Shiba Inu cost just $0.00004893 or so each on Friday afternoon, while Dogecoin fetched less than 1 cent early this year. A Bitcoin can be sliced into a satoshi, which is this much of the coin: 0.00000001. Then there’s the weirdest of all: the wei. That’s one quintillionth of an Ether, or 0.000000000000000001.
The likely explanations for this are a mix of understandable and befuddling.
Retail traders love penny stocks. It’s easy to dream of huge returns when a move from 1 cent to 2 cents doubles your money. So going even smaller than that rides on some long-standing coattails, even if Shiba Ibu and Dogecoin don’t bring much else to the table. And who doesn’t want to buy a million of something? With Shiba Inu, that only costs about $50.
“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,” said Halsey Minor, executive chairman of Public Mint, a blockchain platform. “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.’”
But 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 — besides the fact that they’re named for crypto pioneers. The satoshi’s namesake is, of course, Bitcoin’s creator, Satoshi Nakamoto. Wei refers to influential cryptographer Wei Dai.
Why on earth would anyone need to divide a token up to 18 decimal places? Well, there are not many compelling reasons. Though, theoretically, a token could rise so much in value that all those decimal places could come in handy. In theory, at least.
“Many researchers in the space have agreed that the 18-decimal standard for ERC20 tokens is pretty arbitrary and likely not ideal — 18 decimals is a LOT of precision for pretty much any use case,” said Arjun Bhuptani, the co-founder and project lead of Connext, which is what’s known as an interoperability network that enables communication between Ethereum-compatible blockchains.
The problem is, while numbers can go up infinitely or be divided infinitely small, computer hardware has finite limits on how much data can be stored. So some platforms and tokens have chosen to break away from the 18-decimal standard. For example, the stablecoin Tether — known as USDT — is an ERC20 token but only uses six decimals. Even that is a lot for a coin meant to be worth almost exactly $1.
“The tradeoff that token creators typically consider when doing this is whether the improvement in user experience outweighs the additional work that would need to happen for other projects and applications to integrate it,” Bhuptani said.
The result is what’s known as decimal precision — or how far to the right of the decimal point that various platforms are willing to go. For example, at Kraken, there are limits on how many numbers can be inputed when placing a trade. Given its high price, the exchange has done away with pennies when it comes to buying Bitcoin — orders can only be placed in dime increments. And when it comes to placing an order for a certain amount of a token, forget about at 18-decimal standard for Ethereum-based tokens: you only get 8 on Kraken and many other platforms.
As Kraken explains on its website: “A lower price precision can help order books operate more efficiently by reducing the volume of canceled (unfilled) orders as traders continually jump in front of each other by small fractions in price.”
When it comes to coins like Shiba Inu, Dogecoin and SafeMoon — which currently goes for about $0.00000348 — it’s usually a preposterously large number to the left of the decimal when it comes to supply that helps create the preposterously small number to the right when it comes to price. Shiba Inu started with a supply of 1 quadrillion. In other words: 1,000,000,000,000,000.
While half of that was gifted to Ethereum co-founder Vitalik Buterin, who “burned” most of it by sending it off to a wallet no one can access, that still left about 500 trillion of the coins.
So, in the highly unlikely event the coin were to rise in value to $1, the amount circulating would be worth almost 10 times as much as the entire U.S. stock market. Retail traders probably aren’t thinking through how unlikely that is, said Jonathan Azeroual, vice president of blockchain asset strategy at crypto exchange platform INX.
“Decimalization on Dogecoin and on Shiba was actually the best marketing thing you could ever do, basically, because nobody wants to buy 0.01 Bitcoin, but everybody wants to have millions of Shiba,” said Azeroual. “Why? Because they think somehow, one day, maybe that thing will go to $1.”
That psychological effect is why some in the crypto community advocate for quoting prices for satoshis, rather than a full Bitcoin. For what it’s worth, when Bitcoin is $65,000, a satoshi is $0.00065 — more than 10 times the cost of a Shiba Inu.
INX also only allows eight decimals for subdivisions of a coin. Even that’s a lot. Starting at the sixth place, you’re already dealing with a fraction of Ether that’s worth less than a penny and deep into territory known as “dust” — slivers of tokens so tiny they can get stranded in wallets because they’re not valuable enough to cover transaction costs.
Of course, the crypto world is famous for making plausible what once seemed implausible and vice versa. Azeroual recalls the cautionary tales of years past when people blew massive amounts of Bitcoin or Ethereum as payments just because they could. Like the guy who spent 10,000 Bitcoins — current value, almost $600 million — for two pizzas in 2010. These days, at some shops, you could get something like 10,000 pizzas for one Bitcoin.
“And that’s what the exchanges are dealing with, at the end of the day, what the price will be 10 years from now,” he said. “Who knows? Right?”