All cryptocurrencies are fungible tokens, or tokens which can be replaced by other tokens which have the same value. Fungible tokens represent assets stored on the blockchain which are used for making payments.
Cryptocurrencies like Bitcoin (BTC) and Ether (ETH) and fiat currencies like the Yen, Peso, and Dollar are also considered fungible because they share three features:
Each token is equivalent to another token of the same type.
Just like 1 U.S. dollar in New York equals 1 U.S. dollar anywhere else in the world, one bitcoin is equivalent to every other bitcoin in existence.
You can split 1 BTC into 100 million Satoshis and 1 ETH into 1 billion Gwei. Each of these smaller units are equal in value.
Each token can be exchanged for either another token of the same type and value, or the equivalent amount of another type of token.
Anyone can exchange one Ether for another Ether, or one Ether for its equivalent value in Bitcoin.
There are thousands of fungible tokens in existence, but all of them share these three characteristics that set them apart from Non-Fungible Tokens, or NFTs.
Check out our other guides to learn more about fungible and non-fungible tokens. Happy learning, Ka-Bit!