.jpeg)
In other words, it is possible to barter products of different or incomparable value. An item is said to be liquid if you can easily exchange it for money or another good. Goods that are fungible are treated as commodities, and markets in commodities are active and liquid because of their fungibility. For example, gold is generally fungible because its value does not depend on any specific form, whether of coins, ingots, or other states. However, a unique item such as a gold statuette would not be considered fungible with the 4 ways to find the best web development language same weight of gold in some other form.
Fungibility of commodities
A fungible issue is a bond that replicates one that’s been previously offered by the same company. Its terms are the same but the yield will most likely be different. AI tokens will play an integral role how does bitcoin mining work in the adoption of machine learning models in the blockchain industry. Kevin Miller is a growth marketer with an extensive background in Search Engine Optimization, paid acquisition and email marketing.
Non-fungible items are not substitutable in the same manner. In finance and investing, commodities, common shares, options, and dollar bills are examples of fungible goods. The term “fungible” is not identical with barter or liquidity. A good traded by barter is not necessarily equivalent to the exchanged commodity in units.
Bitcoin Inches Closer to $100K Amid Record $3.4T Crypto Market Cap
- For example, gold is generally fungible because its value does not depend on any specific form, whether of coins, ingots, or other states.
- Adding unique numbers to bars of gold, collectibles, and other items makes it possible to distinguish them, which makes them non-fungible.
- The farmer thought that his grain would be fungible with his neighbor’s.
- As an example of a serial task that is not fungible, suppose there was a group of nine newly pregnant women.
Non-fungible tokens (NFTs) are assets that are not interchangeable. They’re often digital and can include assets such as music, images, and videos, as well as some forms of cryptocurrency. You can have a right to ownership if you purchase an NFT but this right doesn’t necessarily translate to outright ownership of the asset. The line between fungibility and non-fungibility may be a thin one. Gold is generally considered to be fungible because one gold ounce is equivalent to another gold ounce. But when otherwise fungible goods are given serial numbers or other uniquely identifying marks, they may no longer be quite as fungible.
Fungibility: What It Means and Why It Matters
Altered goods, such as opened, stained or return packages, do not 10 help desk skills it support and help desk software development hold the same value as their unopened or clean peers, and are therefore not fungible anymore. When fungibles are given numbers, they may no longer be fungible. Adding unique numbers to bars of gold, collectibles, and other fungibles makes it possible to distinguish them.
The word fungible stems from the Medieval Latin fungibilis, Latin fungor, and the Latin fungī. If you went to a BMW dealer and swapped her vehicle for another brand new red BMW 3 series, and returned that one to Alice, she would probably not be happy.
Creators and buyers of NFTs are not like owners of diamonds or quartz, where one piece can be exchanged for another and hold the same value for an equal amount and grade. The satisfaction of owning NFTs on internet marketplaces comes from their uniqueness and liquidity. Diamonds are liquid, they can be readily bought and sold. However, as no two stones are identical, one diamond cannot be easily swapped for another – diamonds are liquid but do not possess fungibility. Something is fungible if one unit of that product is substantially equivalent to another unit of the same product that has the same quality at a specific time and place. Anything we want to use as money has to be fungible, whether it be bags of saffron, shells, beads or gold bars.
Because listed options are considered fungible goods, it is possible to close out positions by taking offsetting positions. For example, if you sell (write) a call option, you can close out the position by buying a call with the same underlying asset, expiration date, and strike price—their components are equivalent. Fungible assets are of like kind, which makes them interchangeable. Non-fungible assets, on the other hand, have something unique about them that means one cannot be replaced by another.
Other fungible commodities include other precious metals and grades of crude oil. The legal recognition of fungibility is limited, and even very similar items, such as new cars of the same model and specifications, are not considered fungible with each other in law. On the other hand, diamonds 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. Examples of fungible goods include oil, bonds, gold and other precious metals, money, and unopened items of consumer products on store shelves such as boxes of oatmeal or cereal.