If you delve into the world of cryptocurrencies, you will soon come across the terms Bitcoin and Satoshi. But what exactly do they mean and what is the difference? This article explains what Bitcoin and Satoshi are, how they are related, and why it is important to understand both.
What is Bitcoin?
Bitcoin is the world’s first and most famous cryptocurrency. It was introduced in 2009 by an individual or group under the pseudonym ‘Satoshi Nakamoto’. Bitcoin is a digital currency that is not controlled by a central authority such as a bank or government. Instead, it uses decentralized blockchain technology to process transactions securely and transparently.
When you hear about Bitcoin, you are usually talking about the whole unit. For example, “The current price of 1 Bitcoin is $53,000.” But what if you want to buy or send less than 1 whole Bitcoin? Of course, you can, but in that case, you are talking about ‘parts of Bitcoin’.
What is Satoshi?
Satoshi is the smallest Bitcoin unit that can be owned or traded. It is named after Satoshi Nakamoto, the mysterious creator of Bitcoin. 1 Bitcoin is equal to 100,000,000 Satoshi. This is similar to comparing a Eurocent to a Euro. But it is much smaller. A million times smaller.
Why is Satoshi important?
We need small Bitcoin units for several reasons:
1. Economic efficiency
As the value of Bitcoin has risen, it has become impossible for many people to purchase a whole Bitcoin. In fact, it has been this way for a long time, as the value of a Bitcoin has been over €10,000 for several years and is currently over €53,000. Fortunately, Satoshis allow you to own (very) small portions of Bitcoin. Satoshis make this digital currency accessible to small investors and traders.
2. Accurate Transaction
If you want to buy a digital product worth €0.50, Satoshi’s allows you to pay the exact amount in Bitcoin, without rounding up.
3. Future Security
If Bitcoin’s value rises further in the future, Satoshis will ensure that we can still make small transactions.
How do you actually use Satoshi?
In most cases, you don’t need to actively think about Satoshi. Many cryptocurrency exchanges and wallets do the conversion for you. For example, if you want to buy 0.001 Bitcoin, you can simply type this. Behind the scenes, this will automatically convert to 100,000 Satoshi.
However, there are situations where you explicitly meet Satoshi.
- Some micropayment services work with Satoshis, especially for small online transactions.
- In discussions about the future of Bitcoin, people sometimes talk in terms of Satoshi, especially when speculating about extremely high Bitcoin prices.
- Satoshi is often used for fine-tuning when setting transaction fees for Bitcoin transfers.
Psychological factors
Understanding Satoshi can also have a psychological impact on how you view Bitcoin. When you hear that one Bitcoin costs $53,000, it may sound daunting. But when you realize that you can buy 100,000 Satoshis for €53 (at that price), it seems much more approachable. By the way, you should not confuse Bitcoin with Bitcoin Cash, because Bitcoin is a completely different cryptocurrency with a completely different value.
A small but important difference
While Bitcoin and Satoshi are essentially the same (they are the same cryptocurrency, after all), it is important to understand the differences. Bitcoin is the umbrella term and unit that you usually hear about in the news. Satoshi is the smallest subset of Bitcoin and is crucial to the utility and scalability of the system.
Discussing both terms will give you a more complete picture of how Bitcoin works and how they can interact. Whether you are a novice investor looking to invest small amounts of money in BTC or an experienced trader looking to accurately calculate transaction costs, knowledge of Satoshis is essential in the Bitcoin world.
Remember: every bitcoin you own represents 100 million satoshis. It doesn’t matter whether you think of it as a whole bitcoin or a satoshi, it’s the same value in the end. The most important thing is that you now know how flexible and accurate the bitcoin system really is.
Finally, if you want to convert Bitcoin to Satoshis or vice versa, it is good to know that there are various calculation tools available online.