Satoshi

DEFINITION of 'Satoshi'

The smallest unit of the bitcoin cryptocurrency. Satoshi is named after Satoshi Nakamoto, the creator of the protocol used in block chains and the bitcoin cryptocurrency.

BREAKING DOWN 'Satoshi'

Unlike the physical versions of global currencies, such as the British pound or U.S. dollar, cryptocurrencies predominately exist in the digital world. Despite this difference, a cryptocurrency can be divided into smaller units, just as the pound is broken into pence and the dollar into cents. In the case of bitcoins, the smallest unit available is called the satoshi.

The satoshi unit is named after Satoshi Nakamoto, published a paper in 2008 that jumpstarted the development of the bitcoin cryptocurrency. The paper, “Bitcoin: A Peer-to-Peer Electronic Cash System”, described the use of a peer-to-peer network as a solution to the problem of double-spending. The problem – that a digital currency or token can used in more than one transaction – is not found in physical currencies, as a physical bill or coin can, by its nature, only exist in one place at a single time. Since a digital currency does not exist in the physical space, using it in a transaction does not remove it from someone’s possession.

The satoshi represents one hundred millionth of a bitcoin. Small denominations make bitcoin transactions easier to conduct transactions with. The general unit structure of bitcoins has 1 bitcoin (BTC) equivalent to 1,000 millibitcoins (mBTC), 1,000,000 microbitcoins (μBTC), or 100,000,000 satoshis. While the exact figure is unknown, it is estimated that Satoshi Nakamoto may possess 1 million bitcoins, equivalent to 100,000,000,000,000 satoshi.

While not part of a major currency pair, bitcoins can be converted to and from other currencies. Bitcoin exchanges exist in order to allow individuals to conduct transactions. This involves depositing dollars, pounds, or other supported currencies into an account in one of the exchanges, where the balance can be used to buy or sell bitcoins and ultimately convert them into other currencies. Just as with the exchange rates between established currencies, the value of bitcoins will fluctuate according to supply and demand.  

While individuals may keep a penny or pence in their pockets, physical versions of cryptocurrencies like bitcoin have not become as mainstream. This is primarily for practical reasons, since the main draw of bitcoin is that it is digital and hard to counterfeit. Not having a physical presence means that bitcoins are more secure, even before the block chain technology is taken into consideration. Another reason for the lack of physical bitcoins (and santoshi) is that bitcoins are not widely-accepted in day-to-day transactions.