Bitcoin “Bits” Denomination Suggested in Bitcoin Improvement Proposal

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Bitcoin "Bits" Denomination Suggested in Bitcoin Improvement Proposal

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Bitcoin developer Jimmy Song has encouraged for the use of “bit” for simpler Bitcoin denominations, proposing in BIP 176 published in December 2017 that the denomination be formalized. BIP 176 calls for Bitcoin amounts to be denominated in bits, where 1 bit = 100 satoshis or BTC 0.000001.

Song believes that the bits denomination is considered useful because sending small amounts of money with Bitcoin can become confusing due to the many decimal places required. Missing by a decimal can cause a user to send an order of magnitude less or more than intended. For example, at the current Bitcoin exchange rate of USD 7,700 as of 23 July 2018, USD 1 would be 130 bits instead of BTC 0.00013.

Additionally, using bits allows easier comparisons of the value of fiat currencies relative to Bitcoin. The JPY is worth 1.17 bits, and the KRW is worth 0.11 bits, for example. This is more illustrative than comparing amounts in Bitcoin which have many decimal places.

Implementing bits will become even more important if Bitcoin’s price rises by orders of magnitude. Should Bitcoin hit USD 100,000 then USD 1 will equal 10 bits, and if Bitcoin hits USD 1 million then bits will be at parity with the dollar.

Some arguments against this proposal take into account that “bits” is already used as several computing terms and could further confuse users, but Song believes there are sufficient contexts that would prevent this.

Micro-Bitcoin (µBTC) has already been implemented in the Bitcoin Core wallet GUI, which is BTC 0.001. This implementation was made for the same reason Jimmy Song is calling for bits but was put into place years ago when Bitcoin’s price was much lower. Perhaps in the future, even bits will be insufficient, and satoshi (BTC 0.00000001, the smallest Bitcoin denomination) could be the best denomination to use when transacting Bitcoin.

Adding bits to the Bitcoin Core wallet software can be made with a simple addition to the GUI code, without requiring any changes to Bitcoin’s underlying protocol. BIP 176 has not been implemented yet officially, but anyone who runs a wallet service, payment service, or exchange can code bits into their software if they want to.

 

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