NFTs vs SFTs – Which One Will Dominate the Crypto Space?

The world of digital assets continues to surprise us with new concepts that aim to improve a certain feature or process in the industry.

The crypto industry moves faster than most, but there is one industry that moves even faster: digital assets.

With new concepts emerging all the time, promising to improve a certain feature or process in the industry, it can be hard to keep up.

But two types of digital assets that have been gaining a lot of attention lately are NFTs and SFTs. Both have their own unique advantages and disadvantages, but they both play an important role in the future of digital assets.

So, what are NFTs and SFTs, and how do they differ from each other? Let's take a closer look.

What Are Non-Fungible Tokens (NFTs)?

If you've been in the crypto space for at least a couple of hours, it's impossible to not have heard of NFTs, CryptoPunks, or Axie Infinity.

But to refresh the information, NFT (or Non-Fungible Token) is a digital asset that is entirely unique and cannot be traded with a similar asset, as it has a unique identification (metadata, ownership history) on the blockchain that it relies on.

Two NFTs will never have identical attributes, and this makes them one of the most intriguing type of digital assets.

Non-fungible tokens can take many forms, including images (JPEG), music (MP3), videos (MP4), GIFs, and more. And it is this flexibility that makes them widely used in the crypto space. Some of their use cases include:

In each of these use cases, NFTs provide their holders with a truly valuable concept: ownership.

Each NFT contains data that ensures the ownership of the asset, proving that a specific user is the actual and genuine holder of the digital collectible. It also contains a history of the previous owners and various data about the non-fungible token itself.

NFTs usually use the ERC-721 token standard, which is a protocol that defines the functionality and capability of this type of tokens. ERC-721 also allows for non-fungible token transactions and creation, and each NFT on the Ethereum network must respect the rules and regulations of this standard.

The smart contracts underneath the protocol only allow for sending one NFT per transaction, and this, combined with the fact that Ethereum is already crowded, can make transaction costs go higher than some would expect.

NFTs’ Main Advantages

As you have probably already realized, NFTs come with numerous valuable features, and while their advantages are plenty, there are some that you will hear pretty often:

They Prove Ownership and Authenticity

As we mentioned earlier, NFTs contain metadata that allows to prove the ownership and authenticity of digital art. This makes digital collectibles easier to transfer and especially sell, while also protecting them, their buyer, and their seller.

For instance, let’s say you create a digital artwork and want to transform it into a non-fungible token. Your NFT can be traced back to you, its original creator, and this confirms the authenticity and ownership history of the certain NFT.

They Are Easily Transferable

Since the very first NFT was developed and released, this digital asset class was specially designed to be easily transferable.

These days, you can find them on almost any crypto exchange out there, making it extremely easy for you to buy, sell, or list an NFT without the need of a third-party.

This streamlines every NFT-related activity and makes this digital asset class increasingly accessible to crypto enthusiasts from all over the world.

They Are Transparent

We all know that crypto in general is surprisingly transparent, and this, along with privacy, security, and decentralization, are the advantages that made over 575 million identity-verified crypto asset users choose this type of investment in the first place.

And as the apple does not fall far from the tree (and it could not, basically), NFTs “borrow” the transparency provided by blockchain technology. Given this advantage, you can easily learn what there is to know about a certain NFT, like its previous ownership, authenticity, and more.

This can increase trust in non-fungible tokens and make even more users choose to invest in at least one.

They Offer New Revenue Streams

Last but not least, NFTs can be used to generate new revenue streams for both creators and owners. If you’re an artist and decide to sell your work as non-fungible tokens, you can sell your work as unique and ensure that it will not be replicated ever (or at least it should not be).

Once you become popular with your art (or if you already are), you can offer your fans the opportunity to purchase digital copies of certain things you created, thus offering them a piece of your art that ensures them it is legitimate.

Downsides of NFTs

Just like any other thing in life, although there are not as many as the advantages, the downsides of NFTs do exist:

Top 3 NFTs

The Merge

“The Merge” is the most expensive NFT ever sold. It was designed by Pak (