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Fungible meaning 📖

Fungible refers to any kind of money or commodity that can be replaced with an equal value of money or commodity. It is originally derived from the Latin verb ‘to perform’.

Fungibility goes back as far as time can, where fungible assets were used for trading and barter. Fast forward to the modern era, casino machines and arcade games have been using tokens that can be exchanged with money.

This concept is also present in blockchain and it refers to the ability of a non-unique cryptographic digital asset to be divided or exchanged equivalently with another asset of a similar kind.

The opposite of these tokens are non-fungible tokens or NFTs, which cannot be exchanged and are unique.

Most NFTs in the ERC-721 standard are non-fungible tokens. On the other hand, ERC-20 standard tokens are fungible.

The best analogy to understand fungible tokens

Suppose if Person A borrows $50 from Person B.

It does not matter if Person A repays the loan with a different $50 bill as it interchangeable. Even if Person A returns the money with two $20 and one $10 bills, it doesn’t make a difference, because it is equal in the value.

The blockchain technology that underlies Bitcoin is a major technical breakthrough that could, in time, revolutionize both the Internet and the financial industry as we know them, and the first steps of that potential revolution are now under way.

Jon Evans, a famous writer and software engineer on Bitcoin fungible tokens

Fungible tokens like cryptocurrency are of great use in the blockchain space and have the capability to change the trading system.

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