Bitcoin units – the Achilles heel?

For the moment, ignore any regulation issues, or the growing popularity of other cryptocurrencies including the threat of Bitcoin 2.0. A far bigger issue facing bitcoin is the unbelievable confusion created when trying to work out the units and how much something actually costs…

Now don’t hate me, but I was one of the smart kids at school – you know, good at maths, no friends, etc. – but even I still struggle with small transactions involving bitcoin. This is mainly due to the insanely small fraction that each coin can be divided into; namely 100,000,000. This unit is called the satoshi and it takes a while to get your head around it. It’s not really a problem when dealing with large numbers of bitcoin, but day-to-day transactions have the potential to become nightmarish. For reference, the satoshi is the smallest divisible unit of Bitcoin and is used by blockchain.

As an example, say an apple costs 50,000 satoshi and the current BTC/USD rate is $417.33

Quite simply, to work out how much that is in actual currency you simply divide a Bitcoin by 100,000,000 then multiply it by the number of satoshi, and then finally multiply by the conversion factor for the unit of currency you want. WTF… really?…

Anyway, most people tend to think in their native currency which becomes apparent when travelling overseas as they try and work everything out in terms of what it would cost at home. Some people, myself included, try and remember a conversion factor (i.e. – one of my dollars is worth two of your dollars, so this thing is worth… you get the idea) and then use this to get a rough estimate for how much something is. This can be disastrous if you get it wrong.

Further confusion for bitcoin is thrown in as some sources use the ‘bit’ and ‘millibit’ unit instead of the satoshi. These are actually the preferred units and you will see them used on financial sites like Xapo and where you purchase things with Bitcoin. A ‘bit’, or ‘micro-bitcoin’ is one-millionth (0.000001 BTC) whereas a ‘millibit’ is one-thousandth (0.001 BTC). The satoshi is mainly used by faucets which first time ‘coiners’ are exposed to. My tip, take the time to learn the bit and millibit units.

The apple costs 21 cents by the way.

If you got that answer well done; now you can help me work out the difference between a ‘bong-bitcoin’ and a ‘bitcoin-bong’!