Fungibility in Crypto: Interchangeable Assets
Fungible is a situation where a coin or token can be replaced with any other identical coin or token.
What is Fungible?
Fungible refers to the ability to replace a coin. Fungible refers to the ability of a particular currency to maintain one standard value. It also needs to have a single recognition. This means that the history of the currency should not affect its value, and this is due to the fact that each part of the currency has the same value compared to any other part of the same currency.
Generally, gold is considered an Fungible commodity because one gold ounce is equivalent to another gold ounce; however, in some cases this is not the case. If an item is assigned a serial number or other identification marks, it is no longer Fungible. In this example, if you add numbers to a gold bar, it becomes distinguishable from another gold bar.
For a more detailed explanation, we can look at the Federal Reserve Bank of New York. It provides gold storage services to central banks as well as government agencies from around the world. The bank does this by storing gold bars in an underground vault, and then all gold bars are deposited and accurately weighed. Each bullion has purity markings on it. In turn, these markings are checked for authenticity.
