Most of us will never own a whole bitcoin – and it’s perfectly fine. It’s not like all gold investors can or should buy an entire bar or bullion. But when you’re running away from arbitrary inflation which severely damages your purchasing power, every quantity counts. The name of this game is steady accumulation, and each one of us should do it at their own pace.
Today’s high bitcoin price is the result of programmed scarcity and 12 years of increasing demand. But the best part about it is that we’re just getting started, as millions of people realize that their money can beat hedge funds, investment firms, and even banks.
Bitcoin is very divisible and right now anyone can buy a few fractions and steadily accumulate amounts that will eventually lead to their financial sovereignty. For the last few years, the standard has been the satoshi (1 bitcoin = 100 million satoshis). But dividing to 100 million is far from being the most intuitive approach, and the cost of 1 satoshi in US dollars is too insignificant to feel tangible.
This is why I argue that we should use bits – where 1 bitcoin = 1 million bits.
As I write this article, 1 bit can be bought on bitcoin exchanges for approximately 3.7 US cents. Yes, that’s $0.03, with a chance to hit $0.04 later in the day if the Elon Musk effect persists.
The quantity might seem insignificant, but then again so did 1 bitcoin in 2009. At the same time, it’s tangible enough to get acquired with physical money. You can find 3 coins of one cent each and trade them for 1 bit (or 100 satoshis) on the Lightning Network. That’s not something you can do with a satoshi (the 100th part of a bit).
Right now, 3 cents is cheaper than dogecoin and pretty much on par with XRP. If people thought about bits instead of bitcoins, chasing price goals would be easier. The idea of pumping 1 bit to $1 sounds a lot more feasible than taking bitcoin to $1 million.
Yes, it implies the same effort. But it no longer seems like only institutions or financial firms can do it – the average folk can chip in and purchase an amount which counts and makes a difference. Wasn’t “vires in numeris” (power in numbers) one of the most popular bitcoin slogans?
The reason why bits were abandoned as a denomination in favor of sats is that the metric system was added on top. Who cares about milli, centi, deci, and deca bitcoins? It sounds confusing to most of the English speaking world which uses the Imperial system, and it’s an overall terrible way of communicating value.
In everyday language, we use hundreds, thousands, and millions to express quantity and significance. Telling someone that you own a deci-bitcoin sounds less impressive than telling them about your hundred thousand bits or ten million satoshis. We need to get rid of this overcomplicated system and make it as elegant and comprehensive as we can.
Why bits are better than satoshis
Here’s my argument: bits are the best unit of account for the base layer (where even a 1 sat/byte transaction costs about 140 sats, or 1.4 bits), while sats are best suited for the Lightning Network (the place where microtransactions take place).
A bit is less of a dust amount than a satoshi. If you own about 2 bits on an exchange, you will most likely be able to pay for a transaction fee (which takes a long time to validate) and move the remaining amount to your own wallet.
We should also consider the branding: it’s easier for a Bitcoin newbie to understand that 1 BTC has 1 million bits. Tell them about “satoshis” and they will most likely feel confused about the whole situation. Then ask them to multiply or divide by 100 million and it’s even harder.
Yes, satoshis are part of the Bitcoin code and they are inevitable. But before we see bitcoin hit $1 per satoshi (which seems to be the goal of many people), we’re gonna have to get to $1 per bit first. And the latter is more attainable and can train our HODLing muscles a lot better than something which appears to be impossible at this point.
At today’s rate, getting 1 bit to $1 implies a 27x price increase. This sounds attainable for the everyday person who puts $100 of their savings to buy some bitcoin. On the other hand, getting to $1/sat implies a 2700x increase. To a lot of people, this sounds unreasonable – even if we believe that it will eventually happen.
It’s all about psychology, and I would argue that contributing to a mission whose goal is to get 1 bit to $1 is a lot more social and involving than telling people to become “satoshi millionaires”. The former is about team work and working towards a common goal, while the latter entails the same consumerism that a lot of people resent. I’d argue that we need to keep it competitive and set realistic goals that we can actually achieve.
And as I previously mentioned, in most fiat currencies you have physical money that can be used to buy bits. You can buy a bit with the fiat in your pocket: US dollar cents, Canadian dollar cents, British pound pennies, and euro cents, Turkish liras, Chinese yuans, Japanese yens, Romanian lei, Zimbabwean dollars, Algerian dinars, and so on.
Can you do the same with satoshis? Not with lots of national currencies. So it’s better to tell people about something that they can buy with money they hold in their physical fiat wallets. It gives them a sense of conversion, as opposed to 0.00037 USD (the current price of 1 satoshi, for which we have no way to express in our common financial language.
We also need to consider volatility: with bits, the swings appear to be a lot less wild than with bitcoin. So if the price goes down from $50.000 to $40.000 and you hold 100 bits, your relative purchasing power went down by only $1 at today’s rate. You could have done a lot worse if you invested in some “backed” national currencies.
If my arguments haven’t convinced you, then you should also look into Adam Back’s pitch from December 2020. While I have taken inspiration from his tweets, I’ve adapted the information to some empirical observations that I’ve made. And I think that bits are a better unit of account for the next few years – at least when we refer to the Bitcoin base layer.
Okay, so you want to use bits as the unit of account for bitcoin. What’s next?
Now that I’ve identified a way to make bitcoins more attractive to the average retail investor, it’s time to spread the education and lobby to exchanges. We need to convince them to list “bits” as an option, so more people can chip in.
It makes a lot of sense for “bits” to be the preferred way of expressing smaller bitcoin units, but this time around we need to make sure that we keep the metric system prefixes away. 100 bits sound more appealing than 10.000 sats, and the fact that they can be bought for the equivalent of $3.7 at today’s rate makes the trade sound a lot more intriguing.
You’re not just purchasing fractions from a bitcoin, but you’re also partaking in a community plan to increase the value of that bit to $1 or more. And if you buy $100 worth of bits and the price of Bitcoin goes up or down by 20%, your position only gets affected by $20 – a lot less wild than buying GME stocks or some Wall Street asset which is a lot more volatile. It’s easier to think in bits, as the gains and losses are tangible and have corresponding physical representations of fiat money.
1 bitcoin = 1 million bits = 100 million satoshis. We’ll use bits until we get to the dollar parity (1 bit = $1), and then switch to satoshis if it gets more convenient. But until then, we have work to do. There will only exist 21 quadrillion bits and we need to help everyone grab some before it’s too late!
Jimmy Song’s BIP 0176
In the midst of the phenomenal December 2017 price increase, Bitcoin Core developer Jimmy Song wrote BIP0176 to standardize bits as the preferred unit of account. This way, users would send small amounts with greater ease and also make instantaneous conversions to fiat money.
Song suggested that the term “bit” already has a monetary meaning which precedes the computer science unit of measurement for data, where 1 bit is the eighth part of a dollar. But contrary to the suggestions presented in this article, he accepted the metric system by acknowledging that the bit and the micro bitcoin (µBTC) can remain synonymous in the Bitcoin lexicon.
It’s definitely an interesting proposal which reflects an early concern of the five-digit bitcoin prices in USD. And today, the wallet section of Bitcoin Core optionally allows users to send amounts and pay transaction fees while accounting in bits.
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