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Author Topic: How Feasible Would it be to Add additional Decimals to Bitcoins?  (Read 1328 times)
Bill Bisco
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November 28, 2013, 05:08:54 AM
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So, with 8 decimal places, it's easier to divide one bitcoin than traditional fiat currencies.  However, because Bitcoin has a much lower total supply compared to the totality of the other fiat currencies in the world, that means as Bitcoin's price rises relative to the other currencies, the value of the decimal bitcoins becomes much higher.  Eventually even the lowest decimal bitcoin could be too valuable to purchase small items.

So, my question is: How Feasible Would it be to Add additional Decimals to Bitcoins?

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November 28, 2013, 05:27:14 AM
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So, with 8 decimal places, it's easier to divide one bitcoin than traditional fiat currencies.  However, because Bitcoin has a much lower total supply compared to the totality of the other fiat currencies in the world, that means as Bitcoin's price rises relative to the other currencies, the value of the decimal bitcoins becomes much higher.  Eventually even the lowest decimal bitcoin could be too valuable to purchase small items.

So, my question is: How Feasible Would it be to Add additional Decimals to Bitcoins?

Been discussed many times before:
1) Yes its possible. Its just software after all
2) Won't be necessary for a very very long time if ever
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November 28, 2013, 05:33:40 AM
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It can be done.  It would be a rather extensive change so it isn't trivial.  It is highly likely that it will not be needed at least not in a lifetime.

There is ~$5T of currency in the world (M0 money supply).  If Bitcoin money supply was valued at $5T that would make 1 satoshi worth 0.2 US cents.  Even 25x that would put a satoshi at $0.05 ea and many countries have already removed their smallest currency unit from circulation. 
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November 28, 2013, 03:31:59 PM
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But there are still things priced less than $0.05, so whilst I think the (obviously-did-not-use-the-search-function-noobish post) idea re. "adding additional decimals" is a bad idea, possibly extending the number of decimal places (something which could be done easily) is far more likely to actually happen, at some point.

Sorry OP, if I have misunderstood your "additional decimals" and you did in fact mean also increasing the number of figures following the (current) decimal place position.

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Bill Bisco
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November 29, 2013, 12:39:16 PM
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Yes,  I simply forsee Bitcoin's value skyrocketibg.  In such a case, it would seem that more decimal places would be needed.

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November 29, 2013, 12:41:37 PM
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Yes,  I simply forsee Bitcoin's value skyrocketibg.  In such a case, it would seem that more decimal places would be needed.

+1

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November 29, 2013, 01:07:52 PM
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It's feasible and it is mentioned in the bitcoin.org faq as well because it's one of the common concerns over bitcoin
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November 29, 2013, 06:17:15 PM
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Yes,  I simply forsee Bitcoin's value skyrocketibg.  In such a case, it would seem that more decimal places would be needed.

Skyrocketing how high.

IF 1 BTC = $1,000,000 then 1 satoshi = $0.01.  At $1M per BTC the value of the Bitcoin money supply would be $21 trillion USD.  That is more money (M2) than the entire world currently uses combined.
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November 29, 2013, 07:08:18 PM
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It can be done.  It would be a rather extensive change so it isn't trivial.  It is highly likely that it will not be needed at least not in a lifetime.

There is ~$5T of currency in the world (M0 money supply).  If Bitcoin money supply was valued at $5T that would make 1 satoshi worth 0.2 US cents.  Even 25x that would put a satoshi at $0.05 ea and many countries have already removed their smallest currency unit from circulation. 

The issue here would not be the "value" of a satoshi, but rather "how to spend a satoshi or 2", while keeping miners happy with fees, and not paying a 100% fee either.

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November 29, 2013, 07:13:24 PM
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Well I don't think you will ever be able to spend a satoshi or two.  I mean lets say someday Bitcoin money supply is ~$5T USD equivelent and that makes a satoshi worth say 0.2 US cents adding extra decimal digits isn't going to get you space in a block chain.  For that to happen it would mean that a miner is willing to accept the equivelent of 0.02 US cents or less as a fee.  IMHO that is never going to happen.  It wouldn't even pay for the network we have now.  VISA processes about 8K tps.  Lets guestimate that global tx volume is something like 100K tps.  100K tps would be 3.2 trillion transactions annually.  At a fee of 0.02 US cents per tx that is only $630M USD a year.  Miners make more than that right now.  $630M annually in miner revenue wouldn't build the network necessary to protect a "single world currency" situation.  It would probably have to be something like at least 0.1% of global GDP which would be $75B annually and tx cost would be on the order of 2 to 3 US cents per tx (2013 dollars).


The blockchain does have some cost on a per tx basis and that will always constrain the minimum economical tx size even if the block sizes was unlimited.  There is a certain amount of transaction cost, disk storage cost, and orphan cost (due to the time to broadcast a block).  Transactions may remain "cheap" as in a few US pennies in value (whatever that ends up being in BTC) but it is very likely that sub US penny on blockchain txs aren't part of Bitcoin's future.  Now off blockchain maybe but there is no requirement than off blockchain limit themselves to 8 decimal places anyways.  Today you could make an ewallet which allowed transfering one quadrillionth of a bitcoin to another off blockchain account.


Still the point wasn't "IT WILL NEVER HAPPEN BECAUSE I SAY SO", if it happens it happens just pointing and honestly I probably will be dead long before it happens anyways.   Still under most probable scenarios 2.1 quadrillion units is enough.  There is no point in adding additional units which can't be used discretely anyways.     The protocol is unlikely to be forced for trivial reasons.  To put it into perspective today there are only 0.5 quadrillion US pennies in the global currency supply and the US is one of the laggards in removing obsolete currency units (low value of a purchasing power basis).  If you valued the global currency supply in other currency units like Euro or Pound it would have even less discrete units but the world works just fine. 

Lastly all this assumes a highly dubious scenario where Bitcoin replaces all other forms of currency on the planet.   Bitcoin today can't even prevent marketshare loss to alternatives but it is going to replace all forms of currency both private and sovereign in the future?
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November 29, 2013, 07:16:15 PM
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Extremely, but I would be more worried about starting a pro-decimal tour across the states to teach people to stop being afraid of decimals.
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November 29, 2013, 07:34:09 PM
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I'd just like to point that with economic growth we should see an increase in the global money supply, right? So decades from now it will be much higher than the current $5 trillion.

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November 29, 2013, 07:52:46 PM
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I'd just like to point that with economic growth we should see an increase in the global money supply, right? So decades from now it will be much higher than the current $5 trillion.

True however in real terms global GDP growth is relatively slow at <2% annually.  Lets use 2% that would mean in real terms (adjusted for inflation) the global money supply is likely to only double every three to four decades.  Lets say quadruple in a person's lifetime.  Bitcoin probably still has enough units for many lifetimes. 


It is important to distinguish betwen real (economic term for adjusted for inflation) growth and simply growth in the nominal number.   Now if history is any guide in nominal terms the global money supply will probably grow much faster but all that excessive money growth simply means the value of a unit of currency just buys less.  The excess monetary growth will just show up in price inflation.

If that was unclear lets imagine that on 01/01/2014 the currency supply doubled overnight.  So going from $5T (M0) to ~$10T.  Yes the number of currency units has gone up from 0.5 quadrillion to 1 quadrillion but a US penny now has half the value.  In real terms the value of the money supply hasn't changed.  In simple terms this is why over time money is worth increasingly less and issuers (central banks) eventually decide to drop the smallest currency unit.  Canada for example recently dropped the penny and the Euro has already defacto dropped the euro cent.  So the nominal supply is some base unit (say dollars) will rise but the number of discrete units isn't going to rise faster than the global economy in real terms because that "overprinting" will be offset by reducing the divisibility over time. 

Honestly I wrote that, thought it was unclear, adding to it (turning it into a novella), tried again a little shorter but it still seems unclear so not sure if it makes any sense but I am going to stop before I ended writing a textbook.
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November 30, 2013, 12:27:13 PM
 #14

Yes,  I simply forsee Bitcoin's value skyrocketibg.  In such a case, it would seem that more decimal places would be needed.

Skyrocketing how high.

IF 1 BTC = $1,000,000 then 1 satoshi = $0.01.  At $1M per BTC the value of the Bitcoin money supply would be $21 trillion USD.  That is more money (M2) than the entire world currently uses combined.

The M2 supply is 10 trillion USD but USD is not the only currency in the world (obviously is far from it) so the world wide money supply worths much more than 21 trillion USD.
On top of that bitcoin isn't only a currency. Add to the previous numbers the value of bitcoin as commodity and even as a service.

Really i don't think that anyone can place an upper bound on bitcoin's price based on single line calculations. Maybe through a phd thesis or something...
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November 30, 2013, 12:52:08 PM
 #15

It would be pretty easy.

We'd need to bump the version field in the transaction to 2 and extend the width of the value field of each txout (probably to 128 bits).

But, this would be a hard forking change.  We haven't established a protocol for hard forking changes the way we have for soft forking.  Quite likely, it would be similar, but with a longer support assurance phase, a higher threshold, and a long lag between hitting the threshold and the actual switch.

The hardest part would probably be deciding on the scaling factor for the new width.

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November 30, 2013, 02:21:59 PM
 #16

I would suggest that when a Satoshi is close to parity with a penny (either US, Pound or Euro they are all pretty close), then it is time to add more decimal places.  When 10 Satoshis = 1 penny, it is time to start considered and planning more decimals.

For Order of Magnitude, right now:

0.001 BTC ~= 1 dollar (or pound or Euro)

0.00001 BTC ~= 1 cent.

0.00000001 BTC ~= 1/1000 of a cent.  (A satoshi)

We have 1000 x value multiplier left until satoshi/penny parity.  It took 2 - 3 years for the last 1000 x value multiplier to occur.

We have 100 x value multiplier left until  10 satoshi/penny parity.  It took 1 - 2 years for the last 100 x value multiplier to occur.

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