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Definition

Fungible tokens are digital assets that are interchangeable and have identical value. Each unit of a fungible token is the same as every other unit, allowing them to be easily exchanged or divided.

Why it matters

• Fungible tokens enable seamless transactions and liquidity in digital markets.
• They facilitate the creation of decentralized finance (DeFi) applications.
• Their standardization simplifies trading and valuation processes.
• They can represent various assets, enhancing accessibility and inclusivity in finance.

Risks & Pitfalls

• Lack of regulatory clarity may pose challenges for users and developers.
• Market volatility can affect the value of fungible tokens.
• Security vulnerabilities in smart contracts can lead to potential losses.

Examples

• A cryptocurrency like Bitcoin is a classic example of a fungible token, where each coin holds the same value as another.

Related

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