Purchasing fractions of a bitcoin can be a mental hurdle for some — but a satoshi standard could help alleviate that.
The current price of bitcoin makes it seem as if the world’s leading cryptocurrency is no longer approachable by mainstream users. A five-digit price point makes people rethink their decision, as most assume they still need to buy one full bitcoin. Introducing denomination in satoshis can, in my opinion, make a lot more sense when onboarding newcomers. It may take some effort before the satoshi standard becomes commonplace, though.
The Bitcoin “Acquisition Problem”
Most people in our society can only think in full coins. One dollar, one euro, one pound sterling. Although we can all use change, no one is a fan of the system. If something is priced at $4.22, we will pull out a $5 bill and dump the change we receive into a pocket somewhere. Society likes round numbers, which creates an annoying problem when dealing with bitcoin. Convenience often trumps everything else but acquiring bitcoin with that mindset isn’t necessarily convenient.
More specifically, a lot of people remain convinced that they need to buy an entire bitcoin. While that is an option, the current price point makes it very difficult to do so for the majority. When people encounter the idea of spending over $45,000 to buy something that isn’t yet tangible to them, it can be a tricky ordeal. Although the higher price benefits the crypto industry, many support a potential denomination change.
While the option to trade full bitcoin will always remain available, some people would prefer to see a satoshi standard. Even Mike Novogratz, a respected and renowned crypto investor and trader, would like to see such a standard implemented. So, I can personally get behind the idea of trading satoshis versus bitcoin — however, only if we can achieve this without confusing people even further.
From a price perspective, one satoshi is more accessible than one bitcoin. There needs to be clear information for users to know what they are buying — but if we describe the divisibility of bitcoin to people, it should be simple.
Does The Satoshi Standard Make Sense?
Although I like the proposal, we have to ask ourselves if it makes sense to denominate things in satoshis. Several exchanges appear in favor of this idea — for example, the AAX platform introduced a BTC-SAT conversion option. Additionally, the exchange introduced a SAT-USDT pair to determine if satoshis would be more accessible and appealing to new traders.
Moreover, one has to consider the costs of buying and trading satoshis over bitcoin. The network will require a fee, which, on a satoshi standard, could appear rather large. One solution is to tap into the Lightning Network to offer faster and cheaper transactions.
As much as a satoshi standard would make sense, the logistical challenges may prove a bit complex. The trading of bitcoin has become the industry standard; it is unclear if companies would see the satoshi standard the same.
It is no secret that bitcoin’s price appears too high for consumers who do not understand they do not need to purchase a full bitcoin. Although anyone can buy as much or as little as they want, buying a fraction of a bitcoin appears to create a mental hurdle. I think the introduction of a satoshi standard can change this narrative for the better, under particular restrictions. Setting maximum order limits before switching back to the bitcoin market by default is one option for exchanges to consider.
As several platforms already provide this functionality, an essential first step has been taken. Trading in sats makes the market more accessible and approachable.
There are still many logistical issues to figure out, including trading pairs, price fluctuations and technological hurdles. Solving and addressing these unknown factors and questions needs to happen if a satoshi standard is to be introduced.
This is a guest post by Alex Zha. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or BitcoinLinux.