Fungible

Fungible describes assets or goods that are interchangeable because each unit is intrinsically identical in value and utility to every other unit of the same kind. In practical terms, one unit can be exchanged for another without altering the overall worth or function of the asset. Common fungible items include currencies (such as banknotes and coins of the same denomination), bulk commodities (oil, wheat, gold bars of the same grade), and many financial instruments (shares of the same class, identical bonds).

By contrast, non-fungible assets are distinguishable by unique properties or identities, so one unit cannot be substituted on a one-to-one basis for another. Real estate, art, collectibles, and some digital assets (non-fungible tokens) are typical non-fungible assets.

Fungibility depends on the class of asset and the context of exchange. Within a given class and specification, units are treated as equivalent for purposes of price and settlement, enabling liquidity and efficient trade. However, fungibility can be limited by factors such as legal tender status, quality variations, authenticity, or regulatory restrictions.

In finance and accounting, fungibility simplifies valuation and settlement because units can be pooled and counted by quantity. In contrast, non-fungible assets require idiosyncratic appraisal of each unit.

In cryptocurrency, fungibility is an important property: fungible tokens such as ERC-20 tokens are interchangeable, while non-fungible tokens (NFTs) are unique tokens on a blockchain. Some networks and standards aim to enhance or restrict fungibility for reasons such as privacy or traceability.