Samson Mow, a prominent member of the Bitcoin community, has brought attention to Bitcoin’s growing unit problem by proposing a new subunit for bitcoin called the ‘Finney’. This proposal addresses a pervasive psychological bias known as “unit bias.” This bias can have a significant effect on how the public perceives the value and promise of different cryptocurrencies. This article explores the concept of unit bias, the rationale behind Mow's proposal, arguments for and against the 'Finney,' and its potential impact on the Bitcoin ecosystem.

Understanding Unit Bias in Crypto

Unit bias is a cognitive bias that dictates our desires. Humans have innate preferences to own whole units of things, even when a fractional unit of something else has as much or more value. In the context of cryptocurrencies, this bias leads investors to favor owning a large number of cheaper coins over a smaller fraction of a more expensive coin, such as Bitcoin. This is due to the fact that humans like a sense of ownership that comes with “thousands” of things, even if they’re just cheap, soulless trinkets.

This weird psychological tick can really ruin your ability to think critically when you’re deciding whether or not to invest. Instead, investors might be more focused on how many units they can purchase. In doing so, they might fail to recognize the intrinsic worth and future potential of an asset altogether. Unit bias typically deceives just about every investor. Unfortunately, they blind themselves by failing to recognize the risks involved in purchasing and holding altcoins with no fundamental use or ongoing development. Or they could be lured in by the penny stock price of the coin, dreaming of huge profits when the coin “just gets to $1.” Much like in 2008, too many in today’s financial industry are blind to the risks associated with mortgages and mortgage-backed securities. They were spectacularly deluded by their own optimism. They zeroed in on the perceived affordability and potential for profits while overlooking the risks underneath.

The danger of unit bias is that it distracts from the core principles of sound investing: understanding the asset's fundamentals, evaluating its potential for growth, and assessing the associated risks. What’s Working Least Bitcoin’s biggest strength is its biggest weakness. With unit bias, investors can be blind to these benefits and end up missing them while in search of cheaper and therefore invariably riskier substitutes.

Unit Bias as an Obstacle to Bitcoin Adoption

This unit bias is a major barrier to Bitcoin adoption. The high cost of one Bitcoin might scare prospective new investors away. Consequently, they nearly always seek out less expensive options. They might think, "Why buy a fraction of a Bitcoin when I can buy hundreds or thousands of [insert altcoin name here]?" This is where the problem lies: investors are focusing on the quantity of coins rather than the underlying value and scarcity.

This is why Bitcoin’s supply is fixed and it is a far scarcer asset. In comparison, most other cryptos have rather significant or even infinite supplies. At its core, scarcity is the engine that drives value. Bitcoin’s finite supply is one of the most widely discussed factors that will potentially drive up its long-term value. Unfortunately, unit bias can mask this benefit, causing investors to chase after lower-cost coins that may come with higher inflationary supplies.

Samson Mow's 'Finney' Proposal

Samson Mow has introduced the ‘Finney’ unit to address unit bias. By doing so, this newfangled treatment provides a more psychologically delightful way to portray Bitcoin possession. Today, Bitcoin is usually split into Satoshis (sat), where 1 Bitcoin is equal to 100 million Satoshis. The ‘Finney’ would be to denote another, more understandable piece of bitcoin.

Defining the Finney

The suggested value of one Finney is 1/1000th of a Bitcoin, or 100,000 Satoshis.

The Rationale Behind the Finney

Mow believes that adding the ‘Finney’ will make Bitcoin more approachable and less intimidating to new users. Rather than worry about buying a small percentage of a Bitcoin, individuals can now buy whole Finneys. It helps to make investing less intimidating and more accessible. This reframing of what’s possible might go a long way toward jumping over the psychological hurdle that unit bias has erected.

Arguments For and Against the 'Finney'

The proposal has been hotly contested within the Bitcoin community, and there are compelling arguments on both sides.

Arguments in Favor

  • Reduced Unit Bias: The primary argument is that the 'Finney' could reduce unit bias by offering a more psychologically appealing unit of account.
  • Increased Accessibility: It could make Bitcoin seem more accessible to newcomers who are intimidated by the high price of a single Bitcoin.
  • Easier Calculations: Transactions and prices could be expressed in more manageable numbers, simplifying mental calculations.

Arguments Against

  • Fragmentation of Liquidity: Introducing a new unit could fragment liquidity, as exchanges and wallets would need to support both Satoshis and Finneys.
  • Confusion and Complexity: It could create confusion and complexity, especially for users who are already familiar with Satoshis.
  • Limited Impact: Some argue that unit bias is a deeply ingrained psychological phenomenon and that a simple change in unit is unlikely to have a significant impact.

Implications for the Bitcoin Ecosystem

Beyond the direct implications for the Bitcoin ecosystem of this adoption, the acceptance of the ‘Finney’ would have wider-reaching effects.

  • Software Updates: Wallets, exchanges, and other Bitcoin-related software would need to be updated to support the new unit.
  • Educational Efforts: Educational materials would need to be created to explain the 'Finney' and its relationship to Bitcoin and Satoshis.
  • Community Adoption: Ultimately, the success of the 'Finney' would depend on its adoption by the Bitcoin community. If users embrace the new unit, it could become a standard way of expressing Bitcoin value.

The ‘Finney’ proposal is just one example of the continued struggle to bring Bitcoin to a broader audience in a more approachable and understandable way. Whether or not it will succeed in doing so remains to be seen. That discussion time has proven to be invaluable. It dares us to acknowledge the powerful psychological undercurrents that inform our understanding of value and influence our investment choices.