in Economics

Where Should Bitcoin’s Default Decimal Be?

Around the time the price of a bitcoin rose into the high 900s late last year, some exchanges and bitcoin websites chose to offer the option to display bitcoins in terms of “milli” bitcoins. Bitcoinity, for example, made it their default display mode for the price, which persists today and has seen a great deal of adoption among bitcoin wallet applications. Bitcoin-qt, Blockchain.info and Electrum all offer mBTC as a display option for your bitcoin balance. This list isn’t exhaustive, but you get the idea. Bitcoin-qt does offer microbitcoins (uBTC) as a display option, but the others do not.

With the exchange rate of one standard BTC in the triple digits in most Western currencies, and higher still in Yen, Rubles or Yuan, hardly anyone disagrees that bitcoin’s ergonomics would be well-served by a move of the decimal. Based on implementations seen so far, it would appear the community’s consensus is to use mBTC for the time being. That may be, but the move to mBTC appears to be a move of expediency made somewhat in haste. As Jeff Garzik said today on the bitcoin development mailing list:

Shipping with mBTC defaults was decidedly unwise, considering that — like BTC — it fails to solve existing, known problems that uBTC can solve, and considering the inevitable mBTC to uBTC switch.

In other words, mBTC may temporarily solve the problem of appearances, but leaves other existing issues unresolved. Issues that can interfere with adoption, and the standardization the world expects from a currency. For example, currency formats in commonly-used software are almost always two decimal places. Neither the traditional BTC denomination nor millibitcoins fit this restriction. Microbitcoins do. Attempting to fit mBTC or BTC into systems not designed for more than two decimal places in currency could result in incorrect calculations. If the bitcoin software’s numbers do not exactly match those of the financial software, it will make audits very difficult. The reality of legacy financial software being what it is, a final move to uBTC seems inevitable.

The best argument in favor of sticking to millibitcoins for now is that it appears everyone is already doing it anyway. Further, microbitcoin balances would look very high compared to the numbers most people see every day, while the same number expressed in mBTC fits our day-to-day much better. In the words of Mike Hearn:

If you have to export to financial packages that can’t handle fractional pennies, then by all means represent prices in whatever units you like for that purpose, but in software designed for ordinary people in everyday life mBTC is a pretty good fit.

Besides, fractional pennies crop up in existing currencies too (the famous Verizon Math episode showed this), so if a financial package insists on rounding to 2dp then I guess it may sometimes do the wrong thing in some business cases already.

In one sense, the products we are talking about are software, so there is no technical reason we can’t do uBTC in one context and mBTC in another. It just might confuse people. We do see fractional cents from time to time in fiat currencies so it’s possible going all the way down to microbitcoins is unnecessary at the moment.

Regardless, with Wall Street knocking on bitcoin’s door more intently by the day, the decisions that go into the development of client software are only going to get more important. This is open source software, so the decisions will be made by those who choose to act and implement a solution.