What is fungibility in economics?

In economics, fungibility is the property of a good or a commodity 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.

What is an example of a fungible asset?

A fungible asset is interchangeable and indistinguishable from another asset of the same type. For example, units of the same currency are fungible: One U.S. dollar can be exchanged for another dollar (or four quarters, or 20 nickels), and each of those dollars can be used to make a purchase.

What is the difference between fungibility and liquidity?

An asset’s fungibility and its liquidity are two different things; fungibility refers to its ability to be copied or exchanged, and its liquidity refers to how easily it can be traded or exchanged. Some fungible assets are liquid, and some are not — conversely, some non-fungible assets are liquid, and some are not.

What are non-fungible goods?

That gives us a non-fungible definition: Items that do not possess the same value and therefore cannot be copied or exchanged for another of its type. Fungible goods include fiat currencies and financial assets, like stocks. Many commodities and precious metals are also fungible.