#nostr I need your help
I have a very smart friend who thinks that because #bitcoin can be infinitely divisible, it is inflationary. I talked to him for more than an hour and could not find the right language to make him understand.
This is now the second smart friend I have who thinks that #bitcoin is inflationary because it can be infinitely divisible.
#nostr can you help me find the right language / proof to help them understand?
Cut a pizza into as many slices as you like, the amount of pizza still doesn't change.
It is not infinitely divisible. There will be 21 million Bitcoin and 2.1×10¹⁵ Satoshi, because every Bitcoin is 100.000.000 Satoshi.
The supply is fixed. Satoshis can't be split up any further.
Yes they can. It will be a relatively simple change in the code to divide satoshis to 16 decimal places instead of 8.
There is really no such thing as a bitcoin, it's just a name for 100,000,000 satoshis. satoshi is the base unit. Lightning network actually further divides this and uses millisatoshi (1/1000 of a satoshi), but ultimately channel settlement is rounded to the nearest satoshi.
If the price rises very significantly, I expect there would be relatively little political difficulty hardforking Bitcoin to increase the precision of the base unit. In such a case microsatoshi might become the new base unit on the blockchain, and the value of pre-fork UTXOs would be adjusted appropriately.
So, it is highly divisible but not infinitely divisible. It can be further divided in Layer 2 solutions but ultimately can't be settled in precision greater than 1 satoshi. However, if it becomes a big problem we will just adjust the base unit.
Increasing precision does not affect scarcity: there will always be less than 21,000,000 BTC, or 2,100,000,000,000,000 satoshi, or 2,100,000,000,000,000,000,000 microsatoshi. It just allows Bitcoin to be transacted in smaller amounts.
Appreciate you. I think the problem my friends are having is more fundamental. If there’s 100 units of a currency, then making it divisible by another decimal place is the same as saying there are 1000 units.
I constructed a quick thought experiment that I think breaks this and this seemed to sway a 3rd friend who I talked to:
Thought experiment:
Scenario 1 - we have 100 units of currency and there are teacups available for purchase. The price of a teacup can never be more than 100 units, even with infinite divisibility.
Scenario 2 - we increase from 100 to 1000 units, and now teacups *could* be priced above 100 regardless of whether or not the original units of currency can be divided or not.
Why someone thinks adding more decimal places is that same as increasing the total pool is still beyond my understanding.
But this is now 3 people (1 who is questioning but not certain) that think these are the same thing. I am losing my mind over this.
Well it is a very more nuanced topic than that because in a way hes correct integers do not suffer the same limitations as physical goods So we can infantastically divide integers forever and ever but the vision of those integers is essentially multiplication of the number of units that represent the same value therefore inflation but in Bitcoin baselayer units satoshi's can never be divided on the chain Doing so would be a hard fork of consensus therefore no longer Bitcoin
This is what I don’t understand (btw thank you for helping me hash this out):
“multiplication of the number of units that represent the same value therefore inflation”
I think I’m trying to make this point, tell me what you think:
Starting with 100 total and increasing to 1000 causes inflation (aka money printing), but starting with 100 and increasing it to be more divisible DOES NOT cause the same kind of inflation.
Here are 2 tweets that can help you better understand the nuances i have a video clip as well lemme see if i can find it
https://twitter.com/BitcoinErrorLog/status/1524638027909369856
https://twitter.com/BitcoinErrorLog/status/1552935243618951168
You are amazing, thanks
I read those tweets and… I still don’t get it.
Am I a flat-earther but replace “flat-earth” with “infinite divisibility does not mean infinite supply”?
Am I missing some basic logic / reasoning here?
At this point I know more people who say “infinite divisibility means infinite supply” and I’m losing my mind.
nostr:npub1zt8u9mz68x3e6qhey8mhuuqahst4kc587gka7qj84uuhq6t878vsn7yx9r you are too kind to bear with my misunderstanding here, I’m off to listen to that podcast clip now
Its a very counter intuitive idea is why you're having a hard time grasping the idea. I did too when i came across this problem and had to find the answer as to why it wasnt an issue or problem in #bitcoin
Hey we all started and been in your shoes at some point in our journey. Im mean what do we really "know" outside of what others have told us or experienced ourselves? This is the journey for truth and it is a different path for each of us. If i can assist someone else in their journey im more than happen to help point them down paths i too once traveled
Listened to podcast and now I understand that:
Bitcoin currently is not infinitely divisible, there are simply 2.1 quadrillion Satoshis.
(This is a new thing I learned today thanks to you)
What I still don’t understand, is that if we were to actually create millisats (somehow), we would not be increasing the total supply of bitcoin as described here:
nostr:note19et32uy3v44qtk99vuguhu5syf93f4cmmwa2mc7nv8rwl3wt6naqhjnenc
Or am I wrong about the millisats not increasing total supply?
We'll like John said in the podcast by creating an alternate unit that could possibly become more valuable than the actual basic unit of satoshi's therefore you would just run into the same problem with the new current unit. I think a lot of people struggle with this valuation of Bitcoin because they continue to think in fiat dollar terms and think that we will need more units in order to transact but I think they're needs A greater change to come about in society in which we all reprise things insects and no longer try to denominate things in the Fiot denomination because as we all know fiat has no bottom therefore Bitcoin has no top
I think with the current mindset we run into these problems of we need infinite visibility because one sat is gonna become worth entirely way too much to transact in etc etc and I think there's gonna come a point where all that changes because of the human usage of the unit itself
Wait I think I figured it out!
When the government prints money or new gold is mined, that new money goes to a tiny portion of people, it is not evenly distributed, therefore you lose purchasing power as someone holding money outside of those who receive newly minted units.
When you make units more divisble, like adding millisats, that’s like evenly distributing new units to everyone proportionate to their existing purchasing power, so no one’s purchasing power changes.
Is this correct?
Kind of. But even by doing so youre giving more units that represent the actual value of the goods.
Money is one half of every transaction. So if the units that represent said value increase its dilution.
If you keep the distinction between the old units (aka sats) and new units (aka millisats) then it would be fair to say “sats weren’t diluted”?
But then youre creating an altogether " new" unit then it could essentially become worth more than the other. So back to square one.
Could you have started with decimals (instead of integers) from the beginning? Then it’s all the same unit, it’s just names like dollar vs penny to describe amounts.
When I say decimals I really mean “positive real numbers” that starts with some arbitrary cap, like 2.1 quadrillion.
Yeah technically like john stated the 21 million "coins" are just arbitrary software baggage. Actual bitcoin (100 millions sats) dont exist. All Bitcoin see are the 2.1 quadrillion units.
Ive searched for an anwser as to why this idea of grouping 100 million sats came to be but came up empty.
Would decimals not have worked because of computational reasons like floating point division errors?
If we, hypothetically, had a world without those errors and decimal math would be perfect, could we have infinite divisiblity without it actually adding more to the total supply?
See now youre way passed anything ive ever vetured to think or ask!
This has really been my original question (except I didn’t know bitcoin was integer based and not decimal based).
And talking about units was actually tricky
As far as I can see now, if bitcoin was decimal based and infinitely divisible, that alone would not make it inflationary instead of deflationary.
Is ^ true?
This is what I’ve been arguing with my friends about.
I think in my mind it boils down to this concept.
If there can be a way to make more representative units of value there is an inflation regardless of how you slice it, due to how integers work in the abstract sense. Your just adding more units to chase the same number of goods respectively.
This is why i believe value in and of itself its going to HAVE TO reprice itself in the future at some date so that the units we have now actually work in practice.
Perhaps this is just a difference between integer based systems and decimal based systems. In an integer system there’s no way to make it divisible without adding more integers. In a decimal based system, you can go as small as you want but it’s all the same amount of units.
One of my friends was arguing that if you can go to infinitely small amounts that’s a type of inflation and I don’t understand how he thinks that (under a decimal based system)
The pizza is the best. All the bitcoin in the world = 1 pizza. As bitcoin becomes more valuable so does a single slice, half a slice, a bite, a nibble, a crumb, dust......
It is inflationary. Except it's the purchasing power that inflates, not the supply.
Oooh this might help me
Pizza, stock splits and realestate subdivisions.
Doesn’t matter how many times you subdivide, you still ain’t increasing the original amount, you’re just making smaller pieces of the pie.
