chain differentiation.

How to Choose: SFT vs NFT vs FT Decision Framework

Use this framework to decide which token standard fits your project:

Step 1: Do you need multiple identical copies of the same item?

• Yes, and all copies are always identical (like a currency): Use ERC-20 (FT)
• Yes, but copies belong to distinct categories (like ticket tiers): Use ERC-1155 (SFT)
• No, every item is one-of-one from the start: Use ERC-721 (NFT)

Step 2: Do you need to manage more than one token type in the same project?

• Yes: ERC-1155 is almost always more cost-efficient than deploying separate ERC-20 and ERC-721 contracts
• No: ERC-20 or ERC-721 alone may be simpler

Step 3: Do your tokens need to change state after use (ticket scanned, loot box opened)?

• Yes: Design the state change logic into your ERC-1155 contract; the standard supports this natively
• No: Standard ERC-721 or ERC-20 is sufficient

Step 4: Do you need batch transfers to minimize gas costs?

• Yes: ERC-1155 transferBatch handles multiple token IDs in one transaction
• No: ERC-721 or ERC-20 transfers are straightforward

Quick rule: If your project involves tiers, categories, or editions where many users hold identical tokens within a group but different groups are distinct, ERC-1155 is likely your best choice.

What’s The Future Of Semi-Fungible Tokens?

SFTs are gaining traction precisely because they solve a problem that neither pure FTs nor NFTs handle well: managing large-scale token collections with internal structure. As blockchain adoption expands into gaming, ticketing, loyalty programs, and real-world asset tokenization, the need for class-based fungibility grows alongside it.

Key trends to watch:

• Real-world asset tokenization: Fractional ownership of real estate, commodities, and IP rights fits the SFT model naturally, with each asset class as a separate token ID.
• Gaming economies at scale: As blockchain games grow their player bases, the gas efficiency of ERC-1155 batch operations becomes a competitive advantage over ERC-721-based item systems.
• Multi-chain expansion: The SFT model is not exclusive to Ethereum. Solana and other chains are implementing equivalent standards, broadening the addressable market.
• Loyalty and membership programs: Brands exploring on-chain loyalty tiers (Bronze, Silver, Gold) find SFTs a natural fit for managing fungible-within-tier, distinguishable-across-tier memberships.

SFTs are unlikely to replace NFTs. Their strength is in utility and operational efficiency, not in speculative value storage. That distinction may be exactly what drives sustainable adoption.

Frequently Asked Questions About Semi-Fungible Tokens

What is the difference between an SFT and an NFT?

An NFT (ERC-721) is unique at the individual token level. Every NFT has its own token ID and is not interchangeable with any other token. An SFT (ERC-1155) groups tokens into classes. Within a class, all tokens are identical and interchangeable. Across classes, they are distinct. An NFT is always one-of-one; an SFT can be one-of-many within its group.

Is ERC-1155 the same as an SFT?

ERC-1155 is the most common technical standard used to implement semi-fungible tokens on Ethereum. Not every ERC-1155 token is used as an SFT, but the standard’s multi-token-ID architecture is what makes the SFT model possible.

Are semi-fungible tokens more gas-efficienct than NFTs?

Yes, in most multi-token scenarios. ERC-1155 allows batch minting and batch transfers, meaning you can create or send thousands of tokens across multiple categories in a single transaction. Deploying separate ERC-721 contracts for each token type would require multiple deployments and individual transfer calls.

Can an SFT become an NFT?

In many designs, yes. A common pattern is for tokens to start as fungible units within a class and become unique after a redemption event, such as opening a loot box or using a concert ticket. The state change logic is defined in the smart contract and is not a built-in feature of ERC-1155 itself.