Sats or Bits? Is It Time to Rebrand Bitcoin as “Cheaper”?

Unit Bias and Renewing the Sats Call

The debate about listing Bitcoin as sats in exchanges is not new. The notion is that “unit bias” is turning folks away from Bitcoin and, in the process doing no favors for Bitcoin’s widespread acceptance.

Unit bias describes the perception that buyers are more enticed to purchase a whole unit of currency than one in fractions. For instance, anyone entering into cryptocurrency could more readily buy a coin with a lower price than Bitcoin than spend the same amount of money buying Bitcoin in decimal points. It’s just human psychology.

Mike Novogravtz, CEO of Galaxy Investment Partners sought to renew that debate recently, tweeting “It is time to switch to satoshis.” Novogratz added that many people had told him that Bitcoin (at the then price of $58k) was too expensive. He proceeded to nudge Binance‘s CEO Changpeng Zhao, Coinbase CEO Brian Armstrong, Gemini CEO Tyler Winklevoss, and FTX CEO Sam Bankman to take a step towards listing SATS.

Novogratz’s Twitter call was accepted by a few other prominent figures in the Bitcoin community. Dan Held, current Growth Lead at crypto exchange Kraken and influential Bitcoin investor Preston Pysh chimed in, urging other exchanges’ leaders to set the new standard.

What Are Satoshis?

The satoshi is the smallest unit of Bitcoin. It’s named for Satoshi Nakamoto, the mysterious creator of Bitcoin. One satoshi is equivalent to one-hundredth millionth of a bitcoin — which means one bitcoin is made of 100 million satoshis.

One of the rules for a commodity to qualify as money is it must be divisible. Just like the US dollar is divisible into cents, the British pound into pence, and the Chinese Yuan into jiao or fen, Bitcoin can be broken into smaller denominations, including satoshis, millibitcoins, microbitcoins and centibitcoins.

Satoshis may be the tiniest units of Bitcoin, but they’re not the only ones. The unit structure of Bitcoin is as follows:

1 bitcoin (BTC) = 1000 millibitcoins (mBTC) = 1, 000, 000 microbitcoins (μBTC) = 100, 000, 000 satoshis.

Bitcoin’s divisibility makes it possible to be used as a medium of exchange. (At least, that was Satoshi’s vision — but Bitcoin’s legendary volatility makes it unsuitable for day-to-day transactions).

Pros of Sats

In the Bitcoin universe, people already talk and invest in Sats rather than Bitcoin. Leading crypto price aggregator CoinMarketCap listed and is now tracking sats, while Jack Dorsey’s Cash App allows users to schedule automatic Bitcoin purchases while displaying the value in both BTC and sats.

But what would be the value of listing Bitcoin in sats? First of all, Bitcoin’s price at thousands of dollars looks intimidating to most people. The fact that Bitcoin is divisible to microbitcoins or sats is not an obvious fact to newcomers, and that can have the effect of turning them away. Listing Bitcoin as sats could show that Bitcoin as an investment is affordable and inclusive, not just for a few moneyed elites.

Sats could represent for the ordinary people a savings vehicle that’s secure, non-manipulable and can afford way better yields than traditional savings options.

Could This Work?

In theory, there are enough sats for everyone. Bitcoin’s supply is 21 million, and out of those 18.5 million bitcoins have already been mined. That makes for 1.85 quadrillion satoshis in existence. When you divide this by the world’s population — 8 billion, 231,000 sats for everybody. Easy peasy, right?

The reality is much more complicated. 20% of the mined Bitcoin has been lost or is irrecoverable. A further 10 million of that is HODLed. This means only 4.2 million of all existing Bitcoin — which makes 400 billion satoshis, is available for trading. The world’s population is roughly 8 billion. When it comes down to it, that’s 50 sats available for everyone.

But just because everyone can get a piece of the Bitcoin pie doesn’t make it practical. Obviously, 50 sats is too negligible a figure to be considered savings. Additionally, it’s not plausible that sats would be distributed equally across the population. Like in any economy, people with more financial wherewithal have more purchasing power to buy more sats. Those with the least money will be priced out of the market.

Others Think The Opposite

While some Bitcoiners are clamoring for sats to make an entry, others think the unit should be completely scrapped altogether. Bitcoin developer Adam Back, who’s also CEO of Blockstream, is firmly in this camp. Back tweeted last December that it was time for a  “bits reboot”. For reference, one “bit” would be equal to 0.00000100 Bitcoin, or 100 satoshis. Nothing would change about the core supply of Bitcoin, just the way that they are accounted for on-chain.

According to Back, sats are confusing, and the “you can buy a fraction of a Bitcoin” narrative has just not worked so far. And while Back admitted Bitcoin may be pricey, sats are not better because they are “too many, sound cheap”, and are  confusing.  He also thinks it’s hard to figure out what you just bought if you’re dealing with satoshis.

People who agreed with Back, like Twitter user David Burkett chimed with sats are “too small and abundant to reason about.” For others, like Blockstack co-founder Muneeb, the bits vs. sats debate comes down to the mental barrier for Bitcoin’s adoption. “Bits is a much simpler mental model.”

But for all the arguments for bits and sats, Back’s simple argument that “There is something poetic about a Bitcoin being made of bits” could be the winner of them all.

Of course you’ve also go to keep in mind that the value of sats and bits will obviously change when the price of Bitcoin shifts. As an example here’s the breakdown of US dollar value of a single sat vs. bit at the time of publication ($39,000 per coin):

• 1 Satoshi = $.00039 USD
• 1 Bit = $.0389 USD

Now let’s see what happens if Bitcoin hits $100,000 (as some experts predict this year):

• 1 Satoshi = $.001 USD
• 1 Bit = $.10 USD

Finally let’s illustrate what happens if Bitcoin were to somehow hit $500,000 per coin:

• 1 Satoshi = $.005 USD
• 1 Bit = $.50 USD

You can certainly see the argument of the bits crowd. Even if Bitcoin grows exponentially over the next few years, Bits will still cost less than a dollar. Meanwhile sats would still be worth less than a cent, which might be confusing to some.

Final Thoughts

The premise behind Bitcoin is a financial system that includes everyone. For this reason, Bitcoin’s price being beyond reach for the average person is a point of contention. But is listing Bitcoin in its 100 millionth denomination the solution? The community is definitely split on this one.