Bitcoin 101: What is fungibility?
Fungibility is a desirable property of anything used for trade such as a commodity or currency. Items can be considered fungible if any single unit has the same value as any other unit without further inquiry about its origin, destination, or unique attributes.
Several variables have the potential to affect the fungibility of bitcoin units despite there being a commonly discovered price displayed across many exchanges. Privacy and divisibility greatly contribute to the fungibility of bitcoin, but unique differences still exist.
A factor that makes a certain amount of bitcoin have a different value than the same amount in another wallet is the number of UTXOs the balance is split into. Since transaction fees are required to spend each additional input, low value inputs are disproportionally economically penalized compared to high value inputs.
Another factor that makes satoshis worth ever so slightly more or less is their position within lightning network channels. Every lightning channel has a fee rate set by each peer, effectively assigning certain bitcoin units a positive or negative cost to move.
Subjective value assigned by the market may also affect the fungibility of bitcoin units. Much like a guitar signed by Elvis has a premium market value in the eyes of some fanatics, a coin that was “signed” when spent by a Bitcoin celebrity may have sentimental appeal.
wasabiwallet / Wasabi Wallet
npub167…8schc
2023-04-04 01:12:24
Author Public Key
npub167hmfzj38hkumks4wxny89797la0sf7wnwfrw4enlmcl82msp0cs78schcPublished at
2023-04-04 01:12:24Event JSON
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"created_at": 1680570744,
"kind": 1,
"tags": [],
"content": "Bitcoin 101: What is fungibility?\n\nFungibility is a desirable property of anything used for trade such as a commodity or currency. Items can be considered fungible if any single unit has the same value as any other unit without further inquiry about its origin, destination, or unique attributes.\n\nSeveral variables have the potential to affect the fungibility of bitcoin units despite there being a commonly discovered price displayed across many exchanges. Privacy and divisibility greatly contribute to the fungibility of bitcoin, but unique differences still exist.\n\nA factor that makes a certain amount of bitcoin have a different value than the same amount in another wallet is the number of UTXOs the balance is split into. Since transaction fees are required to spend each additional input, low value inputs are disproportionally economically penalized compared to high value inputs.\n\nAnother factor that makes satoshis worth ever so slightly more or less is their position within lightning network channels. Every lightning channel has a fee rate set by each peer, effectively assigning certain bitcoin units a positive or negative cost to move.\n\nSubjective value assigned by the market may also affect the fungibility of bitcoin units. Much like a guitar signed by Elvis has a premium market value in the eyes of some fanatics, a coin that was “signed” when spent by a Bitcoin celebrity may have sentimental appeal.",
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}