Bitcoin treads in the path of money, but still a long way off from its unit of account

Bitcoin is only a decade old but it has come a long way on the path to becoming money. A couple of metrics to consider are precision of spending and unit of account status.

When bitcoin was first envisioned back in 2009 it was largely experimental. For its first year, tens of thousands of them were fired across networks just to see what happened.

The first real world transaction occurred in 2010 when Laszlo Hanyecz famously asked for pizza on the bitcointalk forum in exchange for 10,000 BTC. He received a $25 order of pizza in exchange for the coins marking the first ever transaction for a tangible asset.

It went from magic worthless internet money to something with real value, which was the desired intention for the transaction. At today’s bitcoin prices that pizza would be worth $90 million.

BitMEX Research has delved deeper into the precision of spending on the bitcoin network to reveal how the accuracy has improved over time.

By dividing outputs into groups increasing by a power of ten (from 1 satoshi to 100k BTC) and plotting the results on a chart it is clear to see the increase in precision over the past decade.

Currently over 70% of Bitcoin outputs use the highest available degree of precision (one satoshi), considerable growth since the c40% level in 2012.

The report concluded that an increase in precision would be beneficial to privacy based on the way bitcoin transactions work with UTXOs.
As our data shows, the level of precision is increasing, such that most outputs now have the maximum level of precision. This could inadvertently be positive news from a privacy perspective.

The study went on to state that bitcoin needs to achieve three major steps before it can be considered the same status as money.

Firstly it needs to be used as a medium of exchange which is already happening, driven by its ‘potential unique capability: censorship resistant electronic payments.’
The second step has been clearly evidenced this month and that is its status as a store of value. With market movements mirroring the world’s largest store of value, gold, bitcoin is being viewed in the same light, especially in times of adversity.
Thirdly is the unit of account status. This is when goods and services are priced in bitcoin, or satoshis in this case. This is still a very long way off due to price volatility as BTC is still primarily a vehicle for speculation. There are also a number of factors that need to happen to the technology before it sees mass adoption.

It added that if this does finally occur then the degree of precision may decrease due to the asset’s increased use as a unit of account.

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