What is a Satoshi? How Bitcoin Fractions Work

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Despite what you may believe, you don’t need to be rich to own Bitcoin. For example, a satoshi is the smallest possible unit of BTC, and 1 satoshi equals 0.00000001 BTC. So, let’s assume BTC is $40,000; 1 satoshi is about $0.0004– just fractions of a single penny.

Named after the Bitcoin creator, Satoshi Nakamoto, the satoshi concept makes BTC look ever so scalable and appealing. Remember, only 21,000,000 BTC will ever be created, but since the currency can be effortlessly broken down into 0.00000001 , it still makes sense for the average person to utilize. If Bitcoin’s price reaches $1,000,000 per coin, a sat would be just $0.01!

Today we’re going to explore Bitcoin fractions and explain just how easily the Satoshi currency works compared to everyday cash.

Satoshi: Divide & Conquer

It’s important to note that dividing any currency into smaller units does not make it less valuable. Actually, this is a core principle for anything to function as money. Thousands of years ago, you could barter a chicken for fruit or maybe a couple of beers for a handyman to fix a leaky roof.

As you can imagine, carrying around chickens, fruit or beers is not a very convenient way to store and exchange value. The invention of paper money brought along with it the possibility to store and exchange value quickly and easily. It can be added, subtracted, multiplied, and divided with ease. A chicken? Not so much.

Having more of something that people collectively believe is valuable is what tends to matter in the eyes of crypto holders.

A Reversal of Fortunes

Back in 2010 when Bitcoin was nothing other than a hope and a dream, a man from Florida paid a whopping ₿10 000 for 2 pizzas. Of course, at the time, he had no idea that Bitcoin would skyrocket in price over the next couple of years. Fast forward to today (mid-August 2018) and 2 Bitcoin will buy you roughly 1150 pizzas. Oh, how the tables have turned!

Bitcoin’s massive price-tag versus the Dollar (and other government-backed paper money) is thanks largely to the mismanagement of our current value system. Over thousands of years, we’ve witnessed the devaluation of our money through unpayable government debt and infinite money printing.

Right now, we sit smack bang in the middle of another monetary crisis. All that printed money needs to go somewhere. And it’s pouring into stocks, bonds, housing and just about anything that will hold it’s value. You can be sure that it’s moving into crypto too.

What does this all have to do with Bitcoin fractions you may ask? Well, Bitcoin has been designed with the properties of sound money in mind. As paper money devalues and Bitcoin’s value increases it’s highly likely that we’ll have to start familiarising ourselves with Bitcoin fractions. Trading in the Satoshi currency won’t be something that only geeks and computer gurus take part in.

Breaking it Down: Even More Bitcoin Fractions

The smallest unit of Bitcoin is known as a Satoshi. Named after the now legendary creator/s of Bitcoin, 1 Satoshi = 1/100,000,000 (one 100 millionths) of a Bitcoin.

Let’s take a look at some additional Bitcoin fractions and some terms used to describe them in the crypto community:

Unit Symbol Satoshi Value Bitcoin Value
Satoshi Satoshi 1 0.00000001 ₿
Microbitcoin μBTC 100 0.000001 ₿
Millibitcoin mBTC 100,000 0.001 ₿
Bitcent cBTC 1,000,000 0.01 ₿
Bitcoin BTC 100,000,000 1 ₿

The next smallest unit is called a Microbitcoin (μBTC) which equals 100 Satoshis. Moving on we have a Millibitcoin (mBTC). The mBTC to Satoshi ratio is 1:100,000. Finally, let’s take a look at a symbol that is not as widely known called the Bitcent (cBTC). The Bitcent = 1 million Satoshis and can be likened to pennies, nickels, and dimes in US currency.

If you’re worrying about committing these names to memory, don’t stress– no one, outside of deep crypto forum speak, really talks about things like cBTC.

Cryptocurrency Mythbusting

Bitcoin was designed as a system of value exchange for just about anybody, anywhere in the world. Those who claim that owning Bitcoin is only for the rich simply don’t understand or appreciate how divisible the cryptocurrency is.

Limited Supply

Firstly, keep in mind that there will only ever be approximately 21 million Bitcoins in existence. By design. If we only worked in Bitcoins that wouldn’t be nearly enough to allow meaningful trade on a small island nation, never mind the entire globe of roughly 7 billion people. Dividing Bitcoin into Satoshis and other conventional names is essential for accommodating more users as they climb on board the cryptocurrency phenomenon.

This is infinitely easier to do with virtual currencies since we don’t have to worry about physically creating and carrying around large sums of denominated cash. Not to mention how much of a benefit that would also be for the environment.

Incompatible with Existing Financial Instruments

For some reason, much of the mainstream financial community appears to compare Bitcoin to common company stock. In most cases, you cannot actually own fractions of stock. Consider Berkshire Hathaway which trades at more than $550,000 per share on the New York Stock Exchange. You most certainly need to be wealthy to own that one.

That’s not the case with Bitcoin, which functions more as an almost infinitely-divisible currency.

Final Thoughts: Satoshi is the Smallest Possible Bitcoin

The fact that most of us might transact in Satoshis and not necessarily in bitcoins is a testament to how valuable Bitcoin has become since it began. A transition from pricing things in Bitcoin to pricing them in Satoshis is a mental one, and functionally, you can get by without worrying about correctly naming something in sats or as BTC to the correct decimal place.

The point satoshis drive home is that Bitcoin is a flexible, divisible, and capable way of exchanging value.

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