The crypto market is composed of thousands of abbreviations. Although most of them are just short names for different cryptocurrencies, such as BTC for Bitcoin or ETH for Ethereum, numerous other abbreviations signify a certain type of crypto trading behaviour. A good example is FOMO, which means fear of missing out, or HODL, which stands for hold on to dear life.
Similarly, SATS is a common abbreviation in the crypto world, but it might be confusing for crypto beginners because you won’t find it in the list of cryptocurrencies on Coinmarketcap, nor does it describe any sort of crypto-related event or trading behaviour. In fact, SATS is short for satoshis, the smallest denomination of Bitcoin.
Before we can dive into the details about SATS, let’s take a deeper look at Bitcoin basics and the BTC blockchain to understand the role of satoshi as the smallest units of Bitcoin.
Bitcoin was launched back in 2009 as the first digital currency in the world, developed by a mysterious developer-only known by its pseudonym – Satoshi Nakamoto. The idea behind BTC was to provide users with decentralized digital cash, entirely based on blockchain technology, with no oversight from government institutions or banks.
In comparison, the traditional financial system relies on numerous rules and regulations that often result in slow fiat money transactions. For example, facilitating a multi-million US dollar international bank transfer would take a few business days, as both the sender and receiver need to provide extensive documentation to their banks and comply with specific local laws and regulations.
Bitcoin, on the other hand, enables users to facilitate transactions in 5 to 10 minutes. Not to mention that you don’t need to provide any documentation whatsoever. All you need to do is initiate a transfer from one public address to another, using your private key, which acts as proof of your ownership over the BTC in your public address.
This revolutionary concept became immensely popular in just a couple of years, with crypto exchange platforms and altcoin projects being launched on a daily basis. However, the value of a single Bitcoin wasn’t really high during those first years. Compared to the several tens of thousands of USD per coin and the enormous market cap that Bitcoin has achieved in recent years, the price of a few USD per coin in the early 2010s was a mere nothing.
This could be a major problem if BTC weren’t divisible into those smaller units we mentioned earlier. Satoshis can divide a single BTC into up to 8 decimals and allow users to send only a 100 millionth of a Bitcoin.
The BTC Cryptocurrency Blockchain
Since the Bitcoin blockchain was the first cryptocurrency network in the world, many early digital assets on the crypto market, such as Litecoin (LTC), Ethereum (ETH) and Dogecoin (DOGE), copied the core elements of the BTC blockchain.
Essentially, the Bitcoin blockchain is a distributed public ledger that doesn’t rely on any central authority to operate. Instead, the BTC blockchain is powered by thousands of fully autonomous network nodes that are actually Bitcoin miners with their powerful computers called mining rigs. Miners process and validate all transactions on the network through a mechanism called Proof of Work (PoW).
The PoW mechanism is a security measure that makes the BTC blockchain absolutely safe. When you initiate a transaction, your transfer first goes into a memory pool (mempool), where it waits along with other pending transactions for a BTC miner to pick it up. Each transaction is actually a cryptographic message with information about the sender, receiver, the number of transferred coins, the transaction ID (TXID) and timestamp.
Once a miner selects your transfer, they use their computing power to manually find the appropriate 64-digit hash that corresponds with your transfer. This requires a lot of computing power, which is why miners usually join mining pools and combine their power with thousands of other miners to increase their chances of finding the right hash and receiving the block reward.
The main incentives for miners to participate in this process are transaction fees and block rewards. This is where satoshis come in handy since these fees are always counted in much smaller denominations than a full Bitcoin.
Since the creator of Bitcoin is known as Satoshi Nakamoto, it’s understandable why satoshis carry their name. Just like many fiat currencies have smaller denominations – for instance, cents for USD – Bitcoin, too, has satoshis (SATS).
With up to eight decimals, Bitcoin is a great cryptocurrency to send small amounts of value across the crypto market, as small as one hundredth million of a Bitcoin. For example, a lot of cryptocurrency exchanges like Coinbase show the value of available cryptos or trading pairs in both USD and BTC. Introducing SATS was a smart move by the Bitcoin developers back in 2010.
Here is an illustration of how many SATS make up a single Bitcoin:
1 0.000 000 01
10 0.000 000 1
100 0.000 001
1,000 0.000 01
10,000 0.000 1
These figures should help you understand BTC metrics and the number of SATS in, let’s say, 0.00025 BTC, or any other figure.
A Few Ending Words…
The usefulness of satoshis for the Bitcoin ecosystem has become fully apparent as the value of BTC has increased over time. Back when a single coin was worth just a few USD, Bitcoin’s divisibility wasn’t as important. However, now that BTC is worth several tens of thousands of US dollars, it’s quite helpful to be able to divide it into smaller units and send a fraction of a Bitcoin if you want to use it for everyday money transactions.