Top SFT App You Should Know About In 2023

Since the SFT Labs launch in October 2022, over three dozen inspired co-founders and developers from all avenues of the Web3 economy have flocked into the SFT community and announced plans or ongoing progress of innovating around arguably the most powerful digital asset type since NFTs: ERC-3525 Semi-Fungibile Token. 

In this article, we’ll introduce top apps using SFTs in 2023, including those already building on various forms of SFTs before the final approval of ERC-3525 SFT. So without further ado, let’s get started.

A Little History of SFT

Before we dive into the top apps using SFTs in 2023, we strongly recommend going back to the fundamentals of SFTs: why they were created and how to differentiate between various types of SFTs. (Spoiler alert: there are three!) 

Feel free to jump ahead to the third part of this article: Tops SFT Apps in 2023, if you already got this stuff covered. 

The best way to master the concept of SFTs is by using two close relatives of SFTs: fungible tokens and non-fungible tokens (NFTs), as our starting point. 

Fungible tokens, by definition, are tokens on the public ledgers (the blockchains) that are divisible, non-unique, and interchangeable. For instance, when you need to break a 100-dollar bill into two 50-dollar bills or five 20-dollar bills, that’s divisibility. When you swap your 1-dollar bill with your friend, you have non-uniqueness, and interchangeability.  ERC-20 is the most widely adopted standard for fungible tokens. A near-perfect parallel to fiat currencies, fungible tokens are an important foundation for a decentralized economy, simply because a majority of digital assets traded on the blockchain today are ERC-20 tokens. 

Don’t feel like remembering all that? Here’s the bottom line: the fungible token is Web3 liquidity. 

If fungible tokens aren’t sassy enough to bring the blockchain and crypto into the public purview, then NFTs would probably seal the deal. Short for “non-fungible tokens,” NFTs lie on the opposite end of the spectrum from fungible tokens for being non-divisible, unique, and noninterchangeable. Combining all that with the immutable record of the blockchain, it isn’t surprising that millions of artists across the world are attracted to the space to mint and monetize their otherwise obscure artworks on the blockchain through NFTs. 

Beeple’s Everydays: The First 5000 Days and Crypto Kitties are proofs of how NFTs can transform the lives of millions of artists around the world. 

To learn more about the timeline of NFTs, read this article. 

Then, enter SFTs: a brand new token that combines the liquidity features of ERC-20s and the descriptive attributes of NFTs.  

But we know this probably means nothing to you. So consider an example. 

Alice, a market maker, wants to raise 500,000 USDC in liquidity. Instead of resorting to the time-consuming way of reaching out to a lender that trusts her enough to lend her the money, draw up the IOU document, sign, transfer the money, and repay the lender with interest after X number of days, Alice is able to simply mint a code-enforceable SFT that represents an on-chain debt position that not only allows Alice to embed her unique loan terms or any legally-binding documents to the token but also visually present it a way that is clear for the lender to view the loan terms as easily as inspecting a JPEG. 

But this is not the end of the story: Not only are SFTs visually descriptive, but they are also intelligently descriptive. This means the ability to not only embed JPEGs and files to an SFT, but fully-fledged smart contracts that store, receive, or send assets on cue. With a debt SFT, Alice and the lender can not only view their contractual relationship but can transfer assets per their contract directly into and out of the SFT without resorting to any secondary tools. 

This is a far bigger deal than everyone realizes, and it’s just the beginning. 

SFTs in a Spectrum: ERC-3525, ERC-1155, and ERC-3475

With that little history as a warm-up, now let’s think about different kinds of SFTs. 

First off, there are two “schools of thought” on how an SFT should be defined, and ERC-3525 and ERC-1155 are two official Ethereum token standards that, in one way or another, claim to be semi-fungible. And then, there’s ERC-3475 Abstract Storage Bonds, a powerful Ethereum token standard for creating decentralized securities products, particularly on-chain bonds. 

In fact, the idea of a semi-fungible token isn’t new, but that’s another rabbit hole we’ll get into later. For this article, all you need to know is that three token standards fall in the general scope of SFTs: ERC-3525, ERC-1155, and ERC-3475. 

In the grand scheme of things, it isn’t really important which of these standards is more authentic, or legitimate, than the other. Rather, the creators of these standards saw a gap between fungible tokens and NFTs and succeeded at inventing new tools that allowed them to fill that gap. So for the sake of their shared spirit to diversify our known world of digital assets, we’ll treat all of these token standards as SFT standards. 

To bring you up to speed, let’s quickly review what their missions are. 

 

• • ERC-3525 Semi-Fungible Token

ERC-3525 Semi-Fungible Token (see EIP), approved by the Ethereum Foundation in September 2022, was developed by the Solv Protocol team. In 2020, the team recognized the absence of sophisticated financial instruments in DeFi and created ERC-3525 to fill that gap. 

Designed to express like-kind but uniquely identifiable digital assets on-chain, ERC-3525 developers left open the possibility for use cases far beyond decentralized finance, including Web3 membership certificates, gift card issuances and transfers, virtual lands, lottery, RWA tokenization, SBTs, and more. 

As a result, ERC-3525 remains a general-purpose and omni-asset standard adopted by a wide range of blockchain products and services in 2023. 

If you are interested in understanding how ERC-3525 works on a technical level, check out EIP-3525. 

 

• • ERC-1155 Multi Token Standard 

ERC-1155 Multi Token Standard, developed by Enjin team members, is a flexible Ethereum token standard that allows for the transfer of multiple types of tokens at once. ERC-1155 is often billed as a “semi-fungible token” standard because it allows a person to batch transfer fungible tokens, NFTs, and any other token in a single transaction, or “batch.” 

Prior to ERC-1155, sending 1,000 swords in a metaverse game would result in one transaction for each of the 1,000 smart contracts for the sword. With ERC-1155, managing and sending multiple instances of unique gaming assets (like a sword) would be feasible in a single transaction, which means higher efficiency and lower transaction costs. 

If you are interested in understanding how ERC-1155 works on a technical level, check out EIP-1155. 

 

• • ERC-3475 Abstract Storage Bonds

Developed by DeBond team, ERC-3525 can store a wide array of information about bonds, launch multiple types of bonds, and add customizable features and functions using just a single smart contract. This greatly simplifies the process and reduces the transaction cost of managing multiple callable bonds, which, according to the core contributor Yu Liu, is “essential for the decentralized finance market.” 

Unlike an ERC-20 token or NFT, an ERC-3475 token is semi-fungible and multi-dimensional: any bond nonce is non-fungible from another, and yet has an identifiable uint256 array that stores the bond term, interest rate, and other redemption conditions that make the bond fungible.

In all fairness, ERC-3525, ERC-1155, and ERC-3475 SFTs are still underutilized compared to their ERC-20 and NFT counterparts, but that points more to their nascency than to their lack of capabilities. 

If you are interested in understanding how ERC-1155 works on a technical level, check out EIP-3475.

Top SFT Apps in 2023

Now, let’s go over the top five apps using SFTs in 2023. Some of these applications are still nascent and not very popular, but with time, they will grow. 

 

1. 1. Web3 Consulting: CodeFox

While the Web2 world has prepaid cards and coins – such as gaming coins, amazon gifts, Starbucks cards, etc. – denominated in various point systems, there are no such examples found in Web3. 

At the frontier of building a bridge between Web2 and Web3, CodeFox is developing ERC-3525 SFT prepaid coin that can store any amount of coin to accommodate a wide range of the said use cases. Similar to conventional gift cards, prepaid coins will incorporate a visual design, validity period (featuring the start and expiration date), and any additional text message onto its on-chain metadata to offer a near real-world gift card experience to Web3-native users. 

The team sees the difficulty in expressing and managing expiration dates in ERC-20 tokens and NFTs and envisions a future where prepaid coins can be easily issued and used in decentralized apps. Japan’s regulations around ERC-20 tokens, the founder of CodeFox points out, will continue to spark the team’s innovations for SFTs.  

CodeFox is a Japan-based team specializing in providing a wide array of consulting services and technical support for Web2 and Web3 companies looking to expand their existing scope of business. 

 

2. 2. RWA Tokenization: InVar Finance 

As BlackRock CEO declared towards the end of 2022, “the next generation for markets is tokenization.” InVar Finance, a leading project for RWA (Real-World Asset) tokenization or a HyFi (hybrid finance) protocol, took the point home. To the InVar team, 2023 will be the year for tokenization and a pivotal time to roll out real-world use cases through seamless integration between traditional finance and the Web3 economy. And now, it has found an even better way to tokenize real estate, collectibles, and other real assets: using SFTs. 

The InVar team believes that ERC-3525 SFTs have numerous features – visualization, asset storage, value transfer, and efficient asset or identity attribution – that make these tokens ideal vehicles for RWA tokenization and NFT financialization. 

At the turn of the new year, the team released an official demo on tokenizing assets with SFTs. Feel free to give it a read! 

 

3. 3. Gaming: 3525 Lottery 

What if everything people dislike about conventional lottery – from its lack of transparency to overly centralized governance – could now be elegantly solved with ERC-3525 SFT and blockchain technology? This is what 3525 Lottery, the namesake of ERC-3525 and the first blockchain lottery app, aspires to achieve. 

To combat the transparency problem and return the regulatory power to lottery participants, 3525 Lottery has a scheme that allows lottery participants to become shareholders of the protocol directly through the purchase of lottery tickets, which can be purchased with stablecoin. 100% of the protocol shares are allocated to the participants, and the shareholders can withdraw funds corresponding to the value of shares by burning the shares in SFT, which are fully transferable. 

If you are interested in learning more about 3525 Lottery, check out this documentation. 

 

4. 4. Carbon Credit Market: Carbonable.io

Carbonable, a decarbonization NFT project, is spearheading the joint force of blockchain, DeFi, and environmentalism. Carbonable enables DeFi investors to help finance decarbonization projects across the world by purchasing an NFT tied to the project, and then receiving rewards by staking the NFT. 

When a decarbonization project is funded, investors receive amount of “carbon credits.” Each carbon credit equals one metric ton of removed greenhouse gas. By staking the NFTs, inventors continually receive a decarbonization project’s yield (in stablecoin) and Carbonable’s utility token, $CARBZ.  

Recognizing the potential of ERC-3525 tokens to serve as highly descriptive yet easily fractionalizable carbon credit certificates, the Carbonable team announced in its latest Cairo implementation the deployment of ERC-3525 SFTs on StarkNet, laying the groundwork for supercharging the next-generation carbon credit market using SFTs. 

 

5. 5. Fundraising Instruments: Solv Protocol 

If you are a Web2 or Web3 business looking to raise crypto capital through either an on-chain loan or tokenized equity sale, Solv Protocol offers ERC-3525 SFT solutions for you to do exactly that. Built by the developers of ERC-3525, the Solv team has onboarded over sixty blockchain projects over a year who’ve raised $88 million dollars in total. 

Although Solv has been fairly successful at helping projects raise liquidity through SFTs, its ultimate mission, according to Solv’s co-founder and core contributor of ERC-3525, Mike Meng, is to become “the go-to tokenization platform for any kind of Web3 digital assets.” 

To solidify Solv’s position as a secure platform for raising liquidity, the protocol has recently added integration for leading digital assets management and custody solutions to offer teams interested in raising liquidity using SFTs with even more flexibility and transparency. 

Bond SFT, a Solv Payable product, leverages the NFT’s expressiveness to visualize customizable debt terms that mirror on-chain data in real time. 

If you are interested in learning more about Solv Protocol, check out this documentation. 

 

6. 6. Predictable Cash Flow: Ximension

Since 2021, NFT art has taken over the world. Besides the obvious benefits the blockchain technology provides for digital art–security and authenticity–one of the things that artists are attracted to about NFTs is royalties: the new revenue streams that bring artists income whenever their art is resold on the blockchain. 

The fact remains that although the NFT art can be bought and sold, the right to claim royalties from the NFT art is neither transferrable nor tradable. This leads to a huge opportunity cost of liquidity that could’ve been generated from, for example, using the right to claim upcoming royalties as loan collateral.

Ximension, a Singapore and Dubai-based team, set out earlier this year to solve this problem, and the team chooses ERC-3525 to create what’s called a Predictable Cash Flow Certificate, an ERC-3525-powered digital asset which represents the right to claim any form of future income, such as NFT royalties. Naoer, the co-founder of Ximension, points out that the team will build more foundational products with ERC-3525 to help traditional and blockchain companies manage equity shares and facilitate transactions of NFT collections and derivatives in a way that has not been possible before. 

For more information regarding Ximension’s vision for SFTized predictable cash flow, read this Ethereum proposal. 

 

7. 7. Gaming Infrastructure: Enjin

Enjin is a Singapore-based team that provides a platform to enable game developers to generate in-game items using the Ethereum blockchain, making it easier to build games, transfer, manage, and trade game assets on-chain. The platform was founded by Maxim Blagov and Witek Radomski, with the latter having helped to create the ERC-1155 token standard. 

As an infrastructure for ERC-1155 SFTs, Enjin allows people to create an infinite number of fungible tokens, NFTs, and SFTs through one smart contract, significantly reducing gas and transaction fees. 

Since its launch, the Enjin ecosystem has seen exponential growth: now at 2.3 million wallets, 1.2 billion assets created, and 10.3 million in marketplace volume (ENJ token). Enjin Coin (ENJ) is Enjin’s native token that helps Enjin users govern the network. They can be used across various blockchain games and platforms as a currency and to mint virtual goods. 

 

8. 8. DeFi Aggregator: Fuji DAO

Fuji DAO is a leading DeFi lending and borrowing aggregator. Being a successful lending-borrowing aggregator hinges much on a good position-mapping approach (i.e. the mechanism of mapping an aggregator’s internal positions relative to an external lending protocol, from which the aggregator can source its liquidity.)

Prior to ERC-1155, ERC-20 was an industry standard for position mapping. However, ERC-20s pose a clear problem when used for position mapping: prolonged transaction approval, hefty gas fees, and the fact that many of these interest-bearing ERC-20 tokens are non-transferable, which hugely limits their liquidity. ERC-1155 SFTs successfully enable Fuji users to swap multiple currencies at once. This greatly improves the user experience and saves a ton of gas fees. 

Besides swap operations, Fuji DAO also leverages, in its community-building project Fuji Climb: Fantom Expedition, ERC-3525 SFTs (dubbed “Pre-Token Bonds”) representing the holder’s right to redeem Fuji’s utility token, $FUJI. Similar to the Pre-Token Bond is Solv’s long-standing Vesting Vouchers (token vesting SFTs), the ERC-3525 solution for crowd token purchase agreements. 

If you are interested in learning more about Fuji DAO, check out this documentation. 

 

9. 9. Yield Farming: Alpha Homora V2

Homora is DeFi’s first leveraged yield farming protocol, built by Alpha Venture DAO. The protocol tokenizes farming positions into ERC-1155 SFTs, which group a whole class of ERC-20 tokens by their IDs. Since rewards for farming positions depend on LP shares (how much LP is staked by the user) and stake time, when two users stake simultaneously, their rewards split will simply be proportional to their LP shares. Therefore, farming positions with the same stake time have the same ID and can receive rewards under one ERC-1155 smart contract, instead of numerous ERC-20 ones. 

This clever maneuver makes Homora V2 one of the first proven cases that use SFTs to save gas fees and simplify managing and distributing DeFi farming yields. 

 

10. 10. Decentralized Securities: DeBond

DeBond is a protocol that offers Web2 and Web3 businesses decentralized bond solutions using ERC-3475 Abstract Storage Bonds standard. It is a standard interface for managing multiple callable bonds, where a single contract may include any given number of bond types, balances, and addresses. 

Like Solv, DeBond continues to expand its scope of services beyond decentralized bonds, to provide white-label primary security market, ERC-3475 wallet, and the secondary market aimed to replace inefficient OTC tradings. 

If you are interested in learning more about Solv Protocol, check out this documentation. 

Conclusion

While SFTs are still nascent, their business potential is clearly evidenced by Web3 innovators, including, but not limited to, projects listed here. Those projects are spearheading SFT innovations on multiple fronts – RWA tokenization, gaming, financial instruments, DeFi, and climate change, to name a few – which represent trillions of dollars of on-chain assets in the making.

In light of the rapid pace at which Web3 materializes its ever-evolving missions, we expect to see the SFT community and business solutions using SFTs mushroom in 2023 and onwards at a scale that dwarfs the great NFT boom in 2021. 

If you enjoyed reading this article and would like to be part of the SFT community, please contact us. In the meantime, join our Telegram group to participate in more in-depth discussions with current and prospective builders of SFTs. 

If you know about a project that is building or may be interested in building a product using SFTs, let us know.