Fungible Vs Non- Fungible: How Do They Work?

By James Robert- Nov 25, 2022 27

What do you know about very fungicides and very non-fungible? These two legal terms are used to classify property as provided in the Civil Code. For example, they are used when dealing with legal transactions and related civil liability.

 

However, these two concepts can also be applied in the context of investment. In this sense, knowing them can give investors returns on products and financial assets considered fungible and non-fungible.

 

Want to know more about it? Read and understand what fungible and non-fungible mean and much more!

 

What are goods and how are they classified?

To get started, you need to understand the concept of the product. According to the Civil Code, they are an object that belongs to a natural or legal person. In this way, everything owned by someone can be considered reasonable.

 

Also according to these standards, products can be classified into different groups. This is done to facilitate the establishment of rules for each class individually.

 

Among them, we can highlight:

 

      Real or underlying resources: with and without physical existence, respectively;

      Immovable or movable: allow its proper removal in place, without losing its essence;

      Consumables or non-consumables: Movable goods whose use is immediately destroyed or not, in that order;

      Divisible or indivisible: fractions with or without changes in their structure, value, or substance, respectively;

      Singular or collective: Existence independent or dependent on another.

 

Also, Section 85 of the Civil Code may classify products as fungible and non-fungible. This difference is one of the most important in the context of investment - you will see later. But first, you have to understand these ideas.

 

Now that you know what a resource is, it's easy to understand what a fungible resource is and how it works. It is a legal term used in the classification of real estate that may be substituted by others for the same type, quality, and quantity.

 

Thus, it is possible to realize that the term covers only movable property, since real estate, by its very nature, is unchangeable. For example, a coin is a fungible product because it can be exchanged for other currencies or for items with the same value.

 

For example, if you give someone a $20 bill and that person returns a $10 bill, you still have the same amount of money. Similarly, it is possible to exchange reais for dollars - providing corresponding values ​​in other currencies.

 

What is a non-fungible good?

Unlike fungible products or non-fungible products that are of the same type, quality and quantity cannot be exchanged with others. This is because they have unique features that make them unique.

 

For example, in the case of artwork. No reproduction of a famous artist's canvas would be as valuable as this, would it? Each work has features that make it impossible to replace it with another. Therefore, the price of a copy differs from the original.

 

 

However, it is important to be careful when determining a good fungible or non-fungible, as it can change its condition. For example, an automobile can be considered a fungible item. However, its level of rarity can make it non-fungible.

 

What are examples of fungible and non-fungible goods in the financial market?

Once you understand the concepts of fungible and non-fungible assets, you may wonder if there are fungible and non-fungible investments. The answer to that question is yes. Therefore, it is possible to run the operation through both types of investments.

 

Here are some examples of fungible and non-fungible assets in the financial markets:

 

Cryptocurrencies

You see, a coin can be a good fungible one. Thus, cryptocurrencies are an example of fungibility in the financial market. This is possible because similar currency units can be exchanged with each other at pre-agreed market rates.

 

After learning more about the subject, it is common to wonder if there is a risk involved when investing in cryptocurrencies. It is also natural to have doubts about the benefits of buying these digital assets.

 

      Benefits

One of the major advantages of cryptocurrencies is the security of their operations. To make a transaction, you do not need to provide credit card details, your name, CPF, or where you live. Therefore, there is no risk of your personal information being stolen.

 

Typically, accessing a traded virtual wallet or exchange depends on a private key and a public key that identifies you and allows you to trade. This increases the security of the process. However, speed and low cost can also be mentioned as advantages.

 

The fact that cryptocurrencies are not regulated by any banking institution or government is considered by fans as another positive point. After all, there is no way to confiscate these from your wallet and no way for the government to interfere in your quotes.

 

Thus, if the country has a ban on virtual currencies, those who own them can transact online in their legitimate market.

 

Also, since the discussions are decentralized and verified online, there are no tax exemptions for the tax authorities. However, this does not mean that cryptocurrency holders may fail to declare their income tax.

 

 

Shares of a company

Another example of fungibility is the stock of a company listed on a stock exchange. Thus, those who invest in securities on the Stock Exchange, B3, or other exchanges around the world are trading this type of product.

 

Commodities

Fungibility is also common when discussing products. The same is true of gold, silver, oil, wheat, soy, and corn. After all, soybeans, no matter where they are born, always has the same monetary value - as long as they represent the same characteristics and quality conditions.

 

NFTs

The short form of a non-fungible item is represented by NFT in the financial markets. It means non-fungible token. NFT is a digital representation of a non-fungible asset.

 

Thus, it may represent, for example, works of art, rare objects, personalized items, and less common pieces. This is for memes, games, music, and videos. NFTs are used to trade pieces that cannot be exchanged with others of equal value because they are unique.

 

What is the importance of understanding fungible and non-fungible goods?

As you can see, there are a number of fungible and non-fungible investments. So, it is important to know these ideas to know how you can benefit from them. Thus, it would be possible to consider fungible and non-fungible in the financial market discussion.

 

In the case of fungible investments, it is possible to make a profit in different ways. With stocks, for example, you can make a profit by valuing them, or among other strategies, you can get dividends distributed by companies.

 

In the case of non-fungible investments, it is possible to earn a return with the appreciation of NFT from their reputation. However, it depends on the market price characteristics. For example, whether a collector pays more for a particular item.

 

Based on this information, it is possible to understand the differences between fungible and non-fungible products and how they work. Also, you can learn how to benefit from them in the financial markets. But if you want to make a good decision before investing, you must understand!

 

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