This is opinion editor Stefan Livera, host of the Stephan Livera Podcast and managing director of Swan Bitcoin International.
Many fiat currencies struggle to maintain purchasing power in USD terms. The macro conversation about finance on Twitter is now about how the overall system is broken, and yours Can’t narrow Ponzi.
Now is a great time to squeeze in the advantage that Bitcoin brings: not being a fiat currency that can be printed on demand. Time to denominate in Bitcoin terms.
What’s Happening in the World of Fiat Currency Markets?
As you know, many fiat currencies are collapsing against the US dollar. This does not necessarily mean that the US dollar is “rising”, it is also losing purchasing power, just at a slower rate.
Year-To-Date (YTD) for major fiat currencies and USD:
- GBP fell from $1.34 to $1.057 – a 21% drop
- JPY fell from 0.0087 to 0.0069 – down 20%
- EUR fell from $1.13 to $0.97 – down 15%
The Bank of England is now embarking on a new wave of bond purchases, in other words, the bearishness continues. GBP holders and depositors will continue to have their savings destroyed by the money printer over time. They are sacrificed on the altar of “financial stability”.
With the rapid devaluation of fiat currencies, it’s not such a crazy idea that we value everything directly in terms of sats or BTC. While Nocoiners love to hate on Bitcoin for not always having high prices, the reality is that long-term Bitcoin users have made significant gains in terms of both purchasing power and freedom.
The loss of faith in fiat currencies is causing a fundamental shift in thinking. If our advanced friends were afraid of bitcoin before because of its volatility, the difference in volatility between bitcoin and fiat coins is decreasing, so it makes sense to start using bitcoin denominations.
What does it mean to denominate in Bitcoin terms?
It means evaluating financial costs and benefits in terms of Bitcoin or satoshi. This includes a financial valuation of our net worth in terms of bitcoins/sat. This is actually what matters to Bitcoin Maximalists in the long run. If you believe that everything will be sold at prices one day, why not start now?
I’ve personally denominated my net worth in bitcoin terms for a while now, but I’ve struggled with the next part: daily expenses. For me, it’s mostly about mental arithmetic. So my next step is to focus more on estimating the bitcoin value of the income and expenses of everyday items. If we’re serious about bitcoin being the better money, we need to show it.
Practical tips on Bitcoin denomination
Start by keeping your finger on the pulse of what the “sats per dollar” price is. You can do this using Coinkite’s BLOCKCLOCK (aka Moscow time) or perhaps on sites like Bitbo.io that list it. You can also use converter tools like bitcoin.io or preev.com. Also, pricedinbitcoin21.com is a useful site that shows all types of bitcoin prices.
A mental arithmetic tip is to start with sats per dollar. So, for example, if 1 BTC = $19,067, then sats for one dollar is about 5,200, so $10 is about 52,000 sats, $100 is about 520,000 sats, and $1000 is about 5.2 million sats.
Another hurdle, really, is if we have to constantly reset prices quotes real world products/services in bitcoin terms. But so be it, that’s our proverbial saying, and working this way benefits the user in the long run.
Of course, there may come a point where the price of bitcoin is no longer appropriate for something that was set a few years/states ago, but that just requires readjustment. To be fair, this is something all fiat traders should do anyway.
It’s Not New, We’re Just Bringing It Back
In the early days of Bitcoin, it was more common to talk about things in terms of BTC values. Perhaps it has become more difficult to deal with price increases and small fractions of bitcoin in our heads.
Remember, the first services and games from SealsWithClubs to MPOE to SatoshiDice were denominated in bitcoin! Some early exchanges on the Bitcoin Talk forums were denominated in bitcoin. So, really, this is what Bitcoiners get back is used make.
Of course, there are some in the Bitcoin space that are already denominated in bitcoin even in terms of the service/product they sell. Note that CoinJoin services are denominated in bitcoin (see the Whirlpool fee calculator here for example) and various individuals in the space operate without fiat bank accounts, so they work best denominated in bitcoin.
Note that Lightning Network helps here as well. Various Lightning services, luggage and wallets have been sold. For example, Alby and Podcasting 2.0 programs are sitting. The people who run the routing nodes on the Lightning Network set the base fees and variable fees (ppm or parts per million) in satoshi terms, which we can see by looking at Lightning nodes in explorers like mempool.space.
In the matter of sums: Bitcoin or sats?
It’s been a hot topic in Bitcoiner circles for a long time uniform bias, believed to be behind the pumping of some shitcoins. An 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 the logic is that if we all talk only in terms of sats (and not in terms of BTC), this bitcoin can also use this influence.
But it doesn’t come for free, there’s a trade-off. There can be high net worth investors (HNWI) who get into Bitcoin and because they want to buy a “whole coin” they buy more than they might otherwise. We can even argue that the amount purchased by HNWIs is higher, so the influence of HNWIs is higher. By now, most are aware of the oft-quoted statistic that “even if every millionaire on earth wanted a whole bitcoin, they couldn’t get it.”
Remember, if you divide by the number of people on earth, that number comes out to about 226,000 sats (see satsperson).
But perhaps this impartial question is neither here nor there. As long as our apps and services have an easy option or toggle to switch between BTC terms and sold terms, it doesn’t really matter. In practice, I think people will simply refer to things of smaller value, and in terms of BTC, the larger value.
You Can’t Completely Avoid Doing Fiat Conversions
I understand one criticism here is that most of our daily living expenses are still fiat and we can’t fully get rid of it (yet). Nocoiners may criticize us for still valuing bitcoin in US dollars, but the process forces it start somewhere.
Starting somewhere means we have to try to think in terms of bitcoin or sat first. So if we’re talking about the price of things, mention the price of bitcoin terms first. Or, perhaps more subversively, list the price of bitcoin only and let the other person do the math. Let’s disrupt the network effect of fiat currency and not let fiat currencies rule our lives.
This is a guest post by Stephan Livera. The views expressed are entirely their own and do not necessarily reflect the views of BTC Inc or Bitcoin Magazine.