The m's and b's of millibitcoin redenomination

We could change where the display shows the decimal point. Same amount of money, just different convention for where the [commas and periods] go…moving the decimal place 3 places would mean if you had 1.00000 before, now it shows it as 1,000.00.

—“Satoshi Nakamoto,” February 10, 2010

In the Kingdom of Geekdom, my €2.60 espresso this morning might have cost 0.0283 BTC (at the 90-day weighted moving average of €92/BTC), perhaps pronounced “point zero two eight three bitcoins.”

Such a string of sounds could only happily emerge from the mouths of card-carrying Geekdom denizens channeling Mr. Spock himself, but it would be most unlikely to pass the lips, or be long tolerated by the ears, of the average Katie, Hans, Taiwo, or Eijiro on the streets of this planet.

And thus a resurgence of interest in changing the standard Bitcoin denomination from a bitcoin (1 BTC) to a millibitcoin (0.001 BTC) has taken shape on the Bitcoin Forum with an informal survey. The top responses to “Should we start using mBTC as the standard denomination?” are 53% for “Yes,” and 20% for “After the price is at $1,000, dollar parity for the mBTC.”

Maybe, but what do we say at checkout?

Designed for convenience at much lower value levels, the initial standard “bitcoin” unit, which equals 100 million satoshis, the more fundamental unit within the Bitcoin system, has grown to become far too valuable for most people’s ordinary way of thinking and speaking about prices. A bitcoin has traded over the past several weeks mainly in the $110–$130 range with the 90-day weighted moving average now just shy of $120. Unlike bitcoin exchange values from earlier years—a few cents and later a few dollars—most ordinary items now have to be bit-priced entirely within the decimal point range, although the luxury houses and cars at Bitpremier could just stay priced in bitcoins. A hypothetical rise to $1,000/BTC would greatly amplify this situation.

A redenomination would only impact the way price numbers are displayed and discussed and would make no fundamental changes to values held. A person with 1 bitcoin could just as well be said instead to have 100 centibitcoins or 1,000 millibitcoins.

In contrast, when political money managers talk of devaluation, redenomination, and most recently “easing,” such machinations actually do signal an active manipulation of purchasing power (always to its detriment). This current discussion simply seeks consensus on practical and linguistic conveniences by, for, and among the wholly self-selected community of participating Bitcoin developers, service providers, merchants, consumers, traders, and even observers.

Yet the difficulties of finding spoken language for naming this new unit, language capable of seeing wide global adoption in everyday use, have proven a lingering challenge. To address this topic, I will draw on conventional pricing usages in several different countries and languages in search of common patterns to use as criteria. I will then apply these criteria to existing proposals for a spoken-language name for the too technical “millibitcoins,” and then offer two suggestions, the second of which I have not yet seen proposed elsewhere.

Before moving on, let us be sure to put this whole “problem” in perspective. This is a “sound-currency problem,” in the sense of the “first-world problems” meme. A rising currency and falling prices of goods and services denominated in it are the kinds of “problems” most people ought to be happy to face. The long, sad history of declining political currency values has systematically punished savers and planners and rewarded debtors and those with less effective foresight, leading to shortening time horizons and eroding senses of personal responsibility.

Falling currency values leave families struggling to meet ever-rising prices for goods and services. By several estimates, the United States dollar, for example, has lost some 97%–98% of its value since its “management” was assigned to the Federal Reserve System in 1913 (I refer those who fear falling prices, the deflation-phobic, to my 29 March 2013, A short Bitcoin commentary on “Deflation and Liberty” and the works linked from it).

Speaking of prices

Since the Bitcoin network spans this entire planet, such linguistic research ought to begin by at least attempting to reference practices in several countries and major languages. I will select examples below from the US, Germany, and Japan, based simply on my own degree of direct familiarity with each (please add other instructive usage examples in the comments). The three numerical examples below are of roughly similar purchasing power in each zone, probably enough to buy another espresso.

The first thing I notice is that it is common to use two decimal places, “cents” after a main unit. Second, in shopping language, the unit names are often omitted altogether. Thus, in the US, a spoken “two-sixty” means two dollars and sixty cents ($2.60). In Germany, “zweisechzig” likewise means two euros and sixty cents (€2.60), or more formally “zwei euro sechzig” (but still most often omitting “zent”). Omitting the unit is facilitated in both cases in the same way: two individual numbers are spoken in sequence, the first specifying the whole unit; the second, hundredths of it.

In Japanese, ¥260 is “nihyaku rokujuu-en”. Here, there is no decimal point, but in effect “hyakuen” (¥100) takes the place of the base unit in the dollar and euro examples. The “yen” (actually pronounced “en”) is not omitted in speech, but it only takes a quick syllable to say it and units are not optional in general. The “hyaku,” also lightning fast to say in Japanese, already works to create a division in ¥260 between the two hundreds and the sixty. This makes it less functionally different from the English and German examples than it might at first appear.

Generally speaking, when the names of currency units are not contextually omitted in speech altogether, they can almost always be pronounced in just two syllables: dollars, euros, pesos, kronas, rubles, rupees…bitcoins. In contrast, “millibitcoin” or “mBTC” (pronouncing each letter) each take up a hefty four syllables and are as such unlikely to survive in non-technical spoken usage.

The bit is dead; long live the bit?

So, what might that unit be called in ordinary speech? Some commentators have identified a problem with “coin.” It is by nature indivisible. On the other hand, “the coin of the realm” does give a more uncountable sense of a money in use in a particular place.

Either way, this provides an easy opportunity to cut out a syllable, and with “coin” duly exiled, proposals for spoken options for millibitcoin have included “millibits,” “embits,” “mills,” “mill,” “millies,” and “bits.” Those thinking way ahead have already termed a microbitcoin (0.000001) a “Mike,” presumably the thin, but loving partner of the much heftier Millie.

“Millibits” came out ahead in an informal naming poll for millibitcoin way back on May 14, 2011. Unfortunately, at three syllables, it is still a mouthful for everyday speech, exceeding the conventional two syllable mainstream for currency unit names.

You want change? Anybody got some tools?

“Bits,” at just one syllable, already have a long and storied history in coinage. For centuries, the Spanish silver dollar was a preferred unit of global trade due to its relative freedom from debasement of silver content and its wide international adoption. The peso de a ocho coin was worth eight reales and became known as “pieces of eight” in English, giving pirate parrots something to prattle on about. It has also been said that certain coins were physically cut into eight pieces or “bits” as a way to improvise around small-change shortages using the resulting sharp metallic pie pieces. I am not sure of the ratio of fiction to fact on that one.

The resulting related use of “two bits” to mean a quarter dollar has only recently been fading out of informal use in the US after a long run. Unfortunately, fiat inflation eventually left a quarter dollar unable to buy much of anything and the meaning of “two-bit” declined with it, coming to characterize something of poor quality. A “two-bit coffee” might thus sound rather dilute to modern ears.

Could “bit” be brought back in a decimal-based, high-tech reincarnation? A millibitcoin (0.001 BTC) is now trading at about US $0.13. Twenty of these might buy that espresso at $2.60 and “twenty millibitcoins” (20 mBTC; 0.020 BTC) might be shortened in speech to “twenty bits.”

The centibit challenge and foodie what-ifs

If such bits stood for centibitcoins (0.01 BTC) instead of millibitcoins (0.001 BTC), that espresso might cost about “two bits” after all (assuming $130/BTC). With centibitcoins, a family sushi dinner that might add up to $65.95 would come to “fifty (bits) seventy-three,” or the waiter could say, “in Bitcoin, that’s fifty seventy-three.” That’s 50.73 centibitcoins versus 507.3 millibitcoins and 0.5073 bitcoins.

A centibitcoin redenomination could thus bring things into a familiar range for dollar and euro users right away. At around $130/BTC, a centibitcoin would trade for $1.30, €1.00, and ¥100. That seems intuitively perfect, but only under approximately current rates.

Bitcoin exchange values could stay level or fall. Expecting a long, level trend or modest decline would speak in favor of centibitcoins as the standard unit. If Bitcoin does continue to climb impressively, though, how long before its dollar exchange value adds another digit?

Let us say that the bulls have it and the exchange value of a bitcoin moves to $500 and then $1,000 over the next several years. How would these two alternative redenominations then play out with some everyday examples?

At $500 per bitcoin, a $2.60 espresso would cost 0.0052 bitcoins, 0.52 centibitcoins, and 5.20 millibitcoins. Millibitcoins would win according to the balance of the above criteria (“in Bitcoin, that’ll be five twenty”). The big sushi dinner would be 0.1319 bitcoins, 13.19 centibitcoins, and 131.90 millibitcoins. In this case, either one might look okay.

At $1,000 per bitcoin, the espresso would cost 0.0026 bitcoins, 0.26 centibitcoins, and 2.60 millibitcoins. Millie would win. The sushi would then come to 0.06595 bitcoins, 6.595 centibitcoins, and 65.95 millibitcoins, and millie would win again.

While a centibitcoin transition would make sense for now, an assumption of further exchange value growth would point in favor of the proposed millibitcoin unit. Either way, a redenomination could well be positive. A key challenge for Bitcoin entrepreneurs is helping to broaden adoption into more frequent everyday payments and purchases. Making Bitcoin units easier for contemporary people to talk about in everyday language and think about closer to everyday price numbers could well be helpful.

So how about just putting “m” and “B” together?

“Embies” (mB) is another option I have proposed based on pronouncing “m” and “b”. The B can also be written with the proposed Bitcoin currency symbol when it makes its way into standard character sets. Embie matches the conventional two-syllable criteria. It strikes me as easy to pronounce on a multilingual basis. It also seems friendly and familiar; it could be a pet’s name. I find it easier to say than the two-syllable “embits” candidate. Not all sets of two syllables are equally easy to pronounce.

Still, some people seem to hate it, while others like it. It may be that the name for BTC 0.001 that will prevail in the end has not yet been coined.


For additional articles on this topic, visit my Bitcoin Theory page on this site.


Another bump on the road: Bitcoin and bubbles revisited

Japanese “bumpy road” sign for MtGox. 路面凹凸ありOverload, delays, and the temporary closure of the MtGox exchange seem to have been proximate triggers for a sharp Bitcoin correction on April 10–12 from dizzy highs.

As trading graphs fell freely, some Bitcoin critics appeared gleeful to believe that their prophecies of the Bitcoin phenomenon being nothing more than a delusional bubble might be coming true. Commenters promptly took to the internet to gloat at the short-term losses of naïve traders and bask in their own contrasting wisdom.

In this new context of short-term sentiment, it may be useful to revisit and refine my recent critique of the dismissal of Bitcoin as being nothing more than a bubble or even a sort of Ponzi scheme. In Hyper-monetization: Questioning the “Bitcoin bubble” bubble (6 April 2013), I offered an alternative to the popular interpretation of the long-term rise of Bitcoin’s exchange value relative to fiat money. This was especially intended to address the view that Bitcoin is nothing more than a bubble. The most insistent proponents of this view elaborate along these lines: “Bitcoin has no ‘intrinsic value’ and is therefore ultimately destined to fall to its ‘inherent’ value, which is zero, completely wiping out any true believers still left around for its inevitable and welcome extinction from the universe.” Or something like that.

“Is” versus “in”

A more subtle approach to calling a “Bitcoin bubble” is also available, and has long been advanced by several people with more nuanced understandings of the system. First, Gavin Andresen, lead developer of the open-source Bitcoin Project, wrote nearly three years ago in a short post Bubble and crashes (9 July 2010) that he expected multiple recurring bubbles over the course of several years.

Bitcoin will get mentioned someplace with lots of readers, a bunch of those readers will like the idea and try to buy Bitcoins, their price will rise, which will draw even more people to “invest”, which will drive the price up even more…until people decide that the price isn’t going to rise any more and everybody rushes to sell before the price drops. I predict there will be between one and five Bitcoin bubbles (price will double or more and then crash back down below the starting price) in the next four years…I think it will be impossible to tell if a bubble & crash is “natural” or “the men in black helicopters” manipulating the system.

Second, Rick Falkvinge, who had also called a short-term bubble and a correction to $60–$65, has long identified currency exchange services as a weak link in the wider Bitcoin “ecosystem.” See his 12 April post What we learn from this Bitcoin correction. A commenter on that post wrote, “I would not call an 80% move a correction…” to which Falkvinge replied, “It is not the downslope that is abnormal, it is the upslope. A value that reverts to where it was two weeks ago is normally a mild correction.”

Finally, Peter Šurda who steadily focuses on the importance of liquidity, infrastructure development, and scaling over price, re-summarized in a 12 April Facebook comment that:

My empirical research shows a correlation between media frenzy and price, and between liquidity and price volatility, while my theoretical research concludes that the price will fluctuate more rapidly than with more liquid media of exchange (i.e. what we are accustomed to as money, or even highly liquid goods such as stocks or commodities). The fluctuations will continue until Bitcoin’s liquidity increases significantly.

Such approaches have essentially been warning that, “Bitcoin may well be in a bubble phase,” adding, “one of several large ones, just as we expected to occur along the way.” As a commentary on the price trend in late March and early April, this appears to have been a valuable assessment. These observers recognized in advance that the price seemed to be rising at a pace unlikely to be sustainable, driven perhaps by events in Cyprus and then a flood of popular media attention.

In sum, saying that “Bitcoin is a bubble” (total dismissal of the system as such) and that “Bitcoin is (or was) in a bubble phase,” are quite different claims. Now that another correction has arrived, this distinction can come into better focus.

The Bitcoin system is not the same as the peripheral trading services

The core of the Bitcoin system itself, which few people seem to grasp is something entirely different from the more visible currency exchanges and their price charts, seem to have been relatively untroubled. This includes nodes, mining pools, the blockchain, wallets, and even informal and P2P markets. Besides MtGox, with its 12-hour mini-holiday, from what I noticed, only some of the exchanges and data chart services were heavily challenged and went offline intermittently. Bitcoincharts, for example, reported a 25x spike in concurrent online users from 2,000 to 50,000, requiring “tweaking the backend” systems in response.

The primary proximate cause of the crash, then, seems to have been the inability of a (currently) key exchange service provider to keep up with demand fed by sudden media attention and buy-in frenzy in the run-up, triggering a classic emotional wave of panic selling, most likely the corollary of the previous heat of emotional buying. The existing trading infrastructure (which is not the same as the Bitcoin system infrastructure) was not ready to scale to such a rapid demand spike. This sharp correction might be viewed in part as the rather ungentle method by which the market realigned itself with the current real-world state of scaling capabilities and business planning skills at exchanges that have been working to build themselves from the ground up.

Creation versus destruction

In the case of a classical terminal hyperinflationary event, the authorities orchestrating it are better equipped and prepared. Ink and paper are ready. Printing presses run and are up to their tasks. More importantly, printing plate engravers are standing ready to carve additional integers, a relatively simple task of creating higher and higher denominations of notes. The technical infrastructure is in place for state money monopolists to completely destroy the value of a paper currency, using “zeroes” to drive it all the way to “zero” and extinction.

Building a new kind of media of exchange for a community of all-volunteer users from scratch through peaceful cooperation, entrepreneurship, coordination, debate, and market ecosystem building would appear considerably more challenging than destroying a paper currency. After all, being constructive often seems more challenging than being destructive; it requires greater ingenuity and long-term persistence and perspective.


For additional articles on this topic, visit my Bitcoin Theory page on this site.


Resolving the paradox of value

Philosophers struggled for centuries to understand the paradox of value, the mystery of why certain luxuries such as diamonds and gold are considered more valuable than certain essentials such as water and food.

Everyone must have water, yet it is usually not that hard to get. We can buy a bottle or it comes out of the tap. Diamonds are rare and expensive, but optional. Men, at least, seem to be able to get along well enough without them. It seems counterintuitive that something essential to everyone’s life could be less valuable than something that seems so much more optional.

Many thinkers tried to understand value as a property of things. They thought that a table, for example, has the property of being flat, having legs, being made of wood, and having a certain value or usefulness. Such approaches are called objective theories of value, because value is seen as a property of the object.

This idea is found in our everyday language when we say that “diamonds are valuable.” But this is also the kind of thinking that produced the paradox of value so it is unlikely to resolve it.

The breakthrough came with two of the greatest ideas in the history of economic thought: the subjective theory of value and the concept of marginal utility. Carl Menger, a professor at the University of Vienna, played a key role in formulating and spreading these two ideas in his 1871 book, Grundsätze der Volkswirtschaftslehre, translated as The Principles of Economics.

Menger is considered the founder of what came to be known as the Austrian School of economics. The name started as a way to distinguish this approach from that of the German Historical School, and the name stuck. Ludwig von Mises, in his 1949 treatise, Human Action, further clarified and extended subjectivism and marginalism, and even insisted that these are among the foundations of any sound economic reasoning.

The subjective revolution clarified that the key to value is valuation. Valuing is an action; it is something that people do. The concept of value makes sense as a relationship between an acting person and the means they select in pursuit of the ends they seek. The object of valuation can be tangible or intangible, base or sublime. It can be anything whatsoever that a person chooses as an end or means as demonstrated in what they actually do. In this view, the value of a thing derives from people valuing it.

Different people have different priorities. The same person has different priorities at different times. A person might buy a bottle of water, but after reading an article on possible risk from plastic bottles, that same person the next day might disvalue and avoid an identical bottle of water. When this same person a year later flies to an anti-plastics conference and crashes in the desert, a plastic bottle of water might suddenly become one of the most valuable things in the universe—to that person, at that time, and in that place.

The marginal revolution built on this insight into the subjectivity of value. No one is actually ever in a position to make a choice between “water in general” and “diamonds in general,” or between all water and all diamonds.

Let’s say I want a drink of water. I go to the kitchen, pour a glass, and drink it. What I chose was not “water in general” but “a glass of water right now.” I didn’t choose two liters of water and I didn’t choose a glass of water tomorrow instead.

This leads to another important concept. If I have one apple, I might just eat it. If I have a second apple, I might give that one to someone else. If I have a third apple, I might keep it for later. In this example, there are three different uses to which I have put each of the three apples.

This has a key implication hiding just below the surface. I showed my priorities with these three uses of each apple. We know this because this is the actual order of uses to which I assigned each additional apple. We know in this example, that I valued eating an apple over giving an apple away because I ate the first apple and gave away the second one. Saving an apple for later was only my third priority for using apples. I only met that priority when I had the third apple and not before. If I had no third apple, my third use for apples would just be left unmet.

So each additional apple I obtained I put to a lower priority use than the apple that came before it. This means that each additional unit of the same good has a lower value to me than that of the unit I used before it. This is the Austrian, or subjectivist, version of what economists call the law of diminishing marginal utility.

All of this has important implications for the idea that value could be measured. To measure distance, we need a unit that is always the same, such as an inch. But with value, things are quite different. In our apple example, each additional apple had a different value than each of the others. Imagine trying to measure a distance if each inch you used was different from every other inch!

The Austrian theory of money and prices builds on this insight. Units of money can be analyzed just like units of apples. Money also has important additional properties and uses, but the theory of money and pricing in the Austrian approach is built on this theory of value and cannot contradict it. It can only elaborate on money as a special case. In other words, money too cannot correctly be described as a measure of value in the same way an inch is a measure of length.

This means that value cannot be measured as we measure things in the natural sciences using length, time, or volume. That kind of measurement uses cardinal numbers such as one, two, and three. What we can use with value is the concept of ranking using ordinal numbers such a first, second, and third. An acting person shows a preference for one thing over another, demonstrates a ranking and ordering of values with every choice and every action.

The dual insights that value is the result of people valuing and that people do not value things in general, but things in particular, resolves the ancient paradox of value. While there were some precursors of these ideas in the history of economic thought, their clear modern formulations originated at the University of Vienna starting in the 1870s and they remain central concepts in the foundations of what is still called the Austrian School of economics today around the world.