In the world of finance, identity, and trust, we often hear the term fungibility—a quality that allows something to be freely exchanged for another of equal value. A pound coin is fungible because it can be swapped for another identical coin without loss. A concert ticket, on the other hand, is non-fungible, because it grants a specific seat for a specific event.
But as we move toward portable digital credentials, we need to be careful about what we mean by portability. The idea of an issuer providing a credential to a holder, who then presents it to a verifier is one form of portability—but this is not the same as fungibility. In most cases, credentials remain tied to an individual, meaning they cannot be transferred at will. And yet, if we look closely at real-world examples, there are cases where a form of credential might benefit from controlled transferability.
The Limits of Portability in Digital Identity
In the current world of decentralized identity, an employer, a government, or an institution issues a verifiable credential to a person. That person, in turn, can present this credential when needed—perhaps to a border official, a hiring manager, or a financial institution. This credential is portable in the sense that the holder can use it anywhere that recognizes its issuer, but it is not fungible. It cannot be passed to another person. You cannot give your driver’s license to a friend, nor can you transfer your university degree to a stranger.
This makes sense when credentials are tied to human identity. But what about credentials tied to things, machines, or access to resources? Consider a scenario where you rent an Airbnb and are issued a temporary digital credential that allows you to access a lockbox containing the key. You arrive earlier than planned, and you want to pass that access credential to your wife so she can retrieve the key instead.
In the current decentralized identity model, this is not possible. The credential was issued to you, and there is no mechanism for passing it along within your own circle of trust. Yet, for many use cases, such a feature would be both natural and necessary.
Rethinking Portability: Credentials for More Than Just People
This is where the concept of transferable credentials—or perhaps a more pure definition of portable digital credentials—could come into play. If credentials were designed not just for human identity but also for objects, machines, and temporary access to resources, then a form of controlled fungibility might make sense.
For example:
- A company might issue an equipment access credential that can be transferred among authorized employees.
- A digital parking permit might be assigned to a vehicle rather than an individual, allowing different people to drive and park it.
- A smart home system might allow a homeowner to issue a guest access credential that can be transferred to trusted individuals.
This kind of fungibility does not mean that credentials should become freely tradeable like money, but rather that they should be delegable—capable of being transferred within predefined trust boundaries.
The Hidden Fungibility of Paper Credentials
This issue is not new. In fact, it has long existed in the physical world, where the distinction between fungible and non-fungible credentials is often blurred by practical limitations.
Take a train ticket—a small, printed slip, seemingly interchangeable. You might think this is a fungible token because you could, in theory, hand it to another passenger, allowing them to travel in your place. But look closer. If the ticket was purchased using a discount only available to under-18s or pensioners, then its intended nature is non-fungible—it was issued based on a personal attribute. The fact that it is printed on paper means it can be passed around, but that does not mean it was designed to be fungible.
In a digital system, the issuer could enforce this rule, ensuring that such a credential could never be transferred incorrectly. But does that mean we should strip away all forms of transferability? Or should we design systems that acknowledge some degree of controlled fungibility, allowing flexibility where it makes sense?
The Future: Designing Digital Credentials with Intentional Fungibility
What we are really talking about here is intention. Some credentials—passports, diplomas, medical licenses—are rightly non-fungible, and should never be transferable. Others—event tickets, temporary access codes, digital keys—might benefit from conditional fungibility, where the original holder is allowed to delegate their credential to another person within an approved framework.
Today’s decentralized identity systems do not fully account for this spectrum of transferability. The default assumption is that credentials belong to individuals and remain locked to them. But if we want a truly portable system, we may need to rethink that model—not by making credentials universally fungible, but by allowing well-defined rules for delegation, controlled transfer, and shared ownership.
The question for the future is not just whether a credential is fungible or non-fungible, but who should have the power to decide?
If we can answer that, we may finally achieve a model of digital trust that is as flexible, intuitive, and practical as the real world itself.
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