While many people have heard of Bitcoin, it is still far from mass adoption. There are various reasons for this, but one may be the way that it’s measured. In a sense, Bitcoin is actually a victim of its own success.
To understand why, imagine you are a newcomer to the crypto market. When you look up the price of “one Bitcoin,” you’ll see it is currently above $9,000. That intimidatingly high price can be off-putting and make Bitcoin feel unattainable. Crypto newcomers may not even be aware that it’s possible to buy less than one Bitcoin.
But even if they do know that Bitcoin comes in smaller denominations, measurement is confusing. The smallest unit of Bitcoin is a satoshi, named after the creator of Bitcoin. One Bitcoin equals 100,000,000 satoshi. This is not a particularly helpful or intuitive measurement.
There are other subunits of Bitcoin, such as cBTC (centibits), mBTC (millibits), μBTC (microbits), and bits:
1 cBTC = 0.01 BTC
1 mBTC = 0.001 BTC
1 μBTC = 1 bits = 0.000001 BTC
1 satoshi = 0.00000001 BTC
These are more intuitive to anyone familiar with the metric system, but they’re not very widely used.
Adding to the confusion, Bitcoin itself isn’t always called BTC. According to the International Standards Organization, a unit of Bitcoin in international standards should be labeled XBT, with the X denoting that it’s not associated with any particular country. But not every exchange has adopted this standard. What’s called “BTC” one one exchange may be “XBT” on another.
To help illustrate the measurement problem, let’s take a look at gold.
Bitcoin is often called "digital gold,” in part due to the fact that both Bitcoin and gold have finite supplies. There will never be more than 21 million Bitcoins, and the amount of gold that has been mined to date is about 190,000 tonnes.
You could say that in terms of orders of magnitude, “one Bitcoin” is comparable to “100 kilograms” of gold. This comparison illustrates that Bitcoin’s common unit of measurement is rather large. The common price of gold is calculated in “grams." Imagine if it were sold and denoted in 100kg chunks instead.
Using that standard, the current “price of gold” would be nearly $5 million. But because the smaller unit “grams” is used, if you look up the price of gold you’ll see that it’s about $50. That’s a much friendlier, more approachable sum. Why shouldn’t Bitcoin also have a similarly small unit of measurement?
“Bits” is one option. If one BTC is $9,000, then the price of one bit is $0.009, which is obviously more inviting. In fact, as early as 2013, people have been calling for bits to become the common unit of Bitcoin measurement. Today, some exchanges allow users to select bits as the unit of price display, but it’s generally not the default option.
It might seem like a small thing, but the perceived price of Bitcoin — the number users see and how it’s displayed — matters. Psychologists (and the marketers who study their work) have known for years that making tiny changes like pricing an item at “$19.99” instead of “$20” can have a significant impact on sales.
That tiny change, as the linked study demonstrates, has been shown to increase sales by 24%. Changing Bitcoin’s price presentation to make it less confusing and off-puttingly expensive could have an even bigger impact.
Additionally, many investors come to crypto from the stock trading system. By default, the price displayed by the stock trading system is the unit price of the stock; that is, the price of each share. This is the smallest unit of stock trading and is indivisible. Stock investors are used to reading prices in the smallest units available for purchase, and that habit may be leading some to wrongly assume Bitcoin can’t be purchased in smaller denominations than a full token.
Changing units to attract buyers is not an uncommon occurrence in the traditional financial market. When the price of a stock continues to rise, the high price is likely to affect the purchasing desire of investors, especially retail investors. At times like these, companies will often consider splitting stocks. Bitcoin should consider doing something similar.
BTCC's Bobby Lee has proposed that the industry change the common unit of bitcoin to mBTC (0.001 BTC). Some people suggest using satoshi, but many others have suggested using bits (0.000001 BTC). Whatever the unit, a move to make Bitcoin appear more affordable might attract new investors without affecting current Bitcoin investors holdings.
Recently I asked Leon Li, founder and CEO of the digital currency exchange Huobi, what he thought about using bits as a unit of measurement. "I personally have no objection," he said. "It mainly depends on market acceptance. If it were to be implemented, a user survey and voting may be done first.”
Obviously, the price of Bitcoin has been hovering in the same range for some time now, and one big reason is a lack of new investors. A healthy bull market will require the participation of many new investors, and changing the way we talk about units of Bitcoin could be a step in the right direction.