05 July 2022 • 5 min read
One of the famous artefacts in the history of cryptocurrency is the Bitcoin white paper published by Satoshi Nakamoto on 31st, October 2008. According to his publication, Bitcoin was designed to be a peer-to-peer electronic payment system, and it has become the leading digital currency in the world today.
Given BTC’s price, though, not many people can afford 1 BTC, which means that most will buy a fractional amount. Let’s say that you want to purchase 500 USD of BTC. At the time of this article, that would equate to 0.000047 BTC. On the face of it, that’s not exactly a flex, but it’s obviously more a matter of perception.
Or let’s say that you simply want to buy a coffee in BTC. In order to do so, you have to divide bitcoin into fractions to complete this type of “microtransaction” (sometimes referred to as “mtx”). And when you need your morning caffeine hit, the last thing you want to do is calculate fractional amounts of BTC.
But even under the best of caffeinated circumstances, most people find it confusing to have currencies in decimals involving more than two places. So what do you do if you don’t want to fiddle with calculations, fractional amounts, and countless decimals?
Several terms have emerged as smaller units of Bitcoin, in part due to the volatility of Bitcoin's price against the US dollar, with one of them being mBTC. In the following article, we’ll explore this unit and its relation to BTC in more detail.
Introduced in May 2011 by a poll, millibitcoin is also commonly referred to as millibit, millicoin, and millie. The letter “m” refers to milli-, which naturally stands for one-thousandth of a bitcoin. Therefore, mBTC, or a millibitcoin is 0.001 or 1/1000 of a bitcoin.
In 2017, BTCC CEO Bobby Lee started an open vote and took to Twitter to push the issue of trading in mBTC instead of BTC. As Cointelegraph reported in January 2017, the idea had a number of supporters, least of all because it would remove the psychological barriers for investing in Bitcoin by making it more affordable through smaller denominations. The article concluded that the adoption of mBTC would depend largely on the value of BTC and whether it would top $30,000 (!).
Several Bitcoin converters make it easy to convert mBTC to other fiat currencies like dollars and euros. As of the time of writing, the current price of 1 BTC is $21,64.
According to Nomics, a homepage for cryptocurrencies,
Would you rather see your balance in decimals or units of mBTC?
Instead of counting the number of digits after a decimal, especially when dealing with a smaller amount of BTC, it can be more convenient for you to convert smaller units of BTC to mBTC. Let's look at the equivalent of 1 BTC to mBTC, shall we?
For example, if 1 BTC is equivalent to $20,000, then 1 mBTC (1/100th of BTC) will be equal to $20. It's that simple.
The high market value of Bitcoin makes it practically impossible for most merchants to accept it as an online payment method. However, in light of the growing price of Bitcoin, most crypto enthusiasts have proposed the use of mBTC denominations as the standard unit of Bitcoin.
With the value of Bitcoin currently worth thousands of dollars, most newbies in the crypto space are unaware of the possibility of getting BTC in smaller units. This knowledge gap creates emotional barriers for beginners trying to get into the crypto space.
One of the reasons why people would prefer to use the millibitcoin as a unit of measurement is because it makes it easier for users to understand and communicate smaller units of Bitcoin. Satoshi Nakamoto understood that sooner or later Bitcoin would get to a point where its price can increase dramatically, hence the need for smaller units.
Crypto proponents believe that using units of millibitcoin to describe smaller units of BTC would reduce the psychological barrier and perceptions and allow more users to purchase smaller amounts of Bitcoin without feeling like six places to the right of the decimal equates to a small holding.
As we’ve seen, many crypto enthusiasts believe that mBTC will reduce the psychological barrier of BTC, making it affordable and increasing its adoption. For instance, instead of saying 1 BTC is worth $20,000, it would be $20 for 1mBTC. It is easier for most people to buy one mBTC at $20 than to buy 1 BTC for $20,000 since a large portion of the general public aren't aware that you can buy a fraction of BTC. Also, it is much easier to use mBTC for daily transactions than Bitcoin, worth thousands of dollars.
However, there are arguments against using millibitcoin as a unit of Bitcoin. There’s no doubt that the decimals can be confusing, but there's been a debate on what should be the smallest unit of Bitcoin since there are other options like microbitcoin and Satoshi.
In response to the post on the use of mBTC, a user suggested the generic use of Satoshi as the smallest unit of Bitcoin. As outlined on Reddit, CoinCadence prefers the adoption of Bits over mBTC because of the manner in which the two numbers after the decimal point mimics other global currencies, thereby ensuring that the denomination if future-proof (an important point to bear in mind given BTC's price fluctutations.
Another argument that you might encounter is that mBTC can result in inflation, but this is not true. Inflation rises when the supply of money in an economy increases. Since Bitcoin is capped at 21 million BTC, that means there will not be the mining of new Bitcoin once it hits its hard cap. Therefore, Bitcoin can be said to be deflationary.
Due to the increasing demand for Bitcoin, it takes a proportional amount of a given currency to purchase BTC. Therefore, it only becomes necessary and convenient to break BTC into smaller units using a globally acceptable unit standard.
The smallest value supported by the Bitcoin network is the Satoshi. According to Investopedia, Satoshi is the smallest amount of bitcoin on the blockchain network. It equals one hundred millionths of a bitcoin (1/100,000000BTC). In other words, each bitcoin can be broken down into one-hundred-million (100,000,000) satoshis.
As a CoinDesk article described, it's possible to carry out even smaller transactions than satoshis by using the Lightning network. Such transactions use units called millisatoshi, which equates to one-thousandth of a satoshi. It's important to note, though, that millisathosi cannot be used on the Bitcoin network.
As an article on Bitcoin.com noted that 2010 marked the genesis of the idea of a satoshi. Traders had been discussing the matter of smaller Bitcoin denominations and had been using a number of different terms as substitutes for satoshis, including "Sat" and "bit."
While millibitcoin is divisible by 1000, Satoshi, on the other hand, is divisible by 100,000,000.
Ultimately, it’s a question of language, intelligibility, and convenience. As the price of BTC continues to rise (and fall and rise again), investors will likely be drawn to smaller denominations and it remains to be seen whether mBTC, satoshi, or something else entirely will become the standard in the future.