What is a Satoshi? The Importance of Bitcoin's Smallest Unit

One of the most important features of a currency is divisibility. The dollar can be broken down into cents, and the Pound can be divided into pence. The satoshi is what fills this role for Bitcoin.

What is a Satoshi? The Importance of Bitcoin's Smallest Unit

The satoshi was named after Bitcoin's pseudonymous founder, Satoshi Nakamoto. It is the smallest divisible piece of a Bitcoin, and it is an important part of Bitcoin's crusade to be seen as a real currency.

What is A Satoshi?

Today, one satoshi is worth 0.00000001 BTC. This means that there are 100 million satoshis in a single Bitcoin. Thus, one Bitcoin will need to be worth $1 million for a satoshi to be worth one cent.

As explained earlier, the satoshi moniker came as a means of honoring the creator of Bitcoin. No one knows who Satoshi Nakamoto is - or who they are, as the case could very well be. So, at least naming the division of a Bitcoin after the pseudonymous founder can be a great way to honor him - or her, or then.

It is worth noting that a satoshi is not the only divisible part of a Bitcoin. A millibitcoin is the term given when you divide one Bitcoin by a thousand, and a microbitcoin is the unit for dividing Bitcoin by a million. You can make transactions on the famous Bitcoin Lightning Network using the millisatoshi - essentially, dividing on satoshi by a thousand. The millisatoshi isn't visible on the Lightning Network, but it exists nonetheless.

What Makes the Satoshi So Useful?

The satoshi has come in handy quite significantly for Bitcoin. As explained earlier, one of the key features of a currency is divisibility. People need to be able to break the asset down and make transactions, and the satoshi offers a base for that. In a world where 1 BTC is trading over $30,000, people need a viable basis for dividing it - especially when handling small transactions or making small investments.

With terms like the satoshi, people no longer have to write out so many zeros when they're dealing with small cryptocurrency volumes.

Dividing Bitcoin into the satoshi also makes for better microtransactions. If you want to get a plate of food or a cup of coffee with Bitcoin, you can be charged in satoshis - as opposed to paying in divisions of Bitcoin. All in all, satoshis have become very critical as Bitcoin's value continues to rise and it starts to hit new heights.

Exchanges themselves could charge and handle transactions in satoshis or use multiple satoshis as a minimum balance. So, if an exchange has a minimum trading balance of $2, they could represent that as satoshis instead of as a division of BTC.

Then, there is the use of the term in mining. As rewards for Bitcoin mining continue to get cut by 50 percent over time, there is a point where we could start talking about Bitcoin rewards being paid out in satoshis. The mining process will eventually have to stop due to the existence of satoshis, as it won't be possible to keep mining the asset in smaller and smaller quantities forever.

So Does The Satoshi Mean Bitcoin Is Perfect Money?

In one answer, no.

To be fair, the satoshi - and other divisions of a Bitcoin - will go a long way in making the asset more accessible and functional. But, in terms of serving as money, there are a lot of factors that still plague Bitcoin.

Most prominent is its volatility. For Bitcoin to become a form of money, it will need to be less volatile. This way, it can act as a store of value and a medium of exchange. With the asset's price still susceptible to as much as a 10 percent increase - or decrease - on some days, many companies will still have issues with integrating it.

Bitcoin itself will also need to be more accessible. Ease of use is one of the reasons why people love using cash and credit cards to pay so much. For now, many people still don't know how to use Bitcoin, which will affect their ability to incorporate it into their businesses.

But, it's still early days for Bitcoin by all standards. We expect to see more development and education that will help to improve crypto awareness globally. And with crypto payment processors also doing their best to optimize the use cases of Bitcoin for payments, there is every reason for industry insiders to be excited.

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