Just as it is possible to exchange common currencies with each other, digital currencies can also be exchanged in the same way. Such a capability is called fungibility in economics. In this article, we are going to explain everything you need to know about this concept.
What is interchangeability?
When an asset is interchangeable with another asset of equal value and validity (and in some cases of equal performance), that asset is Replaceable asset (fungible asset) is said; For example, when you borrow a 10,000 Toman bill from someone, you do not need to return the same bill to him when you return it, and you can pay your debt with any other 10,000 Toman bill or several other bills worth 10,000 Tomans. You can also easily trade different currencies with other currencies of the same value. Also, for example, one gram of gold has the same value as any other gram of gold.
Among the different classes of fungible assets are tradable commodities, backed currencies (currencies backed by banks and governments), securities, precious metals, and digital currencies.
In this article, we are going to talk about the exchangeability of digital currencies. In general, most digital currencies are interchangeable with each other. For example, a unit Bitcoin It is the same as any other bitcoin unit, and both units have the same value and efficiency. So it doesn’t matter which bitcoin you want to exchange for another bitcoin Blockchain this Digital currency be extracted; All bitcoins are part of Bitcoin blockchain are and have the same efficiency.
Comments on the fungibility of digital currencies
Due to the traceability of Bitcoin and Digital currencies Similarly, certain tokens of Bitcoin or any other currency may have less demand; Especially if they have already been used in illegal or questionable activities.
This means that some merchants or payment service providers who believe that certain cryptocurrencies have been used for illegal activities in the past may not be willing to accept Bitcoin or any other cryptocurrency as payment.
Of course, some experts in the field Cryptocurrency They believe that the traceability of Bitcoin or any other currency does not question their exchangeability. According to such people, being traceable and interchangeable are two different concepts. These people believe that the value, technology and application of each bitcoin will not change no matter how it is traded and exchanged.
Let us help you understand this better by giving an example; For example, every banknote has its own value and even if a particular banknote has been used for decades for illegal activities, it still has its own value!
Comparing fungibility with non-fungibility
Some digital assets, unlike most of them, cannot be exchanged for any other asset. In the field of cryptocurrency to such assets often Irreplaceable token (Non-fungible token) or for short NFT (NFT) Called. Each of the NFTs has unique features and contents that distinguish them from other NFTs. These contents can include a digital artwork or digital content (such as a photo collection). An NFT can even be created as a digital instance of a physical artifact or object.
NFTs cannot be copied or replaced and their ownership belongs to only one person at a time. NFTs are bought and sold at a significant price due to the lack of similar samples, and some of them even have an astronomical price; For example, NFTPak’s ‘The MergeOn December 8, 2022, it had a value equal to 91.8 million dollars. generally NFT buying and selling In 2022, it was one of the most profitable investments in the field of digital currency.
Frequently asked questions about fungibility in the field of cryptocurrency
Interchangeability is one of the capabilities of digital currencies, and it is said that one digital currency can be exchanged with another digital currency with the same value, validity and efficiency. For example, the Bitcoin digital currency is fungible, and one Bitcoin token can be exchanged for another Bitcoin token or any amount of digital currencies or common currencies of the same value.
Almost all digital currencies are fungible.
Some digital assets are not interchangeable with any other digital asset due to their unique features, content and use. These assets, which are often referred to as non-fungible tokens or NFTs, have no counterpart and, in addition to being non-fungible, they are also non-copyable and non-substitutable.