// GLOSSARY -- BLOCKCHAIN & CRYPTO FUNDAMENTALS

What is Fungible Token?

1 min read Updated

A fungible token is a digital asset where each unit is interchangeable with any other unit of the same type — one USDC is identical to any other USDC, following standards like ERC-20.

WHY IT MATTERS

Fungibility means interchangeability. A dollar is fungible — any dollar bill is worth the same as any other. ERC-20 tokens are fungible — one USDC is identical to every other USDC. This property is essential for money, trading, and financial instruments.

Fungibility is a spectrum in crypto. Most ERC-20 tokens are perfectly fungible at the protocol level. However, chain analysis can tag specific tokens as 'tainted' (from hacks or illicit activity), creating practical non-fungibility.

The opposite — non-fungible tokens (NFTs, ERC-721) — represents unique items where each token is distinct. Most DeFi operates on fungible tokens.

FREQUENTLY ASKED QUESTIONS

What makes a token fungible?
Every unit is identical and interchangeable. 1 USDC in your wallet is exactly the same as 1 USDC in anyone else's wallet. There's no way to distinguish between units.
Are all cryptocurrencies fungible?
Most are. ETH, BTC, USDC — all fungible. NFTs (ERC-721) are explicitly non-fungible. Some privacy coins (Zcash, Monero) aim for stronger fungibility by hiding transaction history.
Does tainted crypto affect fungibility?
Technically, crypto is fungible at the protocol level. Practically, some exchanges reject tokens linked to illicit activity. This creates a practical non-fungibility that's debated in the community.

FURTHER READING

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