economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...

, fungibility is the property of a

good In most contexts, the concept of good denotes the conduct that should be preferred when posed with a choice between possible actions. Good is generally considered to be the opposite of evil and is of interest in the study of ethics, morality, ph ...

or a

commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...

whose individual units are essentially interchangeable, and each of whose parts is indistinguishable from any other part. Fungible tokens can be exchanged or replaced; for example, a $100 note can easily be exchanged for twenty $5 bills. In contrast,

non-fungible tokens A non-fungible token (NFT) is a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership. The ownership of an NFT is recorded in the b ...

cannot be exchanged in the same manner. For example,

gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...

is fungible because its value doesn’t depend on any specific form, whether of coins,

ingots An ingot is a piece of relatively pure material, usually metal, that is cast into a shape suitable for further processing. In steelmaking, it is the first step among semi-finished casting products. Ingots usually require a second procedure of s ...

, or other states. However, a unique item such as a gold statue by a famous artist would not be considered fungible. In short, a thing is fungible when all equivalent amounts of that thing are interchangeable. Fungible commodities include sweet crude oil, company shares, bonds, other

precious metal Precious metals are rare, naturally occurring metallic chemical elements of high economic value. Chemically, the precious metals tend to be less reactive than most elements (see noble metal). They are usually ductile and have a high lu ...

s, and

currencies A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general def ...

. Fungibility refers only to the equivalence and indistinguishability of each unit of a commodity with other units of the same commodity, and not to the exchange of one commodity for another.

Etymology

The word ''fungibility'' comes from the

Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around present-day Rome, but through ...

''fungibilis'', from the verb ''fungī'', meaning "to perform", via phrases such as ''fungi vice'', meaning "serve in place of". It is related to words such as "function" and "defunct".

Use

Finance

Fungibility is different from

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liq ...

. A good is said to be liquid if it can be easily exchanged for money or another good. A good is fungible if one unit of the good is substantially equivalent to another unit of the same good of the same quality at the same time, place, etc. Notably, money is fungible: one US $10 banknote is interchangeable with any other genuine banknote like it. It is also interchangeable with two fives, ten ones, or any other combination of banknotes and coins adding up to $10. On the other hand,

diamond Diamond is a solid form of the element carbon with its atoms arranged in a crystal structure called diamond cubic. Another solid form of carbon known as graphite is the chemically stable form of carbon at room temperature and pressure, b ...

s and other gems are not perfectly fungible because their varying cuts, colors, grades, and sizes make it difficult to 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. After one opens the package and uses the product, however, it is usually considered unique and no longer interchangeable with unopened packages outside of exceptional circumstances, such as a return or exchange.

Cryptocurrency

Cryptocurrencies A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It ...

are usually considered to be fungible assets, where one coin is equivalent to another. However, after a major breach in Japanese exchange

Coincheck Coincheck is a Japanese bitcoin wallet and exchange service headquartered in Tokyo, Japan, founded by Koichiro Wada and Yusuke Otsuka. It operates exchanges between bitcoin, ether and fiat currencies in Japan, and bitcoin transactions and stora ...

, token developers for cryptocurrency NEM added a special flag to hacked coins to indicate they are not to be traded or used.

Non-fungible token A non-fungible token (NFT) is a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership. The ownership of an NFT is recorded in the b ...

s are similar to units of blockchain currency, except that they are connected to unique digital files, so that individual tokens can be considered to have a meaningful distinction from others.

Tasking

Fungibility has been used to describe certain types of tasks that can be broken down into interchangeable pieces that are easily parallelized and are not interdependent on the other pieces. For example: If a worker can hand dig one meter of ditch in a day, and a ten-meter ditch needs to be dug, that worker can either be given ten days to complete the entire project, or nine more workers can be hired for a single day. Each worker can complete their piece of the project without interfering with the other workers, and more importantly, each worker is not ''dependent'' on the results of any of the other workers to complete their share of the total project. On the other hand, non-fungible tasks tend to be highly serial in nature and require the completion of earlier steps before later steps can even be started. As an example of a serial task that is ''not'' fungible, suppose there was a group of nine newly pregnant women. After one month, these women would have experienced a total of nine months of pregnancy, but a complete baby would not have been formed.

Quantum physics

Oxford University Oxford () is a city in England. It is the county town and only city of Oxfordshire. In 2020, its population was estimated at 151,584. It is north-west of London, south-east of Birmingham and north-east of Bristol. The city is home to the ...

theoretical physicist David Deutsch has adopted the term "fungible" to describe the physical nature of quantum particles and universes within the quantum multiverse, where, by virtue of being identical in all respects, different particles chaotically divide or combine as a result of physical interactions from a common fungible fund in superposition.

Law

United States

In legal disputes in the United States, when one party is compelled to remedy another party as the result of a ruling or

adjudication Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation, including legal reasoning set forth by opposing parties or litigants, to come to a decision which determines rights and obligations between the p ...

, the appropriate

legal remedy A legal remedy, also referred to as judicial relief or a judicial remedy, is the means with which a court of law, usually in the exercise of civil law jurisdiction, enforces a right, imposes a penalty, or makes another court order to impose its ...

may depend on the fungibility of the underlying right, obligation or property interest that is intended to be restored. Depending on whether the interests of the aggrieved party are fungible, a determination made by the

trier of fact A trier of fact or finder of fact is a person or group who determines which facts are available in a legal proceeding (usually a trial) and how relevant they are to deciding its outcome. To determine a fact is to decide, from the evidence present ...

, the appropriate remedy may change. For example, a court may require

specific performance Specific performance is an equitable remedy in the law of contract, whereby a court issues an order requiring a party to perform a specific act, such as to complete performance of the contract. It is typically available in the sale of land law, ...

(an

equitable remedy Equitable remedies are judicial remedies developed by courts of equity from about the time of Henry VIII to provide more flexible responses to changing social conditions than was possible in precedent-based common law. Equitable remedies were gra ...

) as a remedy for

breach of contract Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other part ...

, instead of the more favored remedy of

monetary damages At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognised at ...

Belgium

Belgium has adopted fungibility for its domestic central securities depository, CIK (Euroclear), which was set up in 1967–1968. According to royal

decree A decree is a legal proclamation, usually issued by a head of state (such as the president of a republic or a monarch), according to certain procedures (usually established in a constitution). It has the force of law. The particular term used ...

No. 62, issued on 10 November 1967, depositors of fungible securities have the rights of co-ownership. This change was fundamental to the development of Euroclear, by then beginning to process Eurobonds and build systems.