Wednesday, March 23rd, 2022 | Cryptostotle #11 | By: Brad Lathrop
Have you seen or heard the word “satoshi” when reading or listening to something about Bitcoin or crypto? Maybe you’re pretty new to the space and haven’t heard the term before. “Satoshi” is a word that appears often in Bitcoin discourse, and understanding the term can be confusing because the word can refer to two different things! Let’s explore.
Satoshi Nakamoto, Bitcoin’s Founder
The founder of Bitcoin is Satoshi Nakamoto. We know this because when Bitcoin’s official white paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” was released in the fall of 2008, the paper was authored by a Satoshi Nakamoto. That’s about all we know regarding this Satoshi, however. To this day, Nakamoto’s identity remains a mystery! It is unknown whether Satoshi Nakamoto is one person or several, and despite a handful of people claiming they are Satoshi Nakamoto, the consensus is that we still do not know who he, she, or they are. I (like many others) think the anonymity of Bitcoin’s founder contributes to one of Bitcoin’s greatest strengths (decentralization), but that’s a topic for a future article! So, “Satoshi” can sometimes refer to Bitcoin’s founder. There is another meaning for the term, however…
A “Satoshi” is the Smallest Unit of Bitcoin
The other meaning of “satoshi” in the context of Bitcoin is why I wanted to write this article! I see and hear this term a lot. And maybe you do too, or will in the future. Simply put, a “satoshi” is the smallest unit of bitcoin. It is named after Bitcoin’s anonymous founder, of course. According to Mastering Bitcoin, a book written by technologist and Bitcoin advocate Andreas Antonopoulos, each bitcoin “can be subdivided into 100 million units, each called a satoshi (singular) or satoshis (plural), named for Bitcoin’s creator. A satoshi is the smallest unit of bitcoin.” So, a satoshi (also called a “SAT”) equals 0.00000001 BTC. It is an incredibly small fraction of a bitcoin.
What’s the Benefit of a Satoshi?
Now, you might be thinking, what’s the point? Is there a benefit gained from dividing a bitcoin into a hundred million satoshis? The answer is yes. Bitcoin’s divisibility brings significant benefits. Here’s why. The value of bitcoin has grown from a trivial amount at its inception to over $60K last fall (and now currently just above $40K). In order for Bitcoin users to best make small transactions between one another, fractions of bitcoin are needed because of the cryptocurrency’s incredible growth in value. I really like how an article from Investopedia explains this concept:
Because bitcoin has increased in value exponentially, smaller denominations are needed for smaller transactions. Small denominations make bitcoin transactions easier to conduct while making them readable by people. For example, if you bought a $100 item with one bitcoin, your charge might ring up as .00210028 BTC, or 210,028 satoshi (if BTC equaled $47,612.81). In this example, it’s easier to understand satoshi.
So, a satoshi (or SAT) means the smallest unit of BTC. Bitcoin’s price is $42,151 at the time of this writing. Thanks for reading!
