With Fiat Currencies Crumbling, It’s Time to Denominate in Bitcoin Terms

This article from September 28th, 2022 by Stephan Livera was originally published on Bitcoin Magazine and later updated on July 30th, 2023.

Many fiat currencies are struggling to retain purchasing power in USD terms. The macro conversation on finance Twitter is now turning to how the overall system is breaking and the fact that you can’t taper a Ponzi.

Now is a great time to press the advantage that Bitcoin brings: not being a fiat currency that can be printed on demand. It’s time to denominate in Bitcoin terms.

As you may be aware, many fiat currencies are crashing against the USD. This doesn’t necessarily mean the USD is “going up” either; it is also losing purchasing power, just at a reduced pace.

Year to Date (YTD) for large fiat currencies vs USD:

• GBP is down from $1.34 to $1.057 — a drop of 21%

• JPY is down from 0.0087 to 0.0069 — a drop of 20%

• EUR is down from $1.13 to $0.97 — a drop of 15%

The Bank of England is now starting a new wave of bond purchases; in other words, the debasement continues. GBP holders and savers will continue to have their savings destroyed by the money printer over time. They are being sacrificed on the altar of “financial stability.”

With fiat currencies devaluing this rapidly, it’s not such a crazy idea that we should value things directly in sats or BTC terms. While nocoiners love to hate Bitcoin for not being at all-time high prices, the reality is that long-term Bitcoin users have dramatically profited, both in purchasing power and in terms of freedom.

The loss of confidence in fiat currencies is driving a fundamental shift in thinking. If our precoiner friends were scared of Bitcoin because of volatility before, the difference in volatility between Bitcoin and fiat coins is reduced, so it makes sense to start using Bitcoin denominations.

It means to evaluate financial costs and benefits in Bitcoin or satoshi terms. This includes financially valuing our net worth in Bitcoin/sat terms. This is really what matters over the longer term for Bitcoin Maximalists, after all. If you believe everything will be priced in sats someday, why not start now?

I have personally denominated my net worth in Bitcoin terms for a while now, but I’ve struggled with the next part: day-to-day expenses. For me, this is mainly because of mental arithmetic. So, my next step is to focus more on evaluating the Bitcoin cost of revenue and expenditure of day-to-day items. If we are serious about Bitcoin as better money, we should show it.

Start by keeping your finger on the pulse in terms of what the “sats per dollar” price is. You can do this using Coinkite’s BLOCKCLOCK (aka, Moscow Time) or perhaps on sites like Bitbo.io that list it. You can also use converter tools like bitkoin.io or preev.com. Also, pricedinbitcoin21.com is a useful site showing all kinds of Bitcoin-denominated prices.

On mental arithmetic, one tip is to start with sats per dollar. So, for example, if 1 BTC = $19,067, then the sats per dollar is about 5,200, so $10 is about 52,000 sats, $100 is about 520,000 sats, and $1,000 is about 5.2 million sats.

Another hurdle is having to continually reset prices if we’re quoting real-world products/services in Bitcoin terms. But so be it; this is our proverbial cross to bear, and it benefits the user in the longer term to operate this way.

Of course, there may come a point where the Bitcoin price for something set a few years/cycles ago is no longer appropriate, but this just requires readjustment. And being fair, this is something that all fiat merchants have to do anyway.

In the earlier days of Bitcoin, it was more common to speak in terms of the BTC values for things. Perhaps it became more difficult due to the price rise and dealing with small fractions of a Bitcoin in our heads.

Remember, though, that early services and games ranging from SealsWithClubs, to MPOE, to SatoshiDice were Bitcoin-denominated! Some early exchanges on Bitcoin Talk forums were bitcoin denominated. So really, this is just bringing back what Bitcoiners used to do.

Of course, there are some in the Bitcoin space who are already Bitcoin-denominated, even in terms of the service/product they sell. Notably, the CoinJoin services are Bitcoin-denominated (e.g., see the Whirlpool fee calculator here), and various individuals in the space are operating without fiat bank accounts, so they’re obviously doing better at being Bitcoin-denominated.

We should also note that the Lightning Network is helping here also. Various Lightning services, tipping, and wallets are sats-denominated. For example, Alby and the Podcasting 2.0 apps are sat denominated. People running routing nodes on the Lightning Network set their base fees and variable fees (ppm, or parts per million) in satoshi terms, which we can see by browsing Lightning nodes on explorers such as mempool.space.

A long-time topic in Bitcoiner circles is the point of unit bias, which is believed to be behind some shitcoins pumping. The nocoiner coming in sees a very low price per unit and buys the shitcoin thinking, “Hey, it’s coming off a low base so there’s more upside.” So the rationale is that if we all spoke in terms of sats only (and not in BTC terms), Bitcoin could also leverage this effect.

But this doesn’t come for free; there is a trade-off. There may well be high-net-worth investors (HNWI) who get into Bitcoin, and because they want to buy “a whole coin, ” they buy more than they otherwise would have. We could even argue that the amount HNWIs buy is higher; thus, the impact HNWIs have is higher. And by now, most know the oft-quoted statistic about how “even if every millionaire on earth wanted a whole Bitcoin, they couldn’t get it.”

Remember that if you divided the number of sats by the number of people on earth, that number comes out to around 226,000 sats (see satsperperson).

But perhaps this unit bias question is neither here nor there. As long as there is an easy option or toggle between BTC terms and sat terms in our apps and services, it probably doesn’t matter. In practice, I think people will just refer to smaller value things in sat terms and larger value items in BTC terms.

I understand one critique here might be that many of our day-to-day expenditures are still fiat-denominated and that we can’t fully escape it (yet). Nocoiners may also critique us for valuing Bitcoin in USD terms, but the process has to start somewhere.

Starting somewhere means we should try to think in Bitcoin or sat terms first. So, if we’re talking about the price of things, list the Bitcoin-terms price first. Or perhaps more provocatively, list the Bitcoin price only and let the other person do a calculation. Let’s disrupt the network effect of fiat currency and not let our lives be ruled by fiat currencies.