Bitcoin vs satoshi: are SATs better than BTC?
Is it time to push a smaller unit of the world’s largest cryptocurrency?
- What’s the difference between satoshi and bitcoin?
- Why we need satoshis
- Is it too early for satoshis?
- Bitcoin vs satoshi
After reaching a new all-time high, the price of bitcoin has become a barrier as well as its strength. The use of satoshis could overcome many of the obstacles facing bitcoin, including its daunting, complex nature for new investors and the retail environment. But, satoshis are not the perfect solution and comes with its own problems. Before diving into bitcoin vs satoshi, it is important to understand the difference between the two currencies.
What’s the difference between satoshi and bitcoin?
Satoshi Nakamoto is the pseudonym of Bitcoin’s anonymous founder. Back when the cryptocurrency was created, Nakamoto anticipated the potential huge value of bitcoin and wanted to make smaller units of the coin. Along with milibitcoins and microbitcoins, a concept for an even smaller unit was created before the currency launched. It was named a satoshi after the creator and can be abbreviated to SAT. The difference between satoshis and bitcoins is that one bitcoin is worth a 100 million satoshis.
- 1 bitcoin = 1,000 milibitcoins (mBTC)
- 1 bitcoin = 1,000,000 microbitcoins (μBTC)
- 1 bitcoin = 1,000,000,000 satoshis (SATs)
- 1 bitcoin = 100,000,000,000 millisatoshis
The difference between a satoshi and a bitcoin is like the relationship between the cent and the dollar. Using cents makes smaller transactions easier to read and manage. This is also the purpose of the satoshi.
Why we need satoshis
Bitcoin reached a new all-time high in October 2021 at $66,974.70. Although it is good news for the cryptocurrency, it does bring logistical problems for bitcoin that can be solved by introducing satoshis.
New crypto investors could be discouraged from trading with bitcoin because of its huge value, especially if they come from a stock trading background as there are very few shares even close to this price. It may also not be obvious that you can buy a fraction of a cryptocurrency instead of being restricted to buying whole numbers of bitcoins. Introducing satoshis into trading makes investing with the world’s largest cryptocurrency more accessible to new crypto investors.
Using decimals of bitcoins is not only unfamiliar for traditional traders but becomes impractical in a retail environment. If you wanted to buy a $5 cup of coffee, at today’s bitcoin price that would cost 0.00007949 BTC. This is unprecedented in a retail environment as you cannot use decimals of a fiat currency when buying goods. Instead there is a secondary unit, like a penny or cent. When using satoshis to buy a $5 cup of coffee, it would cost 7949 SATs. The size of the number is not ideal, but it is still easier to comprehend than decimals and could encourage day to day use.
The adoption of satoshis may also become essential because of the finite number of bitcoins. The blockchain will only ever produce 21 million bitcoins. Nakamoto anticipated that we would get closer to that amount every year, so they created halvenings. A halvening reduces the bitcoin reward for miners by 50% after every 210,000 blocks mined. Halvenings will continue to occur until the amount of a new bitcoin per block is one satoshi. If every block mined is worth a satoshi, it becomes even more important to start using the currency.
Is it too early for satoshis?
When looking at bitcoin vs satoshi in a trading and retail environment, experts have argued it is still too early to introduce satoshis into the mainstream. Iqbal Gandham, the UK managing director at eToro, spoke to MarketWatch, saying one satoshi needs to be worth one penny before it is introduced.
Gandham compared buying items with bitcoin to using a bar of gold to pay for goods and services. He said: “People will only spend the subdivision of bitcoin – and you can only spend the subdivision if they are of reasonable value.”
A satoshi will be worth a penny when bitcoin reaches £1m, or $1.38m. Bitcoin is still far away from this valuation, as the price would have to increase 22 times its current worth. It is challenging to predict when this will occur as the currency is prone to volatility. After achieving its provisional all-time high of $63,590.80 on 13 April this year, bitcoin crashed to around the $35,000 mark. This unpredictability makes it difficult to estimate whether its recent bullish trend will continue and when it will reach a large enough economy of scale to introduce satoshis.
A more creative logisitical problem facing satoshis is its lack of currency symbol. The bitcoin symbol of two vertical lines going through a “B” took years before it became recognised. Ken Shirriff is a software engineer who led the adoption of bitcoin’s symbol. He persuaded Unicode, the computing industry standard of characters, to adopt it.
But Shirrif is against the idea of creating a new sign for satoshis. In a tweet from 2019, he recommended using a symbol already in Unicode. Shirrif argued creating a new character would be “mostly unusable and cause problems”.
Bitcoin vs satoshi
Introducing satoshis will not deem bitcoin useless. Much like it is difficult to use bitcoins with smaller payments, it will be difficult to use satoshis for larger transactions. It is hard to imagine a successful future for the cryptocurrency where either currency is not needed.
Currently, it is still too early to introduce satoshis, according to experts. They argue we must wait for bitcoin to reach a large enough economy of scale and for a widely adopted symbol. However, if more countries follow El Salvador’s lead and use bitcoin as legal tender, satoshis might be introduced quicker than some experts would like.
They might be. Due to bitcoin’s huge value, the currency is impractical in a retail environment. Setting a price for items using small decimal numbers is unprecedented and a barrier for customers. The use of satoshis can help overcome this hurdle as $5 becomes 7,949 SATs instead of 0.00007949 BTC.
But satoshis are not better than bitcoin in every situation. Satoshis are more useful for smaller transaction while bitcoins are better for larger transactions. It is difficult to imagine a future where either currency is not needed.
It depends. In everyday retail transactions, satoshis could be used much more than bitcoins because it is easier to comprehend smaller values in SATs. However, when dealing with a large value transaction, bitcoins may be the preferred choice.
There is a limit of 21 million bitcoins. As satoshis are worth 100 million of 1 bitcoin, that means there is a limit of 2.1 quadrillion satoshis.
As of 25 October there is currently 18.8 million bitcoin in circulation. That means there is the equivalent of 1.88 quadrillion satoshis in circulation.