That's because the unique codes on the banknotes are not stored forever on a worldwide database every time the banknote changes hands. Bitcoin UTXOs are stored forever on a worldwide database every time that UTXO changes addresses.
UTXO doesn't "change addresses", because UTXO is not money. Bitcoins are, and they are expressed as "value" in the UTXO.
Each participant has to know the entire transaction in order to produce a valid signature...
You deliberately misunderstood. Obviously participants know the inputs they sign, but they don't de-anonymize each input and approve it according to each participant's "moral score". That must be a brand new feature from Wasabi foundation.
You are very clear, I'm telling you that you are WRONG: UTXOs have distinct origins on the blockchain.
Define me fungibility.