Fungibles

Fungibles are goods or assets that are interchangeable because they are identical in function, value, and quality. Each unit of a fungible asset is substitutable for any other unit of the same type and quantity, so buyers and sellers can trade on a one-to-one basis without regard to specific items.

Fungibility supports liquidity, efficient pricing, and standardization. When units are homogeneous, markets can aggregate supply and demand more easily, and contracts can be written in terms of uniform quantities rather than identifying particular items. Factors that reduce fungibility include variations in quality, origin, age, or certification, which create distinctions between units.

Common examples include money, where coins and banknotes of the same denomination are interchangeable; commodities such as crude oil, wheat, or gold bars of standard grade; and shares of stock of the same class, which are typically interchangeable. In digital markets, many cryptocurrencies and tokens are fungible (for example, one unit of Ether or a stablecoin is equivalent to another unit of the same token).

Non-fungible assets are the opposite: each unit has a unique identity or characteristics that distinguish it from others, such as works of art, real estate, or certain digital collectibles. Non-fungibility complicates trading and valuation because units cannot be exchanged on a one-to-one basis.

In practice, fungibility influences market design, pricing, and contract terms, guiding how assets are standardized, traded, and recorded across financial and commodity markets and in digital ecosystems.