Fungible refers to assets or items that are interchangeable with one another because they are identical in nature or value. Here are some examples to illustrate:
- Currency: One dollar bill is equivalent to another dollar bill. If you owe someone a dollar, it doesn’t matter which specific dollar you pay them back with.
- Cryptocurrencies: One bitcoin is exactly like another bitcoin. You can exchange one for another without any difference in value or properties.
- Commodities: A gram of gold from one source is the same as a gram from another source, as long as they are of the same purity.
- Grains: One bushel of wheat is typically considered interchangeable with another bushel of wheat of the same grade.
The key characteristic of fungible items is that their individual units can be mutually substituted, and their value remains consistent, making them easily tradable or exchangeable without distinguishing between individual units.