Fungible

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Fungible /fʌnʤəbl/ (adj.)

Of two things, in all respects but their basic ontology, identical. For the intents and purposes of all those who are not pedants, interchangeable. Undifferentiable, but not the same thing.

The same, you see, but not the same.

Fungible securities

Until recently, the word “fungible” only really found purchase in the world of transferable securities, where it denotes distinct securities of the same issue, and having the same securities identification number — thus satisfying all the world bar those concerned with what is on or off one’s balance sheet and how one’s financial reporting should reflect it, who like the comfort of knowing that the security which comes back to you, which is economically identical to the one you sent out, might not be the one you sent out, but that is still okay. Two fungible instruments are distinct but nevertheless indistinguishable in legal and economic terms. Two ordinary shares in a company, are fungible with each other. An “on-the-run” treasury and an “off-the-run” treasury are not fungible with each other.

“Equivalent” means fungible

So, the key takeaway for nervous types is this: “fungible” does not mean “somewhat like”. It means exactly like. The word “equivalent” when used as a term of securities transfer art means “entirely fungible”. Not just “broadly similar”.

Non-fungible tokens

I said, “until recently”. Recently we have witnessed the emergence of the non-fungible token. This is a new asset class specifically designed for gullible people who like to be up with current trends. Non-fungible things are like the dark inversion of fungible things. Where fungible securities are the same, but not the same, NFTs are not the same, but the same.

Fungible, not fungible, and non-fungible

There are great divides in the bedeviling pedantry of law, between things that are the same but somehow, over a period of time, different; things that are different but nonetheless at a given point in time, the same; and — in recent days — things that don’t exist at all, but being unique representations of that nothing on a blockchain, in a Cartesian sense do exist, but weakly, and only along the very single fragile dimension that they are ontologically distinct. Amendment describes that first class; fungibility the second; credulous gulls the third.

So, with feeling:

  • Fungible: Individual securities comprising part of a single series (and having a the same ISIN are fungible with each other.
  • Not fungible: Securities from different series, even if issued by the same issuer, are not fungible with each other.
  • Non-fungible: Tokenised representations of meritless gobbets of intellectual property (no-longer-existent graffiti prints, memes, tweets etc.) that are created on a blockchain and are therefore uniquely unique, not to mention blockchain — and can be sold to uniquely credulous people.

See also