A commodity or asset’s capacity to be correctly exchanged with other commodities and assets.
Fungibility refers to the condition that a commodity or asset can be exchanged for another based on its inherent value. Thus, the commodity or asset in question can be broken down into units, and then these units can be exchanged for units of similar commodities and assets. As such, interchangeability is the root of fungibility, meaning that any commodity or asset that can be correctly and consistently exchanged for another of the same kind is said to be fungible.
The foremost application of fungibility is in monetary exchange. So, $10 can be exchanged for $10, even though the bills have different serial numbers.