Use of Satoshi/Bits (Research from Utah State)

Researchers Propose the Use of Smaller Units to Increase Bitcoin Adoption (Dec. 23, 2019)

LOGAN – Recent research by professors at Utah State University and Southern Utah University suggest that in order for Bitcoin to gain widespread adoption and use, bitcoin must be referenced in smaller and easier to understand units that the general public can accurately assign value to, such as “bits” or “satoshis.”

Chad Albrecht, a professor at USU’s Jon M. Huntsman School of Business and the director of its MBA programs, spearheaded the study with cooperation from research associate McKay Duffin, and Dr. Steven Hawkins, an assistant professor of accounting at SUU’s Dixie L. Leavitt School of Business.

In the study, which will be published in January in the University of Pittsburgh’s peer-review academic journal, Ledger, the researchers apply whole number bias theory (or natural number bias theory) to show that, in its current form, Bitcoin is too complicated and difficult for consumers to assign value. This limits the use of bitcoin as both a store of value and as a medium of exchange.

As such, the researchers recommend that both exchanges, wallets and the media begin to reference bitcoin in smaller and easier to understand monetary units that the public can accurately assign value to when transacting in Bitcoin. A “bit” equates to 1/1,000,00thof a bitcoin, while a “satoshi” is the smallest unit of a bitcoin and equates to 1/100,000,000thof a bitcoin.

In the study, the researchers state: “Under whole number bias theory, most consumers would not want to spend .00091232 of a single bitcoin for a McDonald’s Big Mac. Rather, because consumers prefer whole numbers with limited decimal places, most consumers would prefer engaging in an easier-to-understand monetary system such as the U.S. dollar, where a McDonald’s Big Mac would cost just $5.50. In this scenario, for most consumers, the unitary measurement of Bitcoin becomes too complicated with eight decimal places, creating confusion in assigning value to the transaction. Similarly, most individuals would prefer to have $2,500 in their checking account compared to .33219732 of a single bitcoin. In each of these scenarios, the lack of whole numbers is perceived by consumers to be too small and complicated and the value too nominal.”

When compared to most major currencies around the world, including the U.S. dollar, the British pound, the Euro, the Japanese yen, the Mexican peso, or the Chinese renminbi, bitcoin is the only currency where one monetary base unit is so valuable and where the mantissa (the fractional or numerical part of a number that occurs after the decimal point) will commonly have six, seven, or even eight digits.

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