It is easy to forget that Bitcoin’s ecosystem is still young, despite all the excitement surrounding recent events. The technology is still less developed than our interest. This will change over the course of time. Adoption is difficult in the interim. Software is often in beta and layers are still emerging. Bitcoin can seem complicated and full of technical jargon to the uninitiated. The decimal is one of the most difficult intellectual leaps.
Decimal Places
Each Bitcoin can be divided to 8 decimal places (100,000,000 units). The fiat currency that we have known for years is only divisible by 2 decimal places. This is a paradigm shift.Bitcoin is therefore more easily divisible than any fiat monetary competitor. This is theoretically a source for strength. But reality is often far more complex than theory. Reality is perception. Perception is the king.
IBM executive Richard Brown made a fascinating statement in a recent interview. He said that Litecoin, an alt-coin, was “testing the idea of psychology matters.”The main differences between Litecoin and Bitcoin are well-known. These include the fact that Litecoin’s total number of nominal units will ever exist (84 million) compared to Bitcoin’s 21 million. Richard views litecoin a test of the idea that “if there is a greater nominal number currency units, does it change people’s behavior?” “
This question has profound implications for adoption. The decimal place and psychological impact of nominal representations wealth are at the heart of this question.
Litecoin to Bitcoin
Theoretically, Bitcoin doesn’t need any clones. It is capable of supporting a global economy with 21 million nominal units that can be divided to 8 decimal places. Bitcoin is open-source. It can be copied infinitely, so it is open-source, for better or for worse.
Litecoin, in a marketing sense, has tried to be the’silver’ of Bitcoin’s gold’. Both exist physically. They are interchangeable, even if they have network effects.
Perception Rules
Our minds interact with numbers, psychology, and value. Research in pricing psychology shows that numbers and their arrangement around decimal places influence perceptions of value.
The digits to our left of the decimal point are the most important for us as we move our eyes from left to right. These numbers are important to us. This results in a general rounding-down effect within one’s mind. We have learned to ignore anything lying to the right. One exception is the’special offer’ situation, where numbers to the right end of the decimal end in seven or nine.
As Bitcoin’s value increases, wealth representation will shift to the right. If Bitcoins are at their current highs, an average weekly wage would show a digit to the right of the decimal place. A ‘0’ to your left is a disappointment if price creates expectation.
Our perception of a thing creates a price level: the point at where demand changes. This case is based on marketing research that suggests that Bitcoin’s demand may be affected by the fact that units to the left are increasingly made up of zeros, which is an inevitable consequence of rising valuations.
Perhaps a user will then irrationally choose to participate in a network that values their worth with a larger number. One reason a user might choose to use Litecoins is because they want to own whole units. This would allow the user to have a larger nominal representation, less zeros to the left, and greater psychological satisfaction.
Stanislas de Haene, scientist and researcher, notes that consumers are more comfortable with numbers than prices. Rounding prices helps to calm consumers and increase their perception of value. Dehaene also noted that rounded numbers convey value.
Bitcoin is a mathematical construct. It is extremely precise as a representation value. It can be even more precise if it allows for protocol changes. Bitcoins are not round. This precision can be intimidating for the inexperienced.
If you believe that Bitcoin is purely disruptive, it will not sell itself. It still faces significant challenges, its continued adoption is uncertain. People who have not given much thought to Bitcoin’s implications for value transfer, money, and distributed consensus will likely not be able to see them immediately. Software already aims to solve these issues.
Practical Approaches
Bridgewalker, a phone app that uses Bitcoin to transfer funds behind-the-scenes, allows users to view balances in fiat through the interface. Multibit and Electrum wallets display fiat denominations alongside BTC balances.
There is also a trend to denominate bitcoins in mBTC or uBTC. It is difficult to break the psychological barrier of giving up so much fiat in order to own a fraction of a purely virtual unit. This is especially true given our current preconceptions about money and value.
It could be that the Bitcoin network doesn’t find its ultimate long-term success as a’money’ or currency. Richard Brown believes that Bitcoin’s true value lies in its potential to be a global digital asset registry. This is just one more disruptive and potentially revolutionary use case. There are many uses for Bitcoin.
This technological quantum leap is not necessarily about a new type or money. It is the ability to achieve global consensus using a distributed, decentralized network without a trusted third party. This could have many applications in different fields of endeavor.
For now, the Bitcoin network is a payment system. Bitcoins are money. This application will be the main focus for the foreseeable future. For the moment, the focus must remain on Bitcoins as money if the network is to grow.
Emotions
Emotion affects decision-making. This is something that all those working on tools to facilitate Bitcoin adoption and ease-of-use must be aware of. Emotions can influence a person’s decision to join the network. The same principle applies to individuals’ views of these new units of account called “Bitcoins” and the price they will pay.
The more creative ways that we can come up with to deal with these esoteric nuances is the better. Bitcoin is full of them. It is crucial to understand the audience and their limitations when developing strategies. Bitcoin will remain inspiring and not be confusing.