Crypto Investors Should Use a ‘Satoshi’ as Bitcoin’s Base Unit for Future Growth and Adoption
Should One Satoshi Be the Base Unit of Bitcoin?
Bitcoin is divisible to eight decimal places. The smallest unit of bitcoin – the least amount of bitcoin you can feasibly transfer – is called a Satoshi. As the value of bitcoin has grown over time, some are claiming that we should start using Satoshis as the base unit.
Today, one bitcoin is worth around $6,500. Less than a decade ago, bitcoin was worth less than $1 USD. The day bitcoin reached parity with the USD was a landmark moment for the world’s largest digital currency.
Back then, it was feasible to trade a whole number of bitcoins for pizza. You might agree to trade 30 BTCs for a whole pizza, for example. Or, you might trade 100 BTC for access to software.
These were round numbers similar to what we’d pay in USD and other major fiat currencies. You can easily visualize the number.
But as bitcoin has grown in value over time, representing prices in bitcoin has become increasingly problematic.
Today, you might be asked to pay a 0.0004 BTC transfer fee, for example. That might not look like much, but it’s $2.60. If your transaction is less than $100, then that’s a sizable transaction fee similar to what you’d pay with PayPal and other traditional payment transfer methods.
But about if someone asked you to pay 0.004 BTC for a transfer fee? Your eyes might miss a zero. You might assume that’s not very much money – but it’s a fee of $26 USD.
Ultimately, unless you’re buying real estate, cars, luxury products, or other high-end purchases, it’s unusual to spend 1 BTC or more in any retail transaction. Today, most BTC transactions for retail purposes involve amounts less than 1 BTC.
Our eyes and minds aren’t used to this. We’re used to seeing whole numbers – whether we’re spending $5 USD on a pint of beer or 35 CNY, it’s easy for us to visualize whole numbers instead of fractions – especially when multiple decimal places get involved.
That’s why a growing number of users are advocating for a significant change: we start using Satoshi as the base unit.
Why Use Satoshi as the Base Unit?
In a recent blog post, Melik Manukyan advocated for using Satoshi as the base unit for bitcoin transactions.
“Humans are not well adapted to think nor work in terms of decimals, and neither are computers (precision or rounding errors) for that matter,” begins Manukyan.
“Therefore, it is wise to adopt an integer as the base unit and stop pandering to the former paradigm of bills and coins as suggested in the BIP176 (‘bits’) proposal. Decimals are simply non special in the digital age and just work towards creating needless complexity.”
Part of the problem is all of the silly names the bitcoin community has come up with for the denominations of bitcoin, including Bitcoin, Bitcent, mBTC, Millibit, Milli, µBTC, Microbitcoin, Mike, Bit, Finney, Satoshi, etc.
Manukyan claims that these names “have achieved nothing other than result in increased confusion and inconsistency.”
Manukyan also makes it clear that he doesn’t want Satoshi to become the official base unit of the bitcoin community. Bitcoin will always be bitcoin. However, he’s advocating that users begin to think internally of their bitcoins being represented as Satoshis.
Advantages of Using Satoshi as a Base Unit
“The Satoshi as a base unit allows us to effectively incorporate and integrate the SI system which is already engrained in all human measurement systems, especially digital ones. In all measurement systems, we always find the most appropriate smallest unit or denomination for each respective object and work upwards.”
Manukyan introduces a number of appropriate comparisons, including:
- It doesn’t make sense to measure a vodka shot in liters, but instead in 50mL
- It doesn’t make sense to measure a modern hard drive as 4,000,000 MB, but rather as 4 TB
- It doesn’t make sense to represent baking measurements in kg, but it makes sense to measure human weight in kg
- Real estate is more easily measured in terms of thousands, saying you bought a home in the “400s” for example
- Earnings reports from major corporations are measured in billions or millions – not in single dollars
For all of these reasons, Manukyan advocates a powerful change in our thinking:
“The Satoshi (0.00000001) is the smallest unit per the Bitcoin base-layer protocol consensus rules and it makes sense to adopt it as our base unit and begin ‘thinking’ in terms of Satoshis and nothing else.”
By using Satoshi as the base unit, it allows us to scale up and denominate everything in Satoshis. It also provides a good reference point for humans, making it easier to understand larger numbers.
Today, 1 USD is equivalent to 15,000 Satoshis – which Manukyan calls “sats”.
That means a cup of coffee might cost 30k to 45k sats. In the future, as bitcoin’s value rises, those numbers might reach into the 100s. Regardless, it’s easier to visualize and discuss 30k to 45k sats instead of the equivalent in BTC, which is around 0.0006 BTC.
“Start thinking in Satoshis today, tomorrow you will,” ends Manukyan.
So far, Manukyan’s post has received 600 claps on Medium, suggesting that it has been well-received by the community. Members of the bitcoin community are tired of thinking in terms of decimal places. I don’t know about you, but I’m tired of leaning into my screen and counting the zeroes before any bitcoin transaction.
By thinking in terms of Satoshis, we may be able to increase the universal adoption of bitcoin. Unless the price of bitcoin suddenly goes down, the decimal point and denomination problem is here to stay.