dash_unit_denominations.md

Dash Unit Denomination - Problem & Solution

Introduction

Note: In this document, "DASH" (in all caps) refers specifically to the unit of account, presently 100,000,000 DUFF, whereas "Dash" can refer to the software project, the community, or the overall ecosystem.

What is Dash's target market? The answer to this question forms the premise of the discussion below.

If Dash's target market is limited to payment processing, with competitors such as Visa, Mastercard, Paypal, Venmo, and Stripe, then the proposition herein may be uninteresting. If, on the other hand, Dash aims to be a free-market money, an electronic currency, a digital cash, with competition including the YEN, EURO, and USD, then the information in this document is vital to consider.

Motivation

Dash is at a crossroads. Two distinct paths lie ahead. On the one hand Dash becomes a glorified payment processor. On the other hand it becomes an independent money (that also happens to have its own built-in payment processor). The difference is whether we intend to rely on national (fiat) currencies into the future, or, aim higher and plan ahead for Dash to fulfill all of the three widely-accepted functions of money:

1. Store of value
2. Medium of exchange
3. Unit of account

Bitcoin got stuck at store of value, leaving medium of exchange to separate, off-chain solutions. Dash aimed higher and is committed to being a good medium of exchange (in addition to store of value), keeping fees low and scaling on chain. Will Dash aim even higher and lay the necessary groundwork to become a prominent unit of account, culminating in goods and services being priced in DASH? The answer to that will dictate which path we take at this crossroads.

Wait, are we already at that crossroads now; isn't that still a long ways down the road? It is true that goods and services won't be priced in DASH any time soon, but the decision to facilitate that is now. In fact, it was probably long ago, but I believe it's still not too late to change course (even though it will probably require some heavy bush whacking) to get on the path to making Dash a viable currency.

So far I haven't justified any of my claims. In fact, I haven't really even described the problem yet. I've just given my motivation, so that it's clear why I'm bringing this up at all. I want Dash to be a currency, not just another PayPal or Venmo that gives deference to the USD and other national currencies. I will expound on that in later sections.

Summary

With the motivation understood, I will summarize the issue at hand: Dash's widely used unit of account, the DASH, is not conducive to an independently functioning currency. This problem won't fix itself, but it can be fixed with targeted actions, taken now. The only viable solution I see is to re-denominate (re-define) the DASH.

There are circumstances when problems arise, and solutions present themselves and gain adoption organically, without anyone taking a prominent lead - people gradually adopting gold and silver for monetary use, for example. Other solutions must be proactively engineered, such as building a space ship to get to the moon. Engineering Dash is an example of the latter; making units suitable for commerce is a key task that requires proactive planning and engineering to implement.

Background

This topic is not new in cryptocurrency. The Bitcoin community has had these discussions before. It has been, and continues to be, a lengthy debate, and to this point no good solution has emerged. Bitcoin didn't plan for the problem ahead of time, and hasn't been able to organize and decide on a solution even after various proposals have been put forth. Ethereum too has been plagued by this problem, although the issue is not as stark there since their community doesn't seem to be targeting the money use case - their smart contracts interface mostly computer-to-computer, so they don't need a unit that normal people are expected to use in daily conversation.

It may be too late for Bitcoin to fix their unit problem. Ethereum doesn't really need a fix. Dash on the other hand, must come up with a unit that normal people will feel comfortable with, because Dash is supposed to be digital cash. Fortunately, Dash has been successful with re-brands and major innovations; mid-flight adaptation is the norm for Dash. Fixing this issue is definitely possible with the right planning.

Reference Links

• r/bitcoin discussion
• bitcoin article
• r/btc discussion
• r/ethereum discussion
• r/dashpay discussion
• r/dashpay discussion
• dash forum discussion
• dash forum discussion
• Bitcoin Improvement Proposal (BIP) 176

The Problem

Currency Viability

For any currency to be vaible long term, it must be capable of operating smoothly and comfortably on its own, independent from other currencies. Although Dash is functioning well as a store of value and medium of exchange, it is not a good unit of account. This is due partly to volatility against national currencies, and because it is new and adoption is still low. But even at this early stage, 1 DASH represents too much value (measured in other currencies, but also in terms of goods and services). This problem would remain even if its exchange rate were stable.

Buying, Spending, & Giving Dash

The problem is apparent in everyday, small purchases, such as the proverbial cup of coffee. Already it costs a very small fraction of a unit to purchase a cup of coffee, something like 0.00417 DASH. With increased consumer adoption, this problem will get much, much worse, to the point where almost anything someone buys will cost a fraction of one unit of account. People are not accustomed to thinking in fractional values.

The problem gets compounded when we consider not just the spend side of the equation, but the buy side also. Someone new to cryptocurrency wants to get into Dash, so they decide to exchange some of their normal money for it. They are immediately hit with sticker shock. "To buy 1 DASH I have to cough up a whole paycheck? Hmm, oh wait, I can get 300 of this other coin for 50 USD, that seems better."

What about when a crypto veteran wants to help friends or family members get into Dash by offering to give them some? You don't want to give too much because these people are new and may lose it. Plus, you want to give Dash to a bunch of people, so it can't be too much. You start off by throwing them a few bucks worth. They look at their wallet and see .0026087 DASH. An underwhelming gesture - they forget about it, or worse, are put off by it.

Maintaining Competitive Advantage

Despite Dash being a technologically superior currency in almost every way, Dash is struggling to maintain (let alone gain) market share against the competition. Incumbents above Dash have largely retained their positions, and emerging competition has been overtaking Dash. Why? I submit three observations for consideration:

1. Some coins are still riding on name recognition
2. Some coins are playing nice with the traditional monetary and financial incumbents
3. Some coins have very attractive units of account

I'm not worried about the first category (including Bitcoin, Bitcoin Cash, and Litecoin) over the long term. These coins are largely floating by on yesterday's achievements, name recognition, and early mover advantage, but they will lose market share over time. The coins in the second category (including Ripple and Stellar) will continue to receive investment from deep-pocketed incumbent financial players. Nothing we can do about that short of selling out and trying to aid rather than compete with fiat currencies (which I hope nobody is considering).

It's the third category that has me wondering. What does NEM, Cardano, and IOTA offer that can justify a valuation higher than Dash? What pushed others above Dash in the past, if even for a short time (e.g. EOS, NEO)? One can't help but notice that the tokens overtaking Dash are generally priced 2 to 4 orders of magnitude lower than DASH. What is the market trying to tell us?

Key Takeaways

All three sections above are pointing in the same direction: we would do well to re-engineer our coin to have a low nominal value. People want this, and it isn't some arbitrary, illogical consumer demand. It's perfectly reasonable for users to want a currency where the cost for the unit is small and the resulting prices of goods and services are whole numbers.

Consumer demand aside, it seems intuitive that a fledgling currency (such as Dash) should have a unit (i.e. DASH) whose value is much lower than a widely-used currency's unit (e.g. USD). People generally have no concept of money supply, so we should accommodate that and design a unit that makes intuitive sense.

Similar to how Bitcoin will not be able to continue functioning as a store of value if it does not fix its medium of exchange problems (high transaction fees), Dash will find it hard to continue functioning as a medium of exchange, and hence store of value, if it does not fix its unit of account problems. People do consider the unit of account aspects of money, even if subconsciously, in their evaluations of which coin they want to buy and transact with. It's not necessarily that they want to try to get rich off a penny currency. Chances are it just makes more intuitive sense to buy the lower cost coin. It's user friendly. Less "expensive" coins seem to them less likely to be "in a bubble". They look at coins over $1,000 and instinctively assume they've "missed the boat" or that "the bubble will pop anytime now". Sure, that may be a misconception, but that's the psychological reality, so that's what we should deal with. Why fight human nature?

To summarize the problem, Dash faces serious challenges because of its unit of account, the DASH. There are psychological, technical, and practical issues involved.

Psychological

• People think it is too "expensive or risky" to buy DASH
• The units are too confusing when people are transacting DASH
• People feel they own relatively little, when they've purchased or been gifted DASH

Practical

• It can be difficult to see where the decimal is, and it's inconsistent from person to person:
  • some people write .00012345, some people write 0.00012345
• It's harder to speak in fractions and small decimals:
  • "point zero, zero, zero, one, two, three, four, five dash" - awkward
  • "one twenty three point forty five dash" - much better

Technical

• Existing software is tailored to 100 subunits per unit

The Solution

Proposed Options

As seen from the links above, many options have been proposed to solve the unit problem. One attempted solution for Bitcoin has been the organic adoption of the term "bits", where 1 BTC is split into 1,000,000 bits. While somewhat popular, this movement has also seen considerable opposition, which in turn has split the community. Some people hate bits, and would rather promote scientific terms derived from BTC (mBTC and uBTC). Others hate those, and have proposed various new names for scientific denominations. Still others hate those, or anything besides plain old BTC. The disunity ultimately results in confusion and fails to solve the underlying problem.

Dash is seeing the same unit problem as Bitcoin, and we have many of the same options to try to fix the units. We can, for example:

• support scientific units based on DASH.
  • i.e. mDASH ("milidash"), uDASH ("microdash")
• support the base unit.
  • i.e. DUFF (the actual base unit in the Dash core software, from which DASH is derived)
• promote new unit name(s).
  • e.g. DOT (possibly equal in value to a uDASH)
• promote national units.
  • e.g. USD, EUR, JPY (hide the DASH unit in favor of displaying existing fiat units)

Objections to Proposed Options

What do all of the above options have in common? They are all informal conventions that rely on disorganized social adoption. Further, all allow the continued use of DASH and DUFF. Even if Dash Core Group, Inc (DCG) decided to promote one of the above options, say, using DOT, there would be large contingents who would oppose it (or simply ignore it). In addition to DOT, people would continue using DASH and DUFF, because those options likely won't get deprecated.

Any campaign (formal or informal) to introduce and promote a new unit through social convention alone will fail. This is because DASH would remain the transactional unit on exchanges, which would forever work against the alternative unit(s) (e.g. DOT). Any change that isn't made at the exchange level will result in long-term confusion about units (in pricing, branding, software development, etc). There will be no clear consensus regarding which unit system is used around the globe. Further, using any unit other than DASH dilutes the Dash brand. Even if Core managed to get the DOT into social convention (or even traded at exchanges), would the product then be "Dash", or "Dot"? The more widely DOT gets adopted, the more diluted the Dash brand becomes - mutually exclusive and conflicting goals.

Additional objections include (but are not limited to) the following:

• Scientific names (mDASH and uDASH) are too technical for mass mass adoption and lead to disunity of pricing (4 units now!).
• DUFF is too unprofessional for the main unit, sounding too much like duff beer from the Simpsons.
• DOT would have to overcome massive social inertia and would result in disunity of pricing (3 units now!).
• Relying on fiat (e.g USD) seems to be admitting two things:
  • 1. Dash's units are confusing and need to be hidden away.
  • 2. Dash does not intend to be an independent currency.

Guiding Rationale

In my experience, most people like, even love, the term "DASH". They have implicitly demonstrated that by holding and using it. If there's one unit we want to promote for mass adoption, it seems that sticking with the term DASH is the least controversial option.

I've also found that very few people like the tiny fractions they encounter with the typical small-value transaction. So if the term DASH is the least controversial, but people are not satisfied with the value that the DASH represents, the only solution I see is to re-denominate (re-define) the DASH. In other words, the solution is not to supplement, replace, or hide the DASH, rather, it's to fix the DASH.

So, if we agree that we want to continue using the term "DASH", refining it so that it's more comfortable to use, the main question would be what order of magnitude to choose for the new definition. For example, we could redefine the DASH to equal 100,000 DUFF (rather than the existing 100,000,000 DUFF), so that 1 DASH is now 1,000 times smaller, resulting in a new DASH/USD price of about $1.20 (instead of $1,200). Or, we could move it one more order of magnitude so that the price would be $0.12. But this is not very forward thinking. A few years down the road we might find ourselves in the same position we are in now.

Proposed Solution

I propose the following new denomination: 1 DASH = 100 DUFF.

This gives us a denomination that facilitates using whole numbers even when dealing with very small value transfers. As an added bonus it puts us on par with all major national currencies, where the popular unit is comprised of 100 subunits. That's very user-friendly, and user-friendly is Dash's primary goal.

Note that this would not expand the money supply, this is merely a shift in nomenclature (naming convention). It is redefining the DASH, but DASH has nothing to do with the money supply. DASH is a cosmetic unit build on top of the fundamental protocol-level DUFF unit. The true money supply is how many DUFFs exist, and that number would not change.

To summarize:

• Before/Now: 1 DASH = 100,000,000 DUFF (by definition)
• After/Future: 1 DASH = 100 DUFF (new definition)
• Implication: 1 DASH --> 1,000,000 DASH
  • What we now call 1 DASH, would henceforth be 1,000,000 DASH

Key Benefits

• Working with whole numbers is better than decimal units:
  • Instead of seeing 0.00123456 DASH you see 1,234.56 DASH.
• There's no need for grandma to learn scientific notation or computer terminology to buy a stick of butter.
• There's no need to come up with new, controversial naming conventions, at all.
• We should only have to do this re-denomination (new definition) once.
• We end up with 100 subunits per main unit, just like most traditional currencies.
  • Hence, it will be more compatible with existing financial software.
• People will be more cognizant of purchasing power increases over time:
  • Even though merchants may be pricing their goods in USD, consumers can recall their costs in DASH.
  • "Last month this coffee cost me 200 DASH, now this same coffee costs only 130 DASH."

Implementation Considerations

If you could wave a magic wand that immediately fixed the DASH unit as explained above, would you wave that wand? If so, the question isn't "should we make that change", but rather:

• What is involved in making this change?
• How much will it cost?
• Can we afford it?
• When should we make the change?

Some might object saying, this is not technically possible. To which I would say, that is incorrect. Software is always changeable. I don't expect this to be nearly as much of a technical challenge as it will be a social challenge. How can we get people to agree to this change, conceptually? How, after we agree, can we roll it out to all the stakeholders (wallets, exchanges, etc)?

Fortunately, we have a governance system designed exactly for this kind of thing. We can put it up to a vote to see whether we want to pursue this. The first question might be whether we should fund a feasibility study. Subsequent proposals can then be submitted to pay for implementation costs.

A lot of software will need to be updated, but what is the alternative? It's better now than later. The opportunity costs are likely much, much higher than the implementation costs.

Foreseeable work includes:

• DCG software updates (Dash Core, mobile wallets, etc.)
• Exchange software updates (Poloniex, Bittrex, etc)
• Peripheral tooling updates (moocowmoo tools, masternode tools, paper wallet tools, etc.)
• Documentation updates
• Marketing efforts (from DCG marketing arm as well as from community sources)

Timing

When should we implement the fix? It seems to make sense to roll out this change with Evolution, concurrent with the expected Dash re-brand.

Dash has a unique opportunity to shine here. Here we have a problem (that almost everyone in Bitcoin, Ethereum, and other communities admits is a problem) that Dash can solve. That's yet another feather in our cap, along with InstantSend, PrivateSend, and our governance/treasury system (which, as a side note, could use a "catchyName" like the other two major features Dash boasts). Imagine the bragging rights alone that Dash would have. We solved yet another problem Bitcoin couldn't.

We have the money, we have the technical team to pull it off, we have a powerful marketing firm that can ensure that this is delivered as a huge achievement, and we have a community and governance mechanism to pull it all together. I can't think of better timing than concurrent with Evolution and the re-brand. If we wait til after that, it's likely a non-starter.

Closing

The following table presents a summary of the proposed denomination.

Comparison Table

Description	Present	Proposed	Comment
Money supply (DUFF)	800,000,000,000,000	800,000,000,000,000	Amount of base does not change
Denomination (DASH/DUFF)	100,000,000	100	Each (new) DASH would be subdivided into 100 DUFF instead of 100,000,000 DUFF
Convention units (DASH)	8,000,000	8,000,000,000,000	What we now call 1 DASH will be 1,000,000 DASH after the change
Dash price (USD/DASH)	$1,234	$0.001234	Today's prices (present and proposed convention)
Dash price (JPY/DASH)	¥123,400	¥0.1234	Japan is already in 6-digit pricing (when USD catches up it will look like this)
1 USD buys (DASH)	Đ0.00081037	Đ810.37	People would find it much easier to buy small amounts of DASH
1 JPY buys (DASH)	Đ0.00000810	Đ8.1037	Once people buy, they'll feel like they own more (they won't feel they own nothing)

Note: The table above uses rough estimates, for illustrative purposes. Dash money supply is actually slightly lower than indicated. USD/DASH is actually currently slightly lower. JPY/DASH is currently slightly higher. JPY/USD = 100 above, but is actually closer to 113.

Bitcoin just turned 9 years old on January 3, 2018. Satoshi's first mined block was the dawn of an entirely new industry, that of cryptographically-secured, open-source, free-market money. Ever since the first fork into a new competing currency, Bitcoin's position in terms of market share has dwindled. Bitcoin has not achieved "digital cash" status. It seems to have given up on that goal, settling for a simple store of value.

Dash has, as its name suggests, set its sights squarely on being "digital cash". In addition to store of value, it has committed to being a viable medium of exchange, even for small value transfers. But will it achieve that? Can it achieve that without fixing the unit of account? I'm gradually starting to see that this is an all or nothing proposition. If you want to compete with the big boys in currency, you must design your coin to be a store of value, a medium of exchange, and a unit of account. All three must be optimized, or you will be out-competed. Welcome to the free market.

Dash is now approaching its 4th year in existence. We have currently claimed just over 1% of the market share. Recent entrants who have more attractive units of account have come out of obscurity and blown by Dash in a matter of weeks. Why? Could it have anything to do with how they've designed their units?

It's time to take action. It's time to proactively address this issue head on. Dash has a good chance of dominating this new industry of free market money, but only if we continue to innovate. Our position is not inevitable. We may have more money to work with than any other coin, but we must use it properly. Let's not lose sight of the goal to be a currency. Let's not ignore one of the three pillars of currency, unit of account. If we fix DASH (the unit), we will have a much higher chance of fixing Dash (the currency, community, and ecosystem) - fixing it into the #1 position in the industry, that is.