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The Difference Between Fungible and Non-Fungible Goods

From Audio: What the NFT is this?

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station description TechStuff
TechStuff
Duration: 06:07
"TechStuff" host Jonathan Strickland outlines the key differences between fungible and non-fungible goods and explains why big companies might fear the dawn of NFT's.
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Is trading gold bars the same as trading dollar bills? Listen to "TechStuff" host Jonathan Strickland as he outlines the key differences between fungible and non-fungible goods and explains why big companies might fear the dawn of NFT's.
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lumber barring any clear differences in quality, one amount of a commodity is roughly equal to the same amount of that commodity. Usually, even if the samples were taken from totally different sources, there's no practical difference between them. So it's a very pragmatic way to go about things. You know that pile of lumber is just as good as that other pile of lumber. You might think now, sure if you were to get down to details like the really fine stuff, there's going to be differences, but at scale, it sort of is awash from a pragmatic standpoint. So what does non fungible mean? Well, as the nun tells us it's the opposite of fungible. So it's something that is not interchangeable with something else, like a car, for example. So Let's say you own a 1959 Cadillac Fleetwood Series 75. And I also happen to own one of those as well. Now, first of all, you got yourself a sweet ride that you probably can't park anywhere because it's not so much a car. It's really a space station. I mean that sucker is huge, but I'm getting off track. Our respective cars are non fungible even though they are the same year, the same, make the same model. We wouldn't just interchange them, we wouldn't just swap them back and forth. I mean, there are many other factors that determine the actual value of a car. How much has each car been driven? How many parts are original to the car? What condition is the car in and its parts? Has either of those cars been in any accidents? Did one of them serve as the vehicle for Doc hopper? The bad guy in the muppet movie. All of these sort of things affect the value of the car. And so these two cars, while possessing lots of similarities are not interchangeable. And to go back to the lending example, let's say you are a very kind person and you lend me your car despite the fact that, you know, I don't actually drive. But for this example we'll say that I do so for a week you lend me your car. It would not be Acceptable for me to return a car that was different from the one you lent me. Even if the car I brought back was the same year, the same make and the same model as the car you lent me. It's not your car. That's a problem. You would probably have some choice words for me if I tried to pull that kind of stunt at me. Well, I'd be like, uh, you know, that is weird. Where did I even get this car and fund ability does admittedly get a bit fuzzy because the line between fungi bility and non fungible Itty isn't always easily distinguishable. For example, let's take gold. Now in general, gold is considered a fungible commodity. If you pan for gold and you end up with half an ounce of gold, that way, that's worth the same as a half ounce of gold in any other format, whether it's a nugget or dust or a teeny tiny piece of a gold bar or whatever, one bit of gold is worth the same as an equivalent amount of that gold, assuming the other things are the same, Like the purity of the gold is the same. That does account for differences in value. But let's say that you go to the Federal Reserve Bank in new york city, maybe you're the sibling of a thief who had a really unsuccessful run at nakatomi plaza and you want to clear out the Federal Reserve. Now, this bank stores gold in an underground vault and it holds it on behalf of financial institutions from all over the world. Each gold bar has a serial number that identifies that gold bar and to whom that gold bar belongs. These serial numbers correspond with ledgers, and those ledgers are a complete record of which gold bars belong to which financial institutions and in this case the gold bars are measured with incredible precision to determine their weight and purity, which means each gold bar has its own distinct value. And it also means you can't just swap the bars around. You couldn't turn to Liechtenstein and say, okay, so you want five gold bars and you just grab any five off the vault shelves. You would have to retrieve the specific bars indicated by whichever client you're talking to because each bar would have a specific value that can vary a little bit, or maybe even a lot from other bars that are in the vault. So this type of gold bar is not fungible. Okay, but what does all this have to do with digital goods? Let's consider the nature of digital stuff for a bit. one of the big differences between digital and physical goods is the ease of replication and distribution. This is something that has been an enormous issue in the business world and it's something that we see prompting big companies to overreact in ways that range from bewildering to incredibly negligent and beyond. So let's consider a few examples essentially, whenever a technology comes along, that allows the common folk, you know, like me to copy stuff. Well, big companies get ants and their britches. If you want to go all economic thought on this, it's all about the means of production and who has access to them in a capitalist society. The means of production are in the hands of private individuals and companies who then may profit off the stuff that they produce. And that totally makes sense. Right? You make something, you can profit off of that, something if someone else wants to buy it. And of course in the world we live in a lot of the stuff we can buy comes from really big companies that are churning out products at an enormous scale. So when tech comes around that can make copies of stuff that scares these companies. One thing big companies do not like to see, for some reason are things that can make their numbers next to profit go down on a spreadsheet. And if a technology allows people to copy stuff rather than by things from a company that's a potential hit to the bottom line. And we've seen this over and over from the first cassette tape and audio recorders.
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