“Rather than focusing on sats replacing dollars or cents as a unit of account to express value,” the focus should be on “the unique value prop of “spending sats,” said Cuy Sheffield, head of crypto division at Visa.
Sheffield took to Twitter to talk about the relationship between dollars, cents, and sats and the consumer value proposition of Bitcoin micropayments enabled by the Lightning Network. He argued there are interesting use cases that could drive mainstream consumers to spend bitcoin instead of dollars or stablecoins.
However, even today people need to explicitly buy Bitcoin to spend it. But he says as on-ramps improve, the shift would happen over the next few years where consumers will be able to spend Bitcoin without buying it first.
But why would people spend it rather than holding as there is currently little to no direct benefit of spending BTC. In fact, there is added friction that involves how to buy Bitcoin, its volatility, and making sure that the traditional merchant actually accepts it.
Sats Gaining a Significant Leg Up to be Used over USD
In terms of dollars, micro-transactions have two major barriers; existing payment networks aren’t designed for sub cent transactions and there is no name for the amount of value below 1 cent. This concept didn’t exist for most mainstream consumers until recently.
“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,” Sheffield said.
And those microtransactions that are under one cent might be the only payment use case that bitcoin fulfills today, said Sheffield. He argues this makes the idea of microtransactions going mainstream possible.
Moreover, every time you make a purchase, you calculate a mental transaction cost but if one needs to pay only 1/100th of a cent every time, it may “completely turn off the mental transaction cost calculator.”
Now, if one such app with micropayments can be built, “it increases the design space leading to significant experimentation and creativity.” If new use cases emerge, then sat denominated payments over Lightning or a similar app “have a significant leg up to be used in them over USD.”
However, for dollar to win these payment flows, a new unit of sub cents needs to be created and globally adopted. And years from now, Sheffield sees a generation of people who might sub cent transaction online denominated in sats more than that denominated in cents.
“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.”