Fungible token
A fungible token is a token that you can exchange one-to-one for another token of the same type. Every token of that type is equal and has the same value per unit.
What is a fungible token?
The word fungible means interchangeable. Think of two €2 coins: you can swap them because they’re worth the same amount. Fungible tokens work the same way.
These tokens are also divisible. So you don’t always have to own or send a whole token. For example, you can have 0.5 BTC.
Most cryptocurrencies are fungible tokens. They can be used to pay, trade, or access a service.
An example of a fungible token
Bitcoin, abbreviated as BTC, is a fungible token. One BTC is equal to another BTC, so it doesn’t matter which specific BTC you receive.
Say you have 1 BTC and send 0.5 BTC. You’ll have 0.5 BTC left. This shows that a fungible token is both interchangeable and divisible.
Why are fungible tokens important in crypto?
Fungible tokens make it possible to easily pay with, buy, sell, and trade crypto. That’s why they often come up in discussions about cryptocurrencies, payments, and services in crypto.
The term also helps explain the difference between an NFT and a fungible token. An NFT is unique, like a digital artwork or collectible. A fungible token isn’t unique and can be replaced one-to-one with another token of the same type.
This doesn’t mean all cryptocurrencies are worth the same amount. Only tokens of exactly the same type are interchangeable.
