This is an opinion editorial by Stephan Livera, host of the “Stephan Livera Podcast” and CEO of Swan Bitcoin International.
Many fiat currencies are struggling to maintain purchasing power in dollar terms. The macro conversation on finance Twitter is now turning to how the overall system is breaking down and how you cannot reduce a Ponzi.
Now is a good time to press the advantage that Bitcoin brings: not being a fiat currency that can be printed on demand. Time to denominate in terms of bitcoins.
What is happening in the world of fiat currency markets?
As you know, many fiat currencies are crashing against the USD. This does not necessarily mean that the USD is “rising”, but that it is also losing purchasing power, just at a reduced rate.
Year-to-date (YTD) for major fiat currencies vs. USD:
- GBP is down $1.34 to $1.057, down 21%
- JPY down from 0.0087 to 0.0069, down 20%
- Euro falls from $1.13 to $0.97, down 15%
The Bank of England is now starting a new wave of bond purchases, or in other words, the downgrade continues. GBP holders and savers will continue to have their savings destroyed by the money printer over time. They are being sacrificed on the altar of “financial stability”.
With fiat currencies rapidly devaluing, it’s not such a crazy idea that we should value things directly in terms of sats or BTC. While nocoiners love to hate Bitcoin for not having consistently high prices, the reality is that long-term Bitcoin users have benefited dramatically, both in terms of purchasing power and freedom.
The loss of confidence in fiat currencies is driving a fundamental shift in thinking. If before our pre-coin friends were afraid of bitcoin due to volatility, the difference in volatility between bitcoin and fiat currencies is narrowing, so it makes sense to start using bitcoin denominations.
What does denomination mean in Bitcoin terms?
It means evaluating financial costs and benefits in terms of Bitcoin or satoshi. This includes the financial valuation of our net worth in bitcoin/sat terms. That’s really what matters in the long run for Bitcoin Maximalists after all. If you think that one day everything will be priced in sats, why not start now?
I’ve personally denominated my net worth in terms of bitcoins for a while now, but I’ve struggled with the next part: day-to-day expenses. For me, this is mostly due to mental arithmetic. So my next step is to focus more on evaluating the cost of bitcoin income and expenses of day-to-day items. If we are serious about bitcoin as the best money, we should show it.
Practical Tips on Bitcoin Naming
Start by keeping your finger on the pulse as to what the “sats per dollar” price is. You can do this using Coinkite’s BLOCKCLOCK (aka Moscow time) or maybe sites like Bitbo.io that list it. You can also use conversion tools like bitcoin.io or preev.com. Also, pricedinbitcoin21.com is a useful site that shows all kinds of prices denominated in bitcoins.
In mental arithmetic, a tip is to start with sats per dollar. So, for example, if 1 BTC = $19,067, then sats per dollar is roughly 5,200, so $10 is about 52,000 sats, $100 is about 520,000 sats, and $1,000 is about 5.2 million sats.
Another hurdle is having to continually reset prices if we actually do quoting real world products/services in bitcoin terms. But be that as it may, this is our proverbial cross to bear, and it benefits the user in the long run to operate in this way.
Of course, there may come a point where the bitcoin price for something set a few years/cycles ago is no longer appropriate, but that just requires readjustment. And to be fair, this is something all fiat traders must do anyways.
This isn’t new, we’re just bringing it back
In the early days of Bitcoin, it was more common to talk in terms of the BTC values of things. Perhaps it became more difficult due to the increased price and dealing with small fractions of a bitcoin in our heads.
However, remember that the first services and games ranging from SealsWithClubs, to MPOE and SatoshiDice were denominated in bitcoins! Some of the first exchanges on the Bitcoin Talk forums were denominated in bitcoins. So really, this is just returning what the Bitcoiners used do.
Of course, there are some in the Bitcoin space who are already denominated in bitcoins, even in terms of the service/product they sell. Notably, CoinJoin’s services are denominated in bitcoin (for example, see Whirlpool’s fee calculator here), and several people in the space operate without fiat bank accounts, so they obviously do better by being denominated in bitcoins
We should also note that the Lightning Network is also helping here. Various services are called Lightning, Tipping and Wallets. For example, Alby and the Podcasting 2.0 apps are called sat. People running routing nodes on the Lightning network are setting their base rates and variable rates (ppm, or parts per million) in satoshi terms, which we can see by browsing Lightning nodes in browsers like mempool.space.
On the issue of amounts: Bitcoin or Sats?
A long time topic in Bitcoiner circles is the point unit bias, which is believed to be behind some crap coins. The incoming nocoiner sees a very low price per unit and buys the shitcoin thinking, “Hey, it’s coming off a low base, so there’s more upside.” So reason says that if we all talk only in terms of sats (and not in terms of BTC), this bitcoin could also take advantage of this effect.
But this is not free, there is a trade-off. There may be high net worth investors (HNWI) who get into bitcoin and because they want to buy “a whole coin” they buy more than they should. We could even argue that the amount that HNWIs buy is higher, therefore the impact that HNWIs have is greater. And by now, most know the oft-quoted statistic about how “even if every millionaire on earth wanted an entire bitcoin, they couldn’t get it.”
Remember that if you divide the number of sats by the number of people on earth, that number comes out to about 226,000 sats (see satsperperson).
But perhaps this unbiased question is neither here nor there. As long as there is an easy option or toggle between BTC terms and sat terms in our apps and services, it probably doesn’t matter much. In practice, I think people will only refer to things of lower value in sat terms, and items of higher value in BTC terms.
You can’t completely escape doing Fiat conversions
I understand that a criticism here might be that a lot of our day-to-day spending is still called fiat and we can’t escape it entirely (yet). Nocoiners may also criticize us for still valuing bitcoin in terms of dollars, but the process has to start somewhere.
Starting somewhere means we should try to think in terms of bitcoin or sat first. So if we’re talking about the price of things, list the price of bitcoin terms first. Or perhaps more provocatively, list the price of bitcoin not more and have the other person do a calculation. We disrupt the fiat currency network effect and not let our lives be ruled by fiat currencies.
This is a guest post by Stephan Livera. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.