While Bitcoin’s meteoric rise in price is one of its greatest strengths when it comes to investors, it’s also a huge psychological barrier to entry for those who aren’t completely aware of how the system works. Time and time again, new users have been put off due to the perceived requirement of purchasing Bitcoin in full coins, when in all actuality, it’s broken down into very, very small parts. To help alleviate these issues, there have been pushes in the past to redenominate Bitcoin to smaller increments, and the pushes are on the rise again – and rightly so.
The Original Issue: $1,000 Bitcoin
To give a little background, these talks started back in 2013, when Bitcoin first breached the $1,000 mark. It was already obvious that there were two issues:
- The price of Bitcoin was too high for outsiders to get involved (“I don’t want to spend $1,000 on a single coin”)
- Paying for goods became a mess due to small fractions
For the first point, a great example would be stock splits. The point behind them is to lower the barrier to entry by making the stocks cheaper again. As the stock then rises yet again, they can continually be split. A major difference here, however, is that stocks generally have to be purchased in full shares. Bitcoin, on the other hand, is broken down into 100 million parts, called “satoshis.” So even if BTC was worth $100 million per coin, you could still trade in a single satoshi for $1.
Due to these talks and concerns, the idea was to break it down into mBTC (or 1/1,000 of a BTC). This would make each mBTC worth $1 when a full coin was $1,000. It just made sense. Some clients and sites did adopt this format, but it never really got adopted as the “norm.”
The New Problem: Bitcoin Nearing $20,000
While getting people into BTC was hard enough when it was $1,000 per coin, it’s now a multitude higher than this – and pushing towards $20,000 each. This has compounded the previous problem, in that now many believe you have to invest close to $20,000 just to get involved. And while mBTC was a great solution in the past, that makes each one close to $20. As such, there have been new discussions for pushing towards the uBTC (1/1,000,000 of a BTC). Going to this increment would make each uBTC around $0.02, much more manageable for both investing and sending payments. To further illustrate, let’s say BTC is $20,000 and you need to pay someone $20 for an item. That’s 0.001 BTC, 1 mBTC, or 1,000 uBTC. The first case is off-putting for a lot of people, the second isn’t really future-proofed, and the last one helps illustrate the “value” you get when holding. Of course, these are all exactly the same at the end of the day – it’s all a mental roadblock, rather than a technical one.
Be Careful With Denominations!
This is all important to understand because the lack of unity currently being displayed with regards to denominations can cause complications. Some clients will use mBTC, some use BTC, and some use uBTC. Some price charts use BTC (like BitcoinWisdom) and some use mBTC (like Bitcoinity). These are all exactly the same price-wise when you convert them, but you must ensure they’ve been converted properly. To assist with that, here’s another easy breakdown chart:
- 1 BTC = 1,000 mBTC = 1,000,000 uBTC = 100,000,000 satoshis
- 1 mBTC = 1,000 uBTC = 100,000 satoshis
- 1 uBTC = 100 satoshis
- Optional (uncommon): 1 cBTC = 0.01 BTC = 10 mBTC = 10,000 uBTC = 1,000,000 satoshis
For those who are already familiar with the metric system, you should be good to go. Just ensure that you always double-check before sending to ensure the denomination is the same as what you expected. There have been a few cases in the past where someone sent exponentially more than they planned to because they weren’t watching the denominations!