Even if a government tracked dollar bills with a ledger of serial numbers, like UTXOs in Bitcoin, cash would still be fungible because fungibility is about the market treating each dollar as equal in value, not about traceability.

A $10 bill with a tracked serial number is still worth $10 to anyone who accepts it, just like one satoshi equals another despite UTXO histories.

The ledger might make some bills harder to spend in regulated systems-like flagged UTXOs on certain exchanges-but that’s an external restriction, not a change to the dollar’s inherent interchangeability.

As Investopedia and economists like Jevons (1875) define it, fungibility means units are substitutable based on equal value, regardless of tracking or government rules.

This applies to any asset, encrypted or not: gold, dollars, or satoshis. If the market sees one unit as equivalent to another, it’s fungible.

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