BitMEX: Bitcoin Is Still Not a Viable Unit of Account

There are currently several uses that Bitcoin meets. The asset has shown to be a stable store of wealth and a medium of exchange, and its status as an investment vehicle is also widely studied. 

However, when it comes to being used as a unit of payment, it would seem that the premier cryptocurrency still lags behind significantly. Earlier today, cryptocurrency exchange BitMEX published a research report which showed transaction outputs spread over the past decade. In the report, BitMEX Research explained that it had evaluated 1.3 billion outputs, totaling in 4.5 billion BTC (worth about $12 trillion, per current asset prices)

Precision Requirements for Bitcoin Are High 

Each of these transactions was categorized by its degree of decimal precision- substantially, the last non-zero value in a payment. As the report showed, over 70 percent of the outputs use the highest precision degree of one satoshi (worth 0.00000001 BTC). As of 2012, however, that figure stood at 40 percent.

One of the many objectives of bitcoin proponents is for the asset to serve as a stable unit of account. However, as the BitMEX research paper showed, the continuous rise in output precision ends to point to the opposite trend forming, 

“If unit of account status is achieved or becomes more prevalent, then presumably, the degree of precision should reduce rather than increase.”

As for reasons why this is so, BitMEX pointed to the “experimental” application of Bitcoin in its early days- gaming, on-chain gambling, and other tests. So, while Bitcoin has seen a surge in its price over the years, one satoshi is still worth less than one-thousandth of a cent, and as the firm notes, it’s unlikely that fiat-denominated payments will need the level of precision that Bitcoin-based payments do. 

In general, the analysis divided the applications of Bitcoin into three stages; store of value, unit of account, and medium of exchange. While the company noted that the functionality as a unit of exchange is still growing, it concluded by saying that, for now, Bitcoin’s application as a unit of account is “still a fantasy.”

Bitcoin is Finding Its Footing as an Investment Asset

However, while Bitcoin is struggling as a unit of account, one application where its interest is currently surging is as a medium of investment. Since the turn of last year, Bitcoin has grown as a reliable investment vehicle, as institutions have especially taken note of its gains and made an entry into the Bitcoin market. 

Several institutional investment firms- from the Chicago Mercantile Exchange to Grayscale Investments and Bakkt- have all recorded impressive trading numbers on their Bitcoin-denominated investment products, and as the hype surrounding the halving continues to build, there is much excitement over how much investors will be able to get from making speculations on the top cryptocurrency.