Fungibility

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Fungibility

Fungibility is the property of a good

Good (economics and accounting)

In economics, a good is any object or service that increases utility, directly or indirectly. It should not to be confused with the adjective "good", as used in a moral or ethics sense....
or a commodity

Commodity

A commodity is anything for which there is demand, but which is supplied without qualitative product differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk....
whose individual units are capable of mutual substitution. Examples of highly fungible commodities are crude oil, wheat

Wheat

Wheat , is a worldwide cultivated Poaceae from the Levant region of the Middle East. Globally, after maize, wheat is the second most-produced food among the cereal just above rice....
, precious metal

Precious metal

A precious metal is a rare metallic chemical element of high economics value. Chemically, the precious metals are less reactivity than most elements, have high lustre , are softer or more ductility, and have higher melting points than other metals....
s, and currencies.

Fungibility has nothing to do with the ability to exchange one commodity for another different commodity. It refers only to the ease of exchanging one unit of a commodity with another unit of the same commodity.

Fungibility versus liquidity
Fungibility is different from liquidity

Market liquidity

Market liquidity is a business, economics or investment term that refers to an asset's ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value....
.

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Encyclopedia

Fungibility is the property of a good

Good (economics and accounting)

Commodity

Wheat

Precious metal

Fungibility versus liquidity

Fungibility is different from liquidity

Market liquidity

Tradable

A tradable Good or Service can be sold in another location distant from where it was produced. A good that is not tradable is called non-tradable....
if it can be easily exchanged for money

Money

Money is anything that is generally accepted as payment for goods and services and repayment of debts. The main uses of money are as a medium of exchange, a unit of account, and a store of value....
or another different good. A good is fungible if one unit of the good is substantially equivalent to another unit of the same good of the same quality at the same time and place.

As an example, one US$

United States dollar

The United States dollar is the unit of currency of the United States and was defined by the Coinage Act of 1792 to be between 371 and 416 grains of silver ....
10 bank note is interchangeable with another. Cash is fungible. A barrel of West Texas Intermediate

West Texas Intermediate

West Texas Intermediate , also known as Texas Light Sweet, is a type of crude oil used as a benchmark in oil pricing and the underlying commodity of New York Mercantile Exchange's oil futures contracts....
crude oil is fungible (direct exchange) with another barrel of the same crude oil. Oil (of the same type) is fungible.

Fungibility does not imply liquidity, and liquidity does not imply fungibility. Jewels can be readily bought and sold (the trade is liquid), but individual diamonds, being unique, are not interchangeable (diamonds are not fungible). Indian rupee

Indian rupee

The rupee is the currency of India. The issuance of the currency is controlled by the Reserve Bank of India. The most commonly used symbols for the rupee are Rs, ? and ??....
bank notes are interchangeable in London (they are fungible there), but they are not easily traded there (they are not liquid in London).

In contrast to diamonds, gold coins are fungible. They are also liquid, especially under a gold standard

Gold standard

The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set, fixed quantities of gold....
. The combination of fungibility and liquidity is one of the reasons why gold has successfully served as money for thousands of years.

Fungibility in law

In legal disputes, when one party is compelled to remedy another party as the result of a ruling or adjudication, the appropriate legal remedy

Legal remedy

A legal remedy is the means with which a court of law, usually in the exercise of civil law jurisdiction, enforces a right, imposes a sentence , or makes some other court order to impose its will....
may depend on the fungibility of the underlying right, obligation or property interest that is intended to be restored. Depending on whether the interests of the aggrieved party are fungible (a determination made by the trier of fact), the appropriate remedy may change. For example, a court may require specific performance

Specific performance

In the law of Judicial_remedy, an order of specific performance is an order of the court which requires a party to perform a specific act, usually what is stated in a contract....
as a remedy for breach of contract, instead of the more favored remedy of monetary damages

Monetary damages

Monetary damages, in civil law , refers to Damages given to an injured party by a liable party. Monetary damages may be restitution, a penalty, or both....
.