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Fungibility seems to be extremely important in the Monero world.

Why does it matters for Monero and for the future of cryptocurrencies?

Does any other cryptocurrency have that property?

Does fungibility mean that at some point, we will be able to have a physical Monero wallet device, that could just be manually given (or lost :)? That would be so '80s sci-fi and cool :) (and don't underestimate the importance of exchanging physical things for humans :)

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Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. That is, it is the property of essences or goods which are "capable of being substituted in place of one another." For example, since one ounce of pure gold is equivalent to any other ounce of pure gold, gold is fungible. Other fungible commodities include sweet crude oil, company shares, bonds, other precious metals and currencies. Fungibility refers only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility does not relate to the exchange of one commodity for another different commodity. This from https://en.wikipedia.org/wiki/Fungibility also check this: http://www.investopedia.com/terms/f/fungibility.asp Now, let's compare Bitcoin to Monero: In this case the transaction history is very important. Bitcoin is not fungible because one can always trace where the coins come from (the public ledger is clear for everyone to see). So let's assume that a Bitcoin was used in a shady transaction (drugs, stolen goods, ...). When that coin lands in your wallet, it would be possible to look into the transaction history of that coin and detect that said shady transaction was carried out, so the Bitcoin that landed in your wallet is not equal anymore to a 'fresh' Bitcoin without transaction history. So that Bitcoin is now tainted... Now that Bitcoin/address could be blacklisted so it can't be used anymore. Monero on the other hand has an opaque blockchain, aka the coins' transaction history can't be looked up, so one XMR will always be one XMR, no matter in which transactions it would have been used before. In a way one could compare it to cash vs digital money. Monero would be cash (untraceable) and Bitcoin would be digital money (traceable), though there are still subtle differences.

No other cryptocurrency that I know of has this property worked out as well as Monero, because Monero is private on the protocol level with the option to be transparent, the other coins are public by default, with the option to be private (Dash, Zcash, ...). In the latter case it means that coins must 'leave' the public blockchain to make them private (via mixing service or other mechanism), this already means that those coins are 'different' (aka not fungible) from the ones that are always on the public blockchain. And those services still don't offer the same level of anonymity that Monero does...

For your last question, could you expand a bit more? I don't quite get the link between physically giving some 'thing' and fungibility.

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  • Hmmz, I might get the link now for your last question. Making a physical payment was indeed always more private than a digital one (cause there is no record keeping in a system somewhere), with monero however, this changed, because transaction history of the coins can't be looked up...
    – tibo
    Commented Oct 8, 2016 at 15:09
  • I was envisioning a world with "10 monero wallet" in an USB stick, actually used by giving the stick to someone, without fear that the monero were used in some out of law transactions and could be confiscated. Not sure how it could work regarding paper keys.
    – fanf42
    Commented Oct 8, 2016 at 15:11
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    @fanf42 just write down the mnemonic seed and give it the someone.
    – Christopher King
    Commented Oct 8, 2016 at 18:24
  • i feel like comparing to physical cash is not very good analogy or metaphor. a bank note can be physically altered by marking, coloring, cutting out a piece, etc, to be able to track where a specific note might have come from. also each bank note has a serial number, much the same way as a bitcoin has an ID.
    – werdwerdus
    Commented Dec 30, 2016 at 1:49
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Fungibility makes a coin very much like physical cash:

Fungibility is a property of money that makes every unit if this money interchangeable: you can pay someone with a paper note and the receiver won’t care where it came from.

Quote taken from this article, which explains what it is and what it means in respect to other cryptocurrencies:

On Fungibility, Bitcoin, Monero and why ZCash is a bad idea.

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  • what about a note that was stolen from a bank and is stained from the exploding ink packet? would that not connect you in some way to the theft and could not a merchant or seller refuse the "stolen" bills?
    – werdwerdus
    Commented Dec 30, 2016 at 1:46
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    Good point, in that respect even the fungibility of banknotes is limited. It is even true that banknotes have serial numbers on them and I know of at least one occasion where this lead to the capture of a kidnapper through the ransom money.
    – Roy Prins
    Commented Dec 31, 2016 at 13:51
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Fungibility matters because a product loses its value when it loses its fungibility, for example if Darknet used Bitcoin is tracked and blacklisted by any government LE, and whoever in possession of those tainted blacklisted Bitcoin can end up in jail, same like buying stolen diamonds, the person in possession of the blacklisted Bitcoins can get into serious trouble. Thus fungibility matters, fungibilty is what makes 1 Monero = 1 Monero, as Monero is fully privacy oriented and anonymous technology, the fungibility is solid, and the possessor of Monero is safe from any such issues.

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Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. That is, it is the property of essences or goods which are capable of being substituted in place of one another.

Fungibility matters in crypto because coins previously used by someone else for nefarious purposes, can be purchased or acquired through legit means by innocent individuals, who may then be labeled as criminals for using the tainted coins.

There are other coins that claim anonymity but Monero (and its little brother aeon) are the only two providing protocol level anonymity in every transaction.

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Fungibility essentially means a payment unit of account is interchangeable. You give me $1 and I give you 4 quarters as change, and no one feels short changed.

Fungibility is one of the seven characteristics of money. Currency is technically not money because it does not serve as a true store of value, but meets the other two functions of money (i.e., medium of exchange, and a unit of account). However, for something to become a true currency to be used for everyday payment purposes, it needs to be fungible.

Any ability for tainting a currency causes tainted funds to loose their value, and loose its fungibility. Hence, tainting can be viewed as being a form of censorship directed inflation by an authority. How long do you think an empowered authority to taint electronic money can be trusted? This is the flip-side to "drug money"... used by authorities to provide a disingenuous long-term narrative to ultimately rob citizens, absolute power absolutely corrupts.

If payments remain private, those funds remain fungible. After fungibility barriers are 1st broken by Monero, the question is will some cryptocurrencies be perceived as almost being money? The first step of getting there is to achieve full currency status, and subsequently have very deep pools of free-market-driven liquidity established.

Long term savers/HODLers provides price stability to cryptocurrencies that eventually is perceived as being a store of value. "People bet on beliefs and invest values." Today's speculations can become the values/money of tomorrow.

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Fungibility is a property of a currency where individual units are equivalent with other individual units of the same currency.

How can we tell if a currency is "fungible"?

Can we buy the same product or service for the same number of units of currency as anyone else?

An example of the fungibility of cash:

  • Alice gives Bob 5 pennies in return for a nickel.
  • Bob puts the 5 pennies in her piggy bank.
  • Alice cannot tell how many pennies are in Bob's piggy bank and even if she did manage to peak into the piggy's belly could not tell which of the 5 pennies came from her.
  • Bob can later spend some amount of pennies for one of Cindy's paintings without Alice knowing about it.

Why is fungibility important?

  • What if Cindy only gives Bob 2 pennies in return for a nickel? (Would Bob likley expect something else from Cindy? If he got nothing else, would he feel cheated?)
  • Does Bob care whether Alice can track where he spends his pennies?
  • If Alice found out that Bob bought Cindy's painting, could that affect her relationship with Bob?

Fungibility reflects the fairness and privacy of a currency.

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