Legitimizing Bitcoin as a Currency and Store of Value: Using Discrete Monetary Units to Consolidate Value and Drive Market Growth

Abstract

Cryptocurrency, and especially Bitcoin, has struggled to gain recognition as a legitimate currency from governments, financial institutions, and consumers. This has occurred because many analysts and consumers believe that Bitcoin is not a stable and consistent store of value, a unit of measurement, or a medium of exchange. One way to overcome this challenge is for Bitcoin to be used as both a currency and store of value by a greater percentage of the world’s population. This paper seeks to identify how a change in Bitcoin’s monetary measurement (or denomination) can more easily facilitate Bitcoin transactions to increase its use. Specifically, we posit that applying whole number bias theory, from the cognitive psychology and mathematics fields, to Bitcoin’s unit of measurement will allow the value of Bitcoin to be referenced in smaller and easier tounderstand units with fewer numbers after the decimal point—such as the “Bit” or the “Satoshi.” In the process, the use of Bitcoin will include more whole numbers and allow the general public to more easily assign value to Bitcoin in day-to-day transactions.