1/ Fantastic thread from @brian_armstrong that got me thinking a lot about the relationship between dollars, cents, and sats and the consumer value proposition of Bitcoin micropayments enabled by the Lightning Network
2/ I'd argue there are some really interesting use cases and scenarios that could drive mainstream consumers to spend Bitcoin instead of traditional dollars or stablecoins in the future that are under discussed in Bitcoin, fintech, and traditional payments circles.
3/ Today, people have to explicitly buy Bitcoin in order to spend it. However, as on ramps improve, there is a potential for a shift over the next few years where consumers are able to spend Bitcoin without explicitly buying it with new applications like @JackMallers @ln_strike.
4/ Now why would a consumer be more interested in spending Bitcoin than buying and holding it? There is currently little to no direct benefit to average consumers of spending Bitcoin for any brick and mortar or online purchases that they are able to spend dollars on today.
5/ In fact, there is usually added friction. You have to figure out how to buy Bitcoin first, stomach its volatility, and make sure that the traditional merchant that you want to transact with actually accepts it which limits your options of where you can transact.
6/ The only reason a consumer would want to spend Bitcoin (consciously or not) is if they could spend it in payment flows they can't make today in dollars. Microtransactions under 1 cent may be the only payment use case that Bitcoin fulfills today that dollars currently can't
7/ Microtransactions have two major barriers today preventing them from being made in dollars. 1) Existing payment networks were not designed for sub cent transactions 2) There is no name for a dollar based unit of account that represents an amount of value below 1 cent.
8/ Have you ever heard an average person refer to the price of something as fractions or basis points of a cent? Probably not, as that concept doesn't exist for most mainstream consumers that conduct dollar based payments today.
9/ Until recently, I was skeptical that microtransactions could go mainstream in the next few years because even if new technology and networks supported them, mental transaction costs for consumers would still exist and limit their adoption.
10/ Whether you realize it or not, every time you actively make a purchase, your brain has to calculate a mental transaction cost. You decide if the item or service is worth the amount you are paying for it and if you really want to buy it
11/ Some people calculate to the dollar and look for coupons and offers, others subconsciously approve anything they want < a certain price. Therefore, even if you have the option of paying 1 cent to read an article, many people would still pause to consider if 1 cent is worth it
12/ I'd expect that there are actually a limited number of popular items and services in our economy today that would sell for between one cent and $0.99 online or offline as mental transaction costs still apply to those purchases and 1 cent could still be considered expensive.
13/ For example, on a social network where I need to pay 1 cent to upvote or comment on a post I may want to do this 100 times / day but that would add up to a $30 bill every month requiring me to think twice and throttle how often I take those actions on the network.
14/ Now if instead I only need to pay 1/100th of a cent every time, I may completely turn off the mental transaction cost calculator in my brain and like every post knowing I'm only spending $3 for the month. This is where the opportunity for micropayments exists!
15/ Bitcoin uniquely has a native unit of account called a "sat" that currently represents 1/100 of a cent while BTC is $10k. The brand of "sats" is far from mainstream, but it could already be the most recognizable global unit of account to represent value < 1 cent
16/ To my knowledge, there isn't a single thing you can buy or pay for online today in USD for under 1 cent. Now is it possible in the future that no items, features, digital goods, or services that are valued and priced sub one cent become popular or demanded? Maybe...
17/ However, if you have 1k+ devs able to easily build on open tech that enables them to create apps with micropayments for items and services that cost between 1/100 of a cent and one cent, it increases the design space leading to significant experimentation and creativity.
18/ If new use cases like paying sats to remove ads, tip influencers, join private messaging groups, or buy digital goods emerge, sat denominated payments over Lightning or a similar open source layer 2 network have a significant leg up to be used in them over USD.
19/ For dollars to win these payment flows, a new unit of account for sub cents would need to be created and then adopted globally by developers across the world in addition to new or enhanced globally available payment networks designed for sub cent transactions
20/ Five years from now, there could be a generation of people who are more likely to conduct a sub cent transaction online denominated in sats on any given day than pay for an item offline or online that is denominated in cents.
21/ Sats unique feature as the sub cent unit of account native to the internet could become more globally understood and adopted than cents much faster than Bitcoin could ever become more understood and adopted as a unit of account than dollars.
22/ You could imagine a consumer who doesn't care about or understand Bitcoin and keeps their digital wallet balance in dollars, could still know what a sat is and conduct dozens of sat denominated transactions online in addition to a few dollar denominated transactions each day.
23/ Sats also don't suffer from same volatility concern for consumers. If you start with an absolute value that is sub one cent, you don't care if it goes down and you lose fractions of a cent or feel fomo by spending it if it could appreciate by fractions of a cent.
24/ While "stacking sats" has started to gain traction as a way to describe buying or earning a few dollars of Bitcoin, I think it will be hard to get mainstream consumers to get accustomed to thinking of $20 of Bitcoin as 200k sats.
25/ Rather than focusing on sats replacing dollars or cents as a unit of account to express value that can already be expressed in existing units of account, devs should focus on the unique value prop of "spending sats" to express and transact in value that is sub one cent.
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