Suppose that the USD price of a Bitcoin (XBT) was $2,000, just suppose. As it turns out, today it is nearing $2,100 and is the reason I’m writing this article. In this case, 1/1000th of a Bitcoin would be, using international nomenclature, a “milli-Bitcoin”. The abbreviation of “milli” is “m”, so one-thousandth of a Bitcoin would be 1 mXBT. It should be noted that sometimes XBT is expressed as “BTC” but I’m using the former in this article as I believe it will be adopted by the International Standards Organization (I.S.O.).
It’s not part of our common experience, even if we are only using cash, to deal in $1,000 or $2,000 notes, so it may become important to start talking about Bitcoins in terms of what we use everyday. 1/1,000th of a $2,000 Bitcoin therefore is worth $2, this is an “mXBT” (milli-Bitcoin).
What happens when 1 Bitcoin becomes $10,000? That would be 10 mXBT. We don’t have any language for this, so let’s consider what we’re talking about; a tenth of a thousandth of a Bitcoin is 100 micro-Bitcoins. A micro-Bitcoin is a millionth of a Bitcoin. Who wants to say that? We need some language for this. We have a Bitcoin, milli-Bitcoin and micro-Bitcoin. One micro-Bitcoin (µXBT) just happens to be the smallest unit of Bitcoin, and it’s already named after the founder of Bitcoin, a “Satoshi”. Maybe we can talk about that someday when Bitcoins are a million USD each, not sure how soon that will be, but for now, we need two new words, one for 1/10th of an mXBT and one for 1/100th of an mXBT.
If it takes 1,000 micro-Bitcoins for 1 mXBT, it would take 10,000 micro-Bitcoins for 10 mXBT. In other words a “micro-Bitcoin” = 1 millionth of a Bitcoin or “1 Satoshi”, which using standard metric system abbreviations, could be “µXBT”. This chart demonstrates the relation between factors of ten, assuming 1 XBT is $2,000:
.001 XBT = 1 mXBT = 1,000 micro-Bitcoins = $2
.0001 XBT = 10 mXBT = 10,000 micro-Bitcoins = $20
.00001 XBT = 100 mXBT = 100,000 micro-Bitcoins = $200
the same as,
.001 XBT = 1 mXBT = 1,000 Satoshis = $2
.0001 XBT = 10 mXBT = 10,000 Satoshis = $20
.00001 XBT = 100 mXBT = 100,000 Satoshis = $200
which would be the same as
.001 XBT = 1 mXBT = 1,000 µXBT = $2 “mBit”
.0001 XBT = 10 mXBT = 10,000 µXBT = $20 “penny”
.00001 XBT = 100 mXBT = 100,000 µXBT = $200 “dime”
The term “mBit” would represent 1/1,000th of a Bitcoin.
The term “penny” would represent 1/10,000th of a Bitcoin or ten mBits.
The term “dime” would represent 1/100,000th of a Bitcoin or one hundred mBits.
I think the language will develop very soon, I just wanted to add in “my two cents” as part of the conversation. I’m sure others have already proposed similar terminology. This may solve the problem of naming the quantities while we are talking to each other, and computers don’t care, they just calculate numbers, but we don’t speak like computers. The real usefulness of this understanding is when Bitcoin is priced in grams or ounces of gold and silver, without using the dollar as a conversion factor.
Even though it’s priced in the dollar, we can look at the U.S. Debt Clock www.usdebtclock.org to help get some idea of the conversion rates. But like I just stated, eventually, no one will care about Bitcoins and USD, and the conversion will be defined by free markets in terms of purely how many Bitcoins I can get for a gram of gold.
The USD / gold ratio as stated on the U.S. Debt Clock as of today is $6,975 to 1 ounce of gold. Dividing the current USD price of Bitcoin (which I’m suggesting that soon we won’t have to do that) by this amount, gives us $2,737 / $6,975 = 0.3924 ounces of gold for 1 Bitcoin. Let’s look at this in terms of grams of gold. A troy ounce of gold is 31.1034807 grams. This would give us $6,975 / 31.1034807 USD / g Au or $224.25 dollars per gram of gold. At this rate, how many grams of gold would it take to buy one Bitcoin? Dividing $2,737 by $224.24 gives us 12.2051282 g Au/XBT. I believe the exchanges should begin to set this pricing, just like they set the exchange rates for Bitcoin and local currencies now. We should not have a centralized “price fixing” authority.