What exactly do “sats” signify within the expansive universe of Bitcoin?
Think of sats as the fundamental building blocks that make up Bitcoin’s intricate structure, just like cents are the building blocks of dollars.
In this article you will learn how Satoshis, the smallest units of Bitcoin, play a vital role in understanding and valuing the cryptocurrency. Delve into their significance, conversion rates, and their broader impact on the world of digital finance.
Get ready to explore the intriguing world of sats in Bitcoin!
Summary
What are Sats in Bitcoin?
What are sats in Bitcoin? Sats is short for satoshis, and one satoshi is the smallest unit of bitcoin, just like a cent is the smallest unit of a dollar.
Now, stick around because it gets a lot more interesting.
Highlights
- A sat is the smallest unit of bitcoin. There are 100 million sats in one Bitcoin.
- Sats made it easier to understand Bitcoin once the price started to increase.
- Sats are yet another example of Bitcoin’s genius.
Why Use Sats and Not Just Bitcoin?
Truth be told, bitcoin can be a complicated subject.
Ask anyone who is into it, those who are known as bitcoiners, and you will hear all about how Bitcoin combines:
- coding,
- economics,
- game theory,
- technology,
- monetary theory,
- politics,
- And even psychology and religion.
But no one started by knowing it all from scratch, not even the most devout bitcoiners. Each of us had simple beginnings with bitcoin. And I believe that is the right way to start: step by step, enjoying every part of the process, understanding little by little. And that is exactly what sats help do.
When bitcoin first started back in January 2009, it was worth nothing for a long time. Then it started to be worth some cents and a couple dollars after that. At that time, buying and selling multiple bitcoins in single transactions was common precisely because it was cheap. When bitcoin was worth $0,50, it was possible to buy six bitcoin for $3. Imagine that.
But as the price started to increase, buying a whole coin got harder and harder. At the time I wrote this piece, one bitcoin is valued at over $25,000. Few people have that much money lying around to buy a whole bitcoin.
But you do not have to buy a whole bitcoin: it is possible to buy just fractions of it, just like you can have fifty cents of a dollar.
Dealing with decimals?
And so we start dealing with decimals. You could perfectly buy just $50 worth of bitcoin, but that means you get 0,0019 bitcoin.
You will agree that that number does not look great.
Dealing with decimals might be both discouraging and confusing. Discouraging because it does not sound exciting to own 0,0019 of anything. And confusing because of how easy it is to get lost in the zeroes.
Sats come in to make it all easier. Since there are 100 million sats in one bitcoin, the 0,0019 bitcoin that you bought with your $50 also means you have 190 000 sats. Now that looks like a nice big number. Everyone wants 190,000 of anything.
Notice that they are still the same thing. 0,0019 bitcoin is the exact same as 190,000 sats. When you buy sats, you are buying bitcoin, and when you buy bitcoin, you are buying sats. Sats are to Bitcoin what cents are to the dollar.
It’s just that, for our brains, dealing with bigger numbers is easier than dealing with smaller ones.
Think of how much more complicated it would be to buy one single egg, for example. In the US, one egg costs around 35 cents. But if cents did not exist and we just had dollars, that egg would cost 0,35 dollars.
It is the same price, but 35 is easier to comprehend than 0,35.
When you start to look at Bitcoin through the lens of sats, everything gets easier to grasp.
- You are no longer buying fractions of Bitcoin; you are buying sats.
- Your wallet does not hold 0,023 bitcoin; it holds 2,3 million sats.
If you want to buy a beer in Brazil, instead of paying 0,00011 bitcoin, you will be paying 11,000 sats.
This way, the numbers make more sense for daily use, which is Bitcoin’s objective.
Quick tip
If you want to quickly convert sats to bitcoin, all you need to do is take any amount of sats and divide it by 100 million (that is a 1 followed by 8 zeroes).
190,000 / 100,000,000 = 0.0019
And it works the other way around, too. If you want to convert any amount of bitcoin to sats, you just need to take that first amount of bitcoin and multiply it by 100 million.
0.0019 * 100,000,000 = 190,000
You might be looking at all of these figures and wondering how many sats are a good number to have.
Look at it this way: we are on track to having 8 billion people on the planet by 2030. That means that there will only ever be 262,500 sats per person if Bitcoin is equally distributed among the entire world population.
However, bitcoin is not evenly distributed. There are people out there who hold hundreds and sometimes thousands of bitcoin. Plus, there are millions of bitcoin that are lost forever. So that figure of 262,500 sats actually looks a lot smaller. But it is still possible to get that many sats.
You can secure your amount of 262 500 sats for less than $100 today, and that figure would put more Bitcoin in your hands than most people on the planet will ever see.
That sounds like a nice place to start.
Where Can I Find Sats?
Once you understand the idea and know what they mean, sats will start appearing everywhere.
Many wallets offer the option to set up your transactions in sats rather than bitcoin as a unit of measure, precisely because it is a lot easier to say the number in sats than it is in bitcoin.
I use Muun wallet to make small lightning transactions, and, as you can see in the screenshot below, I have my amount set to sats because it’s easier to say and understand 63 000 sats than 0.00063254 bitcoin.
Also, the Bitcoin network itself operates mostly based on sats, not on Bitcoin.
If you open the mempool website, you can see that the transaction fees in the network are calculated using sats. Again, because they are very cheap, using the Bitcoin notation with lots of decimals is quite impractical.
You can see below that, right now, when I write this article, any transaction on the Bitcoin network could be set as high priority for 9 sat/vB, which is pretty cheap.
In Nostr, a decentralized, twitter-like platform, it is possible to send small tips to people whose “tweets” you like. Those tips are called zaps and they are all made using bitcoin. But because those are small tips, they are all calculated using sats as a unit, not bitcoin.
Sats are also really useful when making straight conversions. Instead of looking at how much bitcoin a dollar buys, look into how many sats that same dollar buys. You can find sats calculators all over the internet.
Why Sats?
As you may remember, sats is short for satoshis.
Satoshi Nakamoto is the creator of Bitcoin. So, it’s only fair that the network’s basic unit was named after him.
But Satoshi himself was not the one who put his name in the currency.
The need for a name for the smallest unit of bitcoin did not arise until after the price started to rise and buying a whole coin became harder. By that time, Satoshi Nakamoto was already long gone, and no one had ever heard of him again.
People spend hours theorizing about who Satoshi might be, what happened to him, and why he vanished. And I say “he” because it is a male name, but Satoshi might be a man, a woman, or even a group of people. No one really knows.
Still, Satoshi is a legend and a living one, I hope. Everyone in the Bitcoin community knows the name of Satoshi Nakamoto, what he did, why he did it, and what he stood for.
So the name satoshi, for the smallest unit of bitcoin, came up organically in the community, in a decentralized manner, much like bitcoin itself.
It is clearly a homage and a sign of respect to Satoshi. And it just sounds right, so everyone rolls with it.
There are some people who would rather have it called bits and other things of the sort, but satoshis just got too much traction, and everyone uses it, so it will most likely stay that way. Also, bits sound a lot less cool.
Why 100 Million Sats?
You might be asking why there are exactly 100 million sats inside one bitcoin, and not 1 or 10 million.
I know I did for a long time.
There are two reasons why, and they are both really interesting.
Get ready because we are about to get a bit more technical.
Monetary Economics
Ray Dillinger, one of the first people to review the bitcoin source code, explained in 2014 in an online forum how they came up with the 100 million figure.
He said that Hal Finney, one of the legendary early developers, said that Bitcoin’s smallest unit should not have a value too different from the US penny once the network gained traction; this way, its usage could stay practical and familiar to most people.
He says that someone checked the M1 money supply at the time, and they figured that with eight decimals (the eight zeros in 100 million), even if bitcoin was to replace the world’s entire money supply, one sat would still be worth a little less than a penny, and so people would not be inconvenienced by the operations being too big or too small.
They chose to go with the M1 money supply because it represents an estimate of the “physical” money that exists in the world. The M2 and M3 supplies also contemplate global debt, and Bitcoin is supposed to be a debt-free currency.
That rationale worked back in 2008 when the money supply was less inflated. Back then, bitcoin would only need to reach 1 million dollars to accomplish the goal of replacing the money supply.
Now, however, it would have to reach over 10 million dollars, which means Bitcoin has more room to grow than its developers had imagined. Not even Satoshi Nakamoto himself could predict how much money governments worldwide would print.
Coding
The other reason why there are exactly eight decimals in Bitcoin (the eight zeros after the 1 that makes 100 million) is due to programming.
This really shows Satoshi’s genius and foresight.
Satoshi intended Bitcoin as an open-source software, which means anyone can look at it and propose changes.
The main advantage of open source is that you have countless talented and passionate programmers all around the world checking the code at all times. This way, any failure, bug, or exploit can be identified and fixed quickly.
But the only way to have many programmers dedicated to the software is to make the code easy to run anywhere, on any computer, in any programming language.
If you take the 21 million bitcoin that can ever be and multiply it by its 100 million satoshis, you get a total of 2.1 quadrillion sats. This is a magical figure because it is the computational limit of the most popular programming languages out there.
If Satoshi had picked a number higher than 21 million bitcoin (or 2.1 quadrillion sats), many programming languages would not be able to run the bitcoin code without some serious tweaking. It would be harder to run the code.
That extra obstacle would make it so less willing and talented eyes focused on the code, making it significantly weaker and more vulnerable.
The upper limit of 21 million bitcoins is more than just a fancy choice; it was picked to ensure the safety and strength of the network.
Some people say that Satoshi just got lucky and picked 21 million by chance. I like to believe that it was a deliberate choice. It would be too great a coincidence to just have such a perfect figure by chance.
Conclusion
In an ever-evolving landscape, sats stand as a tribute to Satoshi Nakamoto’s vision and serve as a bridge between intricate coding and practical utility.
They encapsulate the heart of Bitcoin – empowerment, inclusivity, and a journey toward reshaping the way we perceive and engage with financial systems.
So, as you venture forth in the world of Bitcoin, remember that sats are more than just fragments – they are the threads that weave the future of currency.
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