What Is the Concept of ‘Fungibility’ in the Context of Cryptocurrencies?
Fungibility is the property where individual units of a currency are interchangeable and indistinguishable from one another. A dollar bill is fungible because one is worth exactly the same as any other.
Bitcoin is generally considered fungible, but its transaction history is public. This public history can sometimes lead to 'tainting' or 'blacklisting' of coins associated with illicit activity, making those specific units less desirable, which slightly compromises perfect fungibility.
Glossar
Fungibility
Definition ⎊ Fungibility is the economic characteristic where individual units of an asset are perfectly interchangeable because they carry the same intrinsic value and utility regardless of prior history.
Transaction History
Historical Record ⎊ Transaction History is the complete, ordered sequence of all validated transfers and smart contract interactions associated with a specific public address or the entire blockchain ledger, forming the immutable audit trail.