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.