What is fungibility? What makes an asset fungible?
Fungibility is the property of being exchangeable for other assets of the same kind without any change in value or utility. For example, a US dollar is fungible, because at any given time you could exchange any dollar for any other, and your new dollar would have the same value and ease of use as the one you have exchanged.
Of course, the US dollar Is change in value over time against other currencies, but it is still fungible because—at any time— all US dollars are worth the same amount. That is, all US dollars change in value as a whole as a currency, not individually as single dollars.
What types of assets are fungible? 5 examples
- Fiat currencies like the US dollar and Mexican peso
- Cryptocurrencies like Bitcoin and Litecoin
- Shares of common stock of a corporation
- Bonds of the same type (i.e. 5-year corporate bonds of the same company with the same yield and same maturity).
- Regulated commodities like barrels of Class A crude oil or gold bullion
What types of assets are not fungible? 5 examples
- Collectibles like old coins, trading cards and art
- Precious stones
- Properties such as land, houses and buildings
- Vehicles and equipment
- NFT (non-fungible tokens)
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TheStreet Dictionary Terms
What makes an asset non-fungible?
When an asset is non-fungible, it is usually a unique condition or characteristic. Unlike a dollar, which is worth the same amount whether it’s crisp and new or old and wrinkled, two Toyota 4Runners of the same color and year could have vastly different amounts depending on their wear and condition. .
Likewise, two gem-cut sapphires, even if they are the same color and size and come from the same mine, may be worth different amounts based on minute differences in quality, clarity, and inclusions. The same goes for most of the collectibles – two copies of the first edition of The Amazing Spider-Man #1 may appraise at different values due to condition and degree of fading of covers.
Simply put, when something is non-fungible, it is unique or one of a kind. There may be other similar products or actives, but each has its particularities and particularities, especially in terms of quality.
What are non-fungible tokens (NFTs)?
NFTs, or non-fungible tokens, are basically strings of data stored on a blockchain that signify ownership of some kind of digital asset. In this way, they work much like certificates of authenticity for digital collectibles.
To note: A blockchain is an unalterable, publicly visible ledger that stores information about digital transactions.
Any digital file can be “monetized” as an NFT, then sold and traded. For example, an artist could create an NFT signifying ownership of an original digital artwork and then sell it to a fan or collector. While anyone with a computer can download the digital artwork to enjoy it, only the collector who purchased it can resell it, as their proof of ownership is embedded in the blockchain.
Visual art is the most common type of asset traded as NFTs, but music, videos, and other assets can also be turned into NFTs. A collection of digital art by famed animator and graphic designer Beeple sold for $69 million in March 2021.