Fungiblity is interchangeablity, which is different from being perfectly identical, which is also different than being perfectly private.

I understand the block is transparent.

Quite simply, those privacy issues are solved on other layers.

TCP/IP isn’t stupid because there isn’t a VPN integrated into it. The VPN just sits ontop.

General compute proof of work is a huge security risk.

Privacy on the base layer of money puts cart before the horse.

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VPN and Tor are a good example. Both are bandaids for a flawed system and its transfered data leaks.

Look at Reticulum. You can do it the right way and encrypt the baselayer so you have no leaks to higher levels.