Fungibility Meaning, Examples, How Does it Work?

Fungible goods refer to securities, or other items, that are equivalent or consist of many identical parts such that, for practical purposes, they are interchangeable. Material items, securities, and other financial instruments may be considered fungible goods. If goods are sold by weight or number, then they are probably not fungible goods. The line between fungibility and non-fungibility may be a thin one. Gold is generally considered to be fungible because one gold ounce is equivalent to another gold ounce. But when otherwise fungible goods are given serial numbers or other uniquely identifying marks, they may no longer be quite as fungible.

Thomas gives five $100 bills to Ralph to settle the payment. It did not make any difference to Ralph, as the repayment equaled $500 in value. Even on a street of identical houses, each house experiences different levels of noise and traffic, is in varying states of repair, and has unique views of surrounding areas. In this case, each worker is able to complete his or her piece of the task without interfering with the other workers. More importantly, each digger is not dependent on the results of any of the others to complete his or her piece of the completed project. Either are withdrawals instant that worker is given 10 days to complete the whole task, or nine extra workers can be hired to complete the whole project in one shift.

Fungibility, in finance, refers to any goods, assets, and commodities capable of being substituted with anything identical in type, nature, form, value, or function. Items that exhibit such property are gold and silver, sweet crude oil, bonds, shares, futures contracts, fiat money, digital currencies, etc. On the other hand, diamonds and other gems are not perfectly fungible because their varying cuts, colors, grades, and sizes make it difficult to setting the environment variables in heroku complete python web course find several diamonds expected to have the same value. Packaged products on a retail shelf may be considered fungible if they are of the same type and equivalent in function and form. Customers and clerks can interchange packages freely until purchase, and sometimes afterward. Gold is naturally fungible because one ounce of gold is equivalent to another ounce of gold.

What Are Synonyms of the Word Fungible?

Adding unique numbers to bars of gold, collectibles, and other items makes it possible to distinguish them, which makes them non-fungible. Overall, the word fungible is an adjective that refers to the concept of something being returnable or exchangeable for something equivalent in nature and quantity. The word fungible is often used about NFTs, or non-fungible tokens, which are one-of-a-kind digital art pieces. Whether goods, assets, or commodities are fungible depends on the possibility of their interchange with different units of the same item without any effect.

Articles Related to fungible

To be clear, these aren’t necessarily identical items, although when it comes to value, you can certainly think of them as identical. Critics say that money is fungible and the deal frees up Tehran to use other funds to build up its own military or to continue funding allies such as Hamas or Lebanon-based Hezbollah. They judge their god-emperor on style rather than substance, and understand truth as an endlessly fungible cryptocurrency compared to wicked memes and liberal tears.

A commodity must be fungible before it can be traded on a commodities exchange. A specific grade of commodity, such as No. 2 yellow corn, is a fungible good because it does not matter where the corn grew; it is essentially the same product. All corn designated as No. 2 yellow corn is worth the same amount. Cross-listed stocks, or the shares of stock listed on multiple exchanges, are still considered to be fungible. The shares represent the same ownership interest in a firm whether you purchased them on the New York Stock Exchange or the Tokyo Stock Exchange. Creators and buyers of NFTs are not like owners of diamonds or quartz, where one piece can be exchanged for another and hold the same value for an equal amount and grade.

When fungibles are given numbers, they may remote web developer salary no longer be fungible. Adding unique numbers to bars of gold, collectibles, and other fungibles makes it possible to distinguish them. Fungible goods are not necessarily liquid—meaning that you can easily exchange something for money or another item. Non-fungible tasks, however, are usually highly serial in nature and cannot be completed before the earlier pieces or steps are done.

• Some considerations, however, come into play when deciding whether or not a fungible commodity is suitable for substitution.
• Fungible, co-founded by CEO Pradeep Sindhu and Bertrand Serlet in 2015, was bought for around $190 million by Microsoft in December 2022.
• For example, it is possible to substitute a $10 bill with three $2 bills and four $1 bills.
• It is impossible to find two identical gems and precious stones.
• More importantly, each digger is not dependent on the results of any of the others to complete his or her piece of the completed project.

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Imagine a 100 foot ditch needs to be dug, and a worker can dig a 10 foot ditch in one shift. Now imagine Alice lends you her car, a brand new red BMW 3 series. In theory, a brand new car is interchangeable for another car of the same brand and model. If I bought ten Microsoft shares in 2006, another ten in 2007, and another ten in 2008 – I bought them at different times – they are all fungible, regardless of when I bought them. Crypto rug pulls cause billions of dollars in loses in the global crypto markets.

What Are Non-Fungible Tokens?

There’s not a single common stock that’s any different from another. They all offer the same value, the same benefits, and the same percentage of ownership. This also goes for shares of exchange-traded funds (ETFs) and similar investments.

What is fungible? Definition and examples

However, as no two stones are identical, one diamond cannot be easily swapped for another – diamonds are liquid but do not possess fungibility. Anything we want to use as money has to be fungible, whether it be bags of saffron, shells, beads or gold bars. Fungible assets create a flow in trade and exchange processes because they’re essentially equal in value.

Assets like diamonds, land, or baseball cards are not fungible because each unit has unique qualities that add or subtract value. For instance, because individual diamonds have different cuts, colors, sizes, and grades, they are not interchangeable, so they cannot be referred to as fungible goods. Non-fungible assets, on the other hand, are unique in some way, which means one cannot be replaced with the other.

The only condition is that interchangeable products must be indistinguishable from each other in terms of value, quality, and utility. In other words, one unit of an item should be equal or uniform to another quantity of the same asset, regardless of its origin and ownership, for a substitution to occur. Fungibility is different from liquidity, where the exchange of a commodity occurs with anything of value. Goods that are fungible are treated as commodities, and markets in commodities are active and liquid because of their fungibility. For example, gold is generally fungible because its value does not depend on any specific form, whether of coins, ingots, or other states. However, a unique item such as a gold statuette would not be considered fungible with the same weight of gold in some other form.