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WHAT: The ability of an asset (or commodity) to be interchanged with another asset of the same type. Assets that are fungible are exchangeable with each other and simplify the exchange process, as each asset has an equal value to all others in circulation.

EXAMPLE: Stocks carry the same ownership interest in a company, whether purchased on the FTSE, DAX or NYSE. This same idea applies to the circulation of money.

In Crawfurd v. The Royal Bank of Scotland (1749) the claimant (Hew Crawfurd) argued that a £20 banknote he had marked was still his property after is was reported stolen in 1748 and turned up later at the bank. The court sided with the bank because “Trade, it was argued for the Banks, rested on the free circulation of money, and free circulation rested in turn on the reliability of notes and coins. If Crawfurd was able to vindicate the banknote, no merchant could risk taking money in payment ‘without being informed of the whole History of it’.” Kenneth Reid, Banknotes & Their Vindication in Eighteenth-Century Scotland (2013)

WHY: Bitcoin passes the money tests above, yet the ability to trace the history of a transaction via its’ public ledger undermines privacy scenarios which physical fiat currencies still afford and which the 1749 case essentially protected – being that the history of currency in circulation did not taint its’ future use. Bitcoin is not a privacy technology because it’s ledger is a traceability machine that affords surveillance for all that use it. Black listing coins with a small supply is also not efficient or scalable in a mass adoption scenario. Open privacy makes ‘tainted’ coins a reality (including in Ethereum) and public disclosure of private financial information be it individual, enterprise or governmental is real risk, but only if that entity has something to hide. Cryptocurrencies such a ZCash seek to solve this concern via Zero Knowledge Proofs (ZKPs).

REFERENCES:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2260952

Diagram: http://money.visualcapitalist.com/infographic-the-properties-of-money/

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