Fungibility
Asset Property, Token Classification
Fungibility is the property of an asset that makes each unit identical and interchangeable with every other unit of the same type. Fungible tokensÔÇösuch as Bitcoin, ETH, or USDCÔÇöcan be swapped one-for-one, just like traditional money. Non-fungible assets (NFTs), by contrast, are unique and not interchangeable, with each token representing a distinct item, collectible, or property right.
Use Case: Swapping one $USDC for another $USDC works seamlessly because both tokens have equal value and function. By contrast, trading NFTs (like art or collectibles) is a one-of-a-kind exchangeÔÇöeach item has unique properties and value.
Key Concepts:
- Token Standard ÔÇö Defines whether a token is fungible (ERC-20, BEP-20) or non-fungible (ERC-721, XLS-20).
- NFT Standards ÔÇö Protocols designed to enforce non-fungibility and uniqueness for digital assets.
- Smart Contract Token ÔÇö Tokens created by code can be either fungible or non-fungible based on their standard.
- Currency Conversion ÔÇö Relies on the fungibility of money-like assets for seamless exchange.
Summary: Fungibility is the dividing line between cryptocurrencies that act as money and those that represent unique value. It underpins the fluidity of digital and traditional economies, enabling universal exchange and liquidity for assets.
| Property | Fungible Asset | Non-Fungible Asset |
|---|---|---|
| Interchangeable? | YesÔÇöevery unit is the same | NoÔÇöeach unit is unique |
| Divisible? | YesÔÇöcan be split into fractions | Usually notÔÇösold/traded whole |
| Example Standard | ERC-20, BEP-20, SPL | ERC-721, XLS-20, BEP-721 |
| Examples | BTC, ETH, USDC, KAG | CryptoPunks, onXRP NFTs, land deeds |