What is Fungibility

If you’re involved in the cryptocurrency world, you’ve probably heard the word fungibility thrown around a few times.

But you may be wondering… what exactly is it?

Fungibility can be best described as a property of money, good, or commodity, which measures the level in which individual units are indistinguishable from another. Depending on who you’re asking, fungibility can be a good or a bad thing.

Fungibility in Fiat Currency

Fiat currencies aren’t exactly fungible. To the everyday person, all legal tender is completely interchangeable with another legal tender. However, fiat currencies come with serial numbers allowing the government to track it, have noticeable wear and tear, and are sometimes made from different materials. In the event of certain crimes such as bank robberies, bills can be corrupted with dye or blacklisted for use.

Fungibility in Cryptocurrency

Now, what about cryptocurrencies? For the most part, cryptocurrencies are fungible. All units of a cryptocurrency look and act the same. However, in some cases such as an exchange hack, some units can be blacklisted effectively reducing their value. We saw this pretty recently when the cryptocurrency Coincheck was hacked. After the hack, the NEM development team flagged stolen coins asking for them to not be accepted or used.

Fungibility in Gold

Gold is one of the most popular stores of value, and for good reason. It has several industrial use cases, is extremely hard to come by, and is widely accepted around the world. Gold is pretty fungible. In the event gold was used in a crime, or given any distinct markings it can be reforged into any other form (bars, coins, jewelry, etc.).

Fungibility in Diamonds

Diamonds might just be the furthest thing from fungible. Every single diamond is different across dozens of factors, some of which we covered in our most recent post about diamonds as an investment. Because diamonds aren’t fungible, and very unique, it can be difficult to trade them in high volumes.

This is where Cedex comes in.

CEDEX’s Mission

CEDEX’s mission is to simplify the diamond trading process, and with this comes the solving of diamond fungibility. Using a proprietary algorithm based on 20 years of past and current parallel data, the DEX algorithm evaluates and compares diamonds to a common benchmark allowing fungibility. If you’d like to get started trading on the CEDEX platform, you can sign up here.