Just like other currencies, bitcoin has been split into multiple denominations for ease of use in smaller sized transactions. The smallest such unit of a bitcoin (BTC) is called Satoshi, named after its mysterious creator(s) Satoshi Nakamoto. Each Satoshi is worth one hundred millionth of a bitcoin or equal to 0.00000001 of one BTC. In other words, there are 100,000,000 Satoshis in one BTC.
Based on current price of bitcoin, 1 Satoshi (also known as sats) equals about Rs 0.033245 or $0.0004.
Why is the Satoshi unit critical in the bitcoin ecosystem?
The use of Satoshi on the bitcoin blockchain has become more common as its value has increased exponentially since its inception. This has been a unit of convenience for users who wanted to transact smaller values and to avoid errors in making small denomination transfers.
It only became more convenient as the asset price reached tens of thousands of dollars, making the division of a bitcoin more feasible. This also made retail shopping for small items like coffee easier for users.
Satoshi also made it easier for small investors who found it expensive to invest even in one bitcoin or crypto novices who wanted to just keep their exposure limited given its high prices. Another important reason the unit is necessary for the bitcoin network is because the block reward for mining new blocks in the blockchain is halved every four years. The rewards given to miners can then be easily counted in Satoshi.
When was Satoshi first created?
The origins of Satoshi stem from the early days of bitcoin and BitcoinTalk, a forum for discussions about the bitcoin ecosystem.
In 2010, a user on BitcoinTalk known as Ribuck suggested that 1/100th of bitcoin or 0.001 bitcoin be the smallest unit represented on the blockchain interface. He also suggested that it should be called Satoshi on a thread about Unicode character for bitcoin. But Ribuck did not get any traction there.
Three months later. Ribuck suggested the same on a thread named “More divisibility required — move the decimal point.” And he got feedback from the other users about the divisibility.
Eight days later, a new thread titled Bitcent popped up on BitcoinTalk, where a user named Kolbas gave this outline for Bitcoin divisibility.
1 satoshi = 1 microbitcent (smallest denomination)
100 million satoshis = 1 Bitcoin
And this was agreed upon by all the users on the thread, and the Satoshi was born.
Satoshi did not instantly gain popularity as the price of bitcoin was in check and use cases were not clear. But now, more than a decade since its creation, Satoshi has gained immense popularity. People mention Satoshi in crypto podcasts; some campaigns revolve around Satoshi; and there are goods and services available for purchase with it.
In an interview with Yahoo Finance, Chris Mezzacappa, CEO of bitConsult, a bitcoin consulting company, said: “Coming from a finance background, I automatically think of stock prices and stock splits.
As daily consumers, we need to spend currencies to purchase goods and services we need. And when we buy something, we want to have a straightforward and convenient experience where we do not want to do complex calculations. Imagine if you’re going to buy a book worth $5 using bitcoin. You have to use a fraction of a bitcoin that goes up to around seven or eight decimal points to purchase it. This is not consumer-friendly and will frustrate buyers.
A JPMorgan Chase Quorum Ambassador, Jesse Xiong, expressed similar beliefs as Mezzacappa. While talking to Yahoo Finance, Xiong said Satoshi has become more popular because “decimals scare people.”
Are there other subdivisions of a Bitcoin?
Over the years, more subdivisions for bitcoin developed. The millibitcoin is the term for 0.001 BTC, or a one-thousandth representation of BTC and microbitcoin is one-millionth of a bitcoin. One subdivision is even more minor than a Satoshi, known as the millasatoshi. It represents one-thousandth of a Satoshi. But it is only usable on the lightning network and not the main bitcoin network. The lightning network is a separate payment channel from bitcoins main channel; it was created to address the scalability issue of the main bitcoin network and increase the number of transactions per second (TPS).
(Edited by : Priyanka Deshpande)
First Published: IST
