When it comes to decimal places, cryptocurrencies are treading into uncharted territory that other markets have never dared — or bothered, for that matter — to go.
On Friday afternoon, Shiba Inu was selling for around $0.00004893 each, while Dogecoin was trading for less than a cent at the start of the year. A Bitcoin can be divided into a satoshi, each of which is this much of the coin: 0.00000001. Then there’s the most bizarre of them all: the wei. That’s 0.000000000000000001, or one quintillionth of an Ether.
The most likely explanations are a mixture of understandable and perplexing.
Penny stocks are popular among retail investors. When a change from one cent to two cents doubles your money, it’s easy to fantasize about huge profits. Even if Shiba Ibu and Dogecoin don’t bring much else to the table, going even smaller rides on the coattails of some long-standing coattails. Who wouldn’t want to spend a million dollars on something? That only costs around $50 with a Shiba Inu.
“You see with a lot of these meme coins, such as Doge and Shiba, retail investors are plowing money into them because they look cheap. There’s a psychological element here, in many cases, where people think, ‘Oh, a whole Bitcoin is $65,000, but one Dogecoin is only 25 cents.’”— Halsey Minor, executive chairman blockchain platform Public Mint
But, aside from the fact that they’re named after crypto pioneers, the rationale for such tiny slivers of Bitcoin, Ether, or Ether’s cousins (smart contracts using the ERC20 standard that also live on the Ethereum blockchain) is harder to explain. Satoshi Nakamoto, the creator of Bitcoin, is the satoshi’s namesake. Wei refers to Wei Dai, a well-known cryptographer.
Why would anyone require a token to be divided to 18 decimal places? There aren’t many compelling reasons, to be sure. Though, theoretically, a token’s value could rise to the point where all those decimal places would be useful. At least in theory.
The problem is that, while numbers can be multiplied indefinitely or divided indefinitely small, computer hardware has finite storage capacity. As a result, some platforms and tokens have chosen to abandon the 18-decimal system. The stablecoin Tether, also known as USDT, is an ERC20 token with only six decimal places. Even so, that’s a lot for a coin that’s supposed to be worth nearly $1.
The end result is decimal precision, which refers to how far to the right of the decimal point different platforms are willing to go. When placing a trade at Kraken, for example, there are limits on how many numbers can be entered.
When it comes to placing an order for a specific amount of a token, forget about the 18-decimal standard for Ethereum-based tokens: Kraken and many other platforms only allow you to order 8 tokens
And when it comes to coins like Shiba Inu, Dogecoin, and SafeMoon — which is currently trading for $0.00000348 — it’s usually a ridiculously large number to the left of the decimal when it comes to supply that helps create a ridiculously small number to the right when it comes to price.
Shiba Inu began with a one quadrillion supply. To put it another way: 1,000,000,000,000,000.
While half of that was given to Ethereum co-founder Vitalik Buterin, who “burned” the majority of it by sending it to an untraceable wallet, there was still about 500 trillion coins left.
So, in the extremely unlikely event that the coin’s value rose to $1, the total amount in circulation would be worth nearly ten times that of the entire US stock market. According to Jonathan Azeroual, vice president of blockchain asset strategy at crypto exchange platform INX, “retail traders probably aren’t thinking through how unlikely that is.”
Because of this psychological effect, some in the crypto community advocate for quoting satoshi prices rather than full Bitcoin prices. When Bitcoin is $65,000, a satoshi is $0.00065, which is more than 10 times the price of a Shiba Inu.
In addition, subdivisions of a coin are limited to eight decimals on INX. Even so, it’s quite a lot. Starting at the sixth position, you’re dealing with a fraction of Ether worth less than a penny, and you’re deep into “dust” territory — slivers of tokens so small that they can get stuck in wallets due to a lack of value to cover transaction costs.
The crypto world is known for making what once seemed implausible plausible, and vice versa. Azeroual recalls the cautionary tales of the past, when people blew large sums of Bitcoin or Ethereum as payments just to be able to.
For example, in 2010, a man spent 10,000 Bitcoins (approximately $600 million at the time) on two pizzas. You can now get something like 10,000 pizzas for one Bitcoin at some shops.