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@ DonMc
2023-07-19 13:44:20How Did We Get Here?
At its inception, bitcoin was worthless; it had no monetary value. Early adopters could mine hundreds, if not thousands, of bitcoin on simple laptops. As such, there was no need to enumerate it in other units than whole bitcoin. The Bitcoin protocol was designed to accommodate smaller fractional units, but there was no need to use them in the early days as tens, hundreds and even thousands of bitcoin were the norm. The first known purchase using bitcoin was 10,000 bitcoin for a couple of pizzas.
Using whole bitcoin to enumerate was logical and necessary in the early days. In the design of bitcoin, Satoshi saw fit to include names for smaller divisions of a single bitcoin, namely bits (1,000,000 bits per whole bitcoin) and sats (100,000,000 sats per whole bitcoin). These are not new terms and are not mutually exclusive. They mimic perfectly the conventions used by the majority of FIAT currencies used throughout the globe. I suggest that this is by design to allow for the eventual increase in the value of whole bitcoins.
The Current Situation
Over time, bitcoin has increased in value to tens of thousands of dollars for a single bitcoin. We must re-evaluate how we enumerate bitcoin values and move away from the ludicrous eight decimal places and unfamiliar divisions. A change is needed to remove confusion and foster familiarity for new adopters, as bitcoin is used as a medium of exchange.
We are still so early in the bitcoin adoption cycle. Although it's estimated that up to 100 million people hold the asset, most people yet to adopt bitcoin are suspicious and confused about what it is. At this point in the adoption cycle, it's safe to say that most individuals introduced to bitcoin in retail will never accumulate one whole bitcoin.
If you hold one or more bitcoin at this point, you're in a very fortunate position that will be unattainable for most individuals moving forward. Not even every millionaire in the world can own a single bitcoin. It's estimated there are over 50 million millionaires worldwide, but there will never be more than 21 million bitcoin.
Except in very rare circumstances, most transactions will only ever include fractions of a whole bitcoin, and these fractions will diminish as the value of bitcoin increases over time.
Confusion and Cognitive Load
Bitcoin is a terrible name.
For the uninitiated, a bitcoin should reference a physical object, i.e., a bit coin. Bitcoin is a digital asset, but this conflicts with its name. In addition, bitcoin can be used to describe both the monetary network (Bitcoin) and the monetary asset (bitcoin).
Bitcoin, the monetary network, is one of the largest and most secure computer networks. It is the core technology that provides the necessary framework and communications channels for bitcoin transactions and runs on thousands of nodes around the globe. The Bitcoin network is unparalleled in reliability and security.
Bitcoin, the monetary asset, is confusing and alien to those who have yet to adopt it. Its high value leads many people to think they cannot afford to adopt bitcoin or have missed the boat. This is because most people still hear about bitcoin priced as whole units with an unaffordable price tag.
Even though current early adopters of bitcoin are comfortable breaking down bitcoin and using eight decimal places, e.g., 0.00221345 BTC, this method is wholly alien and off-putting to non-holders. Not only is this unfamiliar, but the cognitive load of deciphering this abomination can also be quite stressful, especially if the trailing zeros are omitted. Just how difficult is it to differentiate between 0.0007 and 0.00007 BTC?
Madness.
Another source of confusion is the current adoption of the satoshi as the smallest unit of bitcoin. Seen by many bitcoiners as a homage to the designer of bitcoin - Satoshi Nakamoto - the satoshi or sat seems to have no connection with bitcoin to the uninitiated. Due to it's infinitesimal size (100,000,000 of a whole bitcoin), anything $10 in value at todays prices requires tens of thousands of sats ($10 = 33,387 sats). $100 is even more ridiculous - 333,876 sats. Normal people from traditional FIAT currencies just aren't equipped to deal with such large numbers.
To clarify how adopting a new way of enumerating could help remove confusion and boost adoption, let's apply the current bitcoin vocabulary to a familiar FIAT currency - USD.
FIAT Currency Conventions
Let's invent an imaginary USDcoin.
USDcoin = 100,000,000 cents.
Now let's say that the USDcoin has been adopted and is used as a medium of exchange. Imagine the average person walking into a store to purchase a fridge and seeing it priced as Fridge = 0.0003 USDcoin or 30,000 cents.
This is totally alien and unfamiliar to most people.
Instead, let's enumerate using dollars at their actual value of 1 dollar = 100 cents.
So 30,000 cents = $300.00.
Three hundred dollars.
See how much more familiar and comfortable that feels?
You have the dollar symbol so you can instantly see it as dollars, and you have the decimal point to differentiate between dollars and cents clearly.
The majority of the currencies of the world use this same convention.
GBP
£1,000,000 pounds = 100,000,000 pennies, but we use the convention - £300.00
Three hundred pounds.
If we include pence as well, e.g. £300.50, that's Three hundred pounds and fifty pence.
Euro
€1,000,000 euros = 100,000,000 cents, but we use the convention of €300.00
Three hundred euros
If we include cents as well, e.g. €300.50, that's Three hundred pounds and fifty cents
BTC
Let's do the same for bitcoin (let's redefine the BTC symbol ₿ to mean 1 bit)
Bitcoin - ₿1,000,000 bits = 100,000,000 sats and use the convention ₿300.00
The fridge would now be priced at 30,000 sats = ₿300.00.
Three hundred bits.
If we include sats as well, e.g. ₿300.50, that's Three hundred bits and fifty sats.
or smaller amounts such as ₿10.49 - Ten bit forty-nine
See how much more familiar and comfortable that feels?
Repurposing The BTC symbol
There have been many attempts to create a symbol for the sat. These range from lightning bolts to kebabs to fancy S symbols, but all have failed.
There is one symbol that is instantly recognisable and associated with BTC, and that is the ₿ symbol., historically used to enumerate whole bitcoin. With the current convention, this symbol can only be used when using the full eight decimal place nomenclature of BTC, i.e. ₿0.00001234
I would suggest that we now adopt the ₿ symbol for bits. It's implausible anyone will confuse whole bitcoin with bits. If you see a price tag of ₿300.00, you won't think it's 300 whole bitcoin. If you want to deal in whole bitcoin, you can return to using eight decimal places and use the BTC suffix, e.g., 3.09367835 BTC.
Most normal people will never need (or be in a position) to transact in whole bitcoins. If they are fortunate enough, they can transact in millions of bits. Remember, 1 BTC is 1,000,000 bits or using the redefined symbol ₿1,000,000. We do this with USD or GBP: we use millions of units, e.g., $1,000,000 or £1,000,000.
We need to move away from talking about the price of bitcoin in whole bitcoins (BTC) and start using bits, just as we talk about things priced in dollars or pounds. Let's leave the name Bitcoin for the network and focus on bits.
Adopting bits to enumerate bitcoin has other benefits. A bit is a "bit" of a bitcoin. People are more likely to associate the word "bit" with bitcoin and are more likely to understand that a bit is a part of a bitcoin. A "sat" means nothing to the average person.
If exchanges adopt this terminology, people will perceive lower prices because bitcoin would be priced in bits making bitcoin appear more affordable. People would be encouraged to buy and spend in bits.
What Is Required To Move To Bits
Nothing new is required; bits are already part of the Bitcoin protocol and are defined in the Bitcoin white paper. No changes are needed to the underlying monetary asset or Bitcoin network. Bits are already built in, and they were included for a reason.
The significant change is that wallet developers and exchanges need to allow users to select bits as an option to display values. Exchanges could benefit significantly from displaying BTC pricing in bits to change the perception of affordability. The current price of BTC on exchanges today (19 July 2023) is shown as $29,937.90. Unaffordable for the majority of people.
How much more affordable would the price shown as $0.03 per bit or even $2.99 per 100 bits be?
Do you think the fact that they mirror dollars and cents, or pounds and pence, is a coincidence? Satoshi Nakamoto was already looking to the future when bits would become the new global currency and built this familiarity into the protocol.
As an aside, the suggestion of using bits is not new. Jimmy Song created bip-0176 in 2012, suggesting the same. Unfortunately, bits were not adopted back then but I feel the time has come to embrace the benefits of bits and sats.