Sirwin
Sirwin
Crypto chasing man

Does Bitcoin (BTC) Need More Decimal Places?


Those of us who own less that 1 Bitcoin (BTC) are familiar with seeing our holdings with eight decimal places, e.g. 0.00204503 BTC. Imagine if that changed to 0.002045039684, although thoughtful websites would probably add spaces, like 0.002 045 039 684 BTC or 0.0020 4503 9684 BTC. I don't know about the rest of you, but seeing more digits makes me feel a little richer, even if those decimal places are immaterial to my wealth.


At the time of this post (1 Mar 2024), Bitcoin (BTC) is just below its all-time high of USD$64,899, according to Coinbase, although other sources claim higher prices. With BTC being divided into 100,000,000 satoshis per bitcoin, and a current price of USD$61,987 (Coinbase, 1 Mar 2024), that makes each satoshi worth about USD$0.00062. If BTC blasts through to USD$100,000, then a satoshi would be worth USD$0.001.


The increase in the value of the smallest unit of a bitcoin has an impact on the use and adoption of bitcoin. No longer are micro-transactions (those less than USD$0.01) easily conducted, making BTC less useful, and slowing its adoption.


Many Bitcoin enthusiasts are familiar with faucets, websites that pay out small amounts of cryptocurrency. The rise in BTC's value has caused most faucets to convert to internal units as rewards, although there are a few hold-outs, such as the long-running FreeBitco.in faucet. Most of the switch to internal reward units has to do with matching revenues (usually in USD) to payments. FreeBitco.in is different as its revenue is mostly from gaming and mining, but it still faces the issue of a satoshi being worth too much. Currently, its faucet pays 2 or 3 satoshis for the usual payout. But what happens when a payout of one satoshi doesn't draw in users, and a payout of two satoshis loses money for the site?


Some other faucets that still award satoshis have implemented their own extra decimal places, such as RollerCoin, which added two decimal places for its players' BTC earnings. Others added decimal places but round or truncate when adding to earnings.


If Bitcoin transactions were expanded from the current eight decimal places, then micro-transactions are feasible again and more granularity of rewards is possible. My personal opinion is that BTC should be expanded to 12 decimal places, making the smallest unit one trillionth of one BTC. And twelve may yet turn out to be too few. The great Satoshi Nakamoto did not think big enough when he (or she or they) set the number of decimal places to eight (and why not nine, which would have made a satoshi one billionth of a BTC?). With enough decimal places, only one BTC would be sufficient to replace all of the world's current money supply.


I am not familiar with the code for Bitcoin, but having been a software developer for many years, I can't imagine that the number of decimal places would be too hard to change. Of course, that means a fork, possibly a hard fork, which can be painful.


Of course, there are probably good reasons not to expand the number of decimal places in a bitcoin. For example, if BTC is a store of value instead of a currency (something used in transactions), then there is no need for more decimal places.


The idea of adding decimal places to a currency contrasts with a normal practice of fiat currencies, which is to lop off zeroes making the base unit seem more reasonable after a bout of inflation. Slightly off-topic, if the USGovernment chopped off two zeroes of the USDollar, that would erase almost all of the inflation since the creation of the Federal Reserve in 1913. Empirical evidence: Gold in 1913 was USD$20.67/ounce; 1 Mar 2024, gold is USD$2064.80.


Expanding the number of decimal places in a bitcoin may already be the subject of debate. I haven't heard of it, but I don't follow the discussions of Bitcoin changes closely. I think a larger debate may come from trying to name the new smaller unit of Bitcoin (unless three decimal places are added, then milli-Satoshi would probably be chosen).

 

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CryptoForAll
CryptoForAll

Crypto enthusiast since 2014


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