Bits of Bitcoin – What To Call Them?
Crypto-currency’s recent spectacular rise brings mundane question into focus
With bitcoin hitting $1,000 per unit, a question arises in relation to its utility for small-price transactions. Say, takeout food. Specifically, what do you call a bitcoin subdivision in the hundredths or thousandths of a percentage point?
A Subway franchise in the town of Allentown, Pennsylvania recently got some exposure on youtube and other social media for being the first in the United States to start accepting bitcoin as payment. One upload showed the store’s first-ever bitcoin customer buying his sub and, with a bit of kerfuffling around, succeeding to pay in bitcoin via a dedicated app on his smartphone.
Another video demonstrated successful use of a web-based QR (quick response) code reader – using a smartphone’s camera – which obviated the need for a ‘native’ application in the customer’s phone to process the bitcoin transaction. The point was made that, for reasons best known to itself, Apple is prohibiting the sale or distribution of bitcoin apps via its App Store.
A Subway ‘Footlong’ will set you back around $6.00 which, with the BTC/USD at $1,000 for simplicity’s sake, equals 0.6 percent of one bitcoin. But what is that as a unit of currency and how do you say it? And what if your sub costs $6.25 – some do – and the actual rate of exchange is $918.99 – the latest sale on mtgox.com as these words are typed? Then the bitcoin price for that Melt is 0.00680094452, which is as far as our calculator goes. And how do you say that, if you’re behind the till?
In point of fact, and with just the one exception, there appear to be no universally agreed names for bitcoin subdivisions. It’s an ongoing debate in the chaotic bitcoin universe – part of the ‘crypto-currency’s’ charm being that there is no one person or organization to decide such things. The only sub-unit whose name seems to be agreed by everyone is the ‘satoshi’, so dubbed in honour of bitcoin’s still pseudonymous inventor and which is 0.00000001 – or one hundred millionth – of a bitcoin.
We’ll come back to the satoshi but suffice to note at this point that there are no ‘cents’ or ‘pence’ with bitcoin and indeed, many of its advocates want nothing to do with the language of fiat currencies. In what is perhaps the nearest thing to a bitcoin manifesto, the bitcoin wiki at https://en.bitcoin.it, the ‘leading candidates’ for some SI (metric prefix) names are said to be the ‘centibitcoin’ for one-hundredth of a bitcoin – colloquially, the ‘centbit’, the ‘millibitcoin’ for one-thousandth – this to the aficionado being the ‘mbit’, pronounced ‘embit’ – and the ‘microbitcoin’ or ‘microbit’ (or even ‘yu-bit’) for a one hundred-thousandth of a bitcoin.
When bitcoin was tootling around at some few dollars per unit, during most of its short life to date, the question of what to call its sub-units was of little moment. There was little that could be bought for less than one bitcoin – indeed little that could be bought with bitcoin at all – and those purveyors of goods and services (mostly the latter) which did accept the payment mechanism were almost exclusively online, with little or no need for human voice communication.
Fast-forward to today and things are starting to look different. In southern England, for example, a small string of public houses are blazing something of a trail in their acceptance of bitcoin for a pint. So also with an albeit still small group of eateries scattered across the Continent, quite apart from the odd Subway in the United States. At the Pembury Tavern in London’s Hackney, should you so purchase right at this minute, a 250ml glass of house red would set you back £5.40 if you were to pay in folding stuff – a price which probably won’t change in the next 24 hours – but ‘nine point five five seven centbits thanks luv’ if you were to tender bitcoin at the weighted average exchange rate for the BTC/GBP on the Mt Gox exchange right now of £565.01. And that’s taking the bitcoin subdivision out to only four decimal places.
Given bitcoin’s current volatility, were you to check just minutes later, the chances very much are that that rate would have changed, up or down to your or the publican’s advantage. And not just by thousandths of a percentage point. On the weekend, bitcoin slid from over $1,000 to $576 when Chinese social media provider Baidu stopped accepting the crypto-currency in payment (http://invezz.com/news/forex/7408-bitcoin-usd-crashes-to-dollar-576-after-baidu-stops-accepting-it).
Happily for playing-through investors, though equally disconcerting, bitcoin’s now heading back to the new ‘psychological’ $1,000 mark. A question thus raised though, is how the vendors of goods or services of any ilk could price their products in a currency which goes through such wild swings.
Its advocates say that this volatility is just teething trouble and that things will settle down as more and more enterprises around the world start accepting bitcoin. And so what if a bitcoin keeps rising in value, possibly to presently unimaginable heights? Bring it on; the bitcoin community will, cometh the hour, settle on names for the increasingly necessary subdivisions. Even now, some bitcoin price-chart providers are making the switch from quoting in the head unit to the ‘mBTC’, aka the ‘embit’ (see, for example, http://bitcoinity.org/markets). Perhaps it looks more affordable that way.
And if you’re thinking of a bit of a flutter on bitcoin, keep another number in mind – that ‘satoshi’ we mentioned earlier. One of the arguments for bitcoin’s inherent attraction as an investment product is its supposed rarity – the analogy being drawn with gold. As the bitcoin-generating algorithm is written, only 21 million of them can ever be issued – or ‘mined’ in the vernacular. Unlike fiat money, the printing and devaluation of which by capricious governments knows no bounds.
But unlike the dollar, with its 100 cents, or the pound with its 100 pence, the bitcoin has 100 million satoshis. So when all the bitcoins that can ever be have been issued, there will be 2,100,000,000,000,000 – that’s two quadrillion, one hundred trillion in case you’re wondering – satoshis to invest in. How rare is that?