Bitcoin as a Unit of Account

This is the most important quality of money. Don't let the benign name, unit of account, fool you. In the future this will be people's first encounter with Bitcoin, as a unit of account.

A unit of account is -the- measure of value, the measure of value that all human beings can agree upon such that our subjective and continuously changing perception of value can be rendered knowable. In other words, this is the price in a market.

Bentleys and Cristals

There is a peculiar practice amongst some Wall Street types when dealing with large sums of money.

It is difficult to intuitively understand a "billion dollars", or hundreds of millions of dollars, let alone the quadrillions of dollars of unfunded liabilities tied up in derivative schemes.

As a result, an investor may refer to Bentleys, or bottles of Cristal, or other high value items, as more convenient units than dollars.

I'm not going to sweat over this 50 Cristal client when there's 5 Bentleys on the other line.

In this case Bentley and Cristal are being used in the abstract as units of account.

Fiat Unit of Account

Fiat money is a terrible unit of account. This is because you must "adjust for inflation", or append the date, or both. And everything in fiat is relative with no absolute unit to measure against (not even bottles of Cristal). It is all fiat all the time.

Fiat unit of account is like a ruler that arbitrarily changes length; much like the imperial unit of length, the "foot" (which was historically based on the length of a person's foot). Although in fairness at least the length of a foot never inflated to be larger than the earth (inflationary fiat currency can make no such claim).

this old $20 gold coin cost $,1500 last year, but should have been $455 if adjusted by CPI, but right now it's $2,200 because of actual inflation.

Bitcoin as the Standard

Due to it's fixed supply Bitcoin is a superior unit of account. Interestingly, it operates as a potentially deflationary unit of account. That is, goods and services could get cheaper over time as measured in Bitcoin. But only as a result of actual economic growth.

On one hand this presents similar math problems that we see with inflationary money, but only with respect to Bitcoin's early adoption,

my house was 12 Bitcoin in 2022, which is now the price of the entire neighborhood.

The key difference is that any amount of Bitcoin is an exact fraction of all the Bitcoin that will ever exist. 1 Bitcoin is 1 out of 21-million, always.

It's like using real-estate as a unit of account, except it's fungible, infinitely divisible, and the value won't go down because of bad schools in your neighborhood.

As Bitcoin adoption increases, the perceived value of Bitcoin will increase. And yet even now the price of goods and services in Bitcoin send a clear signal of what people are willing to pay based on a truly scarce resource.

Price signals in fiat are very messy, but they become very clear in Bitcoin. Spending Bitcoin is difficult for Bitcoiners, as it should be with money that operates well.

However, there is a pesky unit bias. In addition to having trouble understanding "billions of dollars", we have a similar difficulty understanding fractions,

this costs 0.00000190 Bitcoin

Sats as the Standard

There are exactly 100 million Satoshis, or Sats, in a Bitcoin. This is the smallest unit on the timechain. This is not the smallest possible unit of Bitcoin; one could use millisats or picosats. In fact, there is no end to the divisibility of Bitcoin.

That said -- if Bitcoin is true -- then Sats are the standard.

this costs 190 Sats

Imagine a "100-Sat Shoppe" or "99-Sat Store" where everything is 99 Sats. This could start as the equivalent of a dollar store, or a 100-yen store in Japan.

Now imagine rather than prices rising over time due to inflation, or lowering the quality of merchandise like at the dollar store, the opposite happens under Bitcoin.

When the BTCUSD price reaches a million, then the 100-Sat Shoppe would resemble a dollar store. But as the global economy grows, the 100-Sat Shoppe would offer higher end goods, or bulk quantities of lower end goods, all to justify 100 Sats; eventually, perhaps a Sat Shoppe opens where everything is only 1 Sat.

a Sat earned is a Sat saved

And even then, as the economy continued to grow, the quality of goods at a Sat Shoppe would increase to justify the hefty price tag of a full Satoshi.