Fungibility refers to the interchangeability of individual units of a particular asset or currency. In the context of Bitcoin and other digital assets, fungibility means that each unit is indistinguishable from another - it can be exchanged on a one-to-one basis without any impact on its value or utility. Bitcoin exhibits a high degree of fungibility. Each bitcoin (or [[Supply#Satoshis and Bitcoin Divisibility|Satoshi]]) is equal in value to any other, regardless of its transaction history or origin. This means that if you receive one bitcoin from someone, it holds the same value and digital properties as any other in circulation. Comparing this to historical forms of money, such as physical cash like coins or banknotes, we find similar levels of fungibility. For instance, if you have two $10 bills and exchange one with someone else for their $10 bill, both parties still possess an equivalent amount in terms of face value. However, banknotes are unique to their serial numbers, where [[Bitcoin#Bitcoin the Digital Asset|Bitcoin as an asset]] has no unique address. It can be moved from one address to another on the [[Bitcoin#Bitcoin the Monetary Network|Bitcoin monetary network]] and still retain its digital properties. >[!tip] >Bitcoin has been more aptly compared to gold, which can be melted down while retaining its physical properties. Like gold, Bitcoin offers a higher level of uniformity and interchangeability among units. Each unit is essentially identical to every other unit within the system, while being significantly easier to move, which *gives Bitcoin high [[Portability|portability]]*. It's important to note that while Bitcoin itself demonstrates strong fungibility principles at the protocol level (each coin being equal), external factors such as regulation, or exchanges implementing Know Your Customer (KYC) policies, can introduce restrictions on certain bitcoins based on their transaction history. Institutions must therefore consider the possibility that they may receive tainted coins, and thus, it is posited that programs flagging potentially tainted Bitcoin may actually reduce Bitcoin's fungibility. These factors can potentially impact the overall fungibility within specific contexts; regardless, they do not alter the inherent nature of Bitcoin's basic fungible properties at its core protocol level.