The Satoshi (SAT) is being used more and more in conversations regarding blockchain and cryptocurrencies. Bitcoin mining software, like HoneyMiner, pays you mining reward on SAT, #StackingSats is a frequently used hashtag on Twitter, and the Lightning Torch accounted for on Satoshi’s, just to name a few examples of the word that is being used.
But many – especially those who are newly involved in the world of blockchain and cryptocurrency – may be watching these current events involving the SAT and asking, “What is a Satoshi?”
When we say “Satoshi”, we do not really mean Satoshi Nakamoto, the pseudonym of the creator of Bitcoin. However, the Satoshi to which we refer also goes back to the early days of bitcoin and the BitcoinTalk forum.
Wait, what is Bitcoin?
Bitcoin (BTC) is the first digital currency, used and distributed electronically. It is a decentralized network peer-to-peer (peer-to-peer). No institution or person controls its issuance, expense or reservation. The production of each Bitcoin is maintained digitally and it is prepared under a controlled emission policy in which there are only 21 million units.
But bitcoin is more than just a cryptocurrency and it has been a great financial revolution. You want to know why? In summary, it is a currency to use on the internet. To understand a bit better about what bitcoin is about, we must go back a few years. Specifically to 1950, when Diners Club was created. The idea was born when Frank McNamara, co-founder of this company, was having dinner in a restaurant with clients and had forgotten his wallet. How could I pay without having cash? This is how he created the first credit card.
In the first years, people distrusted that piece of plastic. Was it safe? Could they steal me? However, 20 years later, in the 1970s, half the population of the United States already had a credit card.
Like credit cards, bitcoin is born to cover certain needs. The main aim was to create digital cash. Offer a service in which you can have a digital wallet with cash, with no cards or deposits in banks. This is achieved thanks to the bitcoin addresses. These are lodged within the cryptocurrency network itself. There is no other intermediary, such as banks. In addition, because of the large current extent of electronic devices, you can dispose of them anywhere, stored more securely than traditional cash, which can be stolen or lost.
A system of buying and selling online, without being controlled by banks and fear of hacking. The concept is more difficult than it seems. When you buy a product on Amazon, it confirms with your bank you have the money. How could this confirmation be made without a third party?
This problem confused computer experts for decades. There were many attempts to create an electronic currency, but all failed. The main reason is that none was getting rid of a central authority that controlled the system. Here, a computer server that controls transactions.
It was not until 2008 that it was solved when Satoshi Nakamoto created the concept of bitcoin. The most important thing was not to create a bitcoin payment network, considered as digital cash, but to do so in a decentralized manner. This was the piece of the puzzle missing for the financial revolution that the cryptocurrencies supposed. The reason may be complicated, but it is key to the operation of bitcoin.
The main advantage of bitcoin compared to electronic payments by card is decentralization. With bitcoin, you can buy something by transferring money directly from your wallet. You do not need any bank or intermediary. It’s like having cash but inside a device.
Since its creation, its popularity has only increased, which has been reflected in its price. To give you an idea, in 2009 the first dollar exchange rate – bitcoin was published. Then, with a dollar, 1,309.03 bitcoins could be purchased. Or what is the same, the initial price of bitcoin was 0.000764 dollars.
In December 2017, the cyber currency almost reached $20,000. That is to say, in 8 years its value was multiplied by over 26,000,000. Its popularity ballooned. Many gained the cryptocurrency at a price to sell it more expensive. Even in 2019, it’s still standing at $13,000 after witnessing a decline in 2018. The reality is that bitcoin is also, nowadays, an investment product. This led to the creation of “Satoshi”.
A Satoshi is the minimum unit of measurement that can be used in the Bitcoin system. It is the smallest fraction in which you can divide a bitcoin. Just as a euro is divisible by 100 cents, a bitcoin is divisible by 100,000,000 cents, allowing balances of up to eight decimals to be reflected. Therefore, the minimum fraction of a bitcoin would be 0.00000001. This minimal unit is called Satoshi, in honor of the creator of Bitcoin: Satoshi Nakamoto.
It all started on November 15, 2010, when BitcoinTalk user Ribuck proposed that 1/100 of a bitcoin (0.01 BTC) -the smallest unit that could be displayed on the interface at that time- would be called Satoshi. Although Ribuck made this proposal, none of the other BitcoinTalk forum users affirmed or denied their proposal. This may be because the thread in question was a poll that voted on the best Unicode character for bitcoin, which has nothing to do with the units of account and, therefore, may have made Ribuck’s comment seems out of place.
However, when Ribuck joined the Unicode, thread, he came in with a question:
“What is the plan to subdivide the Bitcoins? Do we go in thousands like the metric system (milibits, microbits, nanobits)?”
It was a good question, but one that nobody was willing to answer, confirm or deny. As a result, the idea expired and no action was taken with respect to Ribuck’s proposal, at least at the beginning.
Three months later, on February 10, 2011, Ribuck made a similar comment regarding denominations of account units. But this time, Ribuck’s comment felt more at home in a thread entitled “More divisibility is needed – move the decimal point.” This time, when Ribuck joined the discussion, he got feedback eight days later, on a completely new topic called Bitcent, in which user Kolbas of BitcoinTalk decided it was time to think about smaller monetary units registered in the bitcoin blockchain.
In the Bitcent thread, a user commented on Ribuck’s initial proposal, the user said:
“1 Satoshi = 1 microbitcent (smallest denomination)
100 million satoshis = 1 bitcoin
Replying to the raised question, users showed positive reactions. After that, everything was said and done: 0.0000000001, the smallest unit that could be registered in the bitcoin blockchain, became known as Satoshi from that moment.
Why the Delay?
Although the Satoshi entered the lexicon of the blockchain and the crypto-industry in 2011, it did not become popular -or a buzzword- until recently. Lately, more and more people refer to the SAT, mention the SAT in their podcasts, and have campaigns that revolve around the SAT -for example, #StackingSats- or fix the price of goods and services in SAT.
Chris Mezzacappa, CEO of BitConsult, a bitcoin consulting firm, said that this may be due to the price trend:
“Coming from a financial background, I automatically think about prices and share divisions… Ultimately, people want more of something and have a price bias.”
If an action has a relatively high value, the company may decide to divide it up so that individual stocks are more affordable – and easier to understand – for retail investors. The same psychology applies to the bitcoin with a high price, so the cheaper outcomes may seem more attractive and affordable to first-time buyers when they enter the cryptocurrency markets (think of Ripple or even Ethereum).
“In the past, the emphasis has been placed on” moving the decimal “because of this, but even with the price bias aside, it feels ridiculous to buy something in line with.001 BTC. Be the final answer, it is very difficult to remember how many decimals the bitcoin has, however, if the whole industry changes to sots, it can become something natural”.
As consumers, we are used to buying goods and services that have easy-to-use price labels: whole numbers or numbers that are rounded off at the end. But due to the relatively high price of bitcoin compared to the price of many everyday goods and services, when you set the prices of items in BTC, they usually end up with relatively unattractive numbers – for example, $ 5 is 0.00057206 BTC, at the moment when I am writing this article and explaining to you the term Satoshi. However, the SAT was able to change that and gave consumers an easy-to-use number to work with – for example, USD 5 equals 57,206 Satoshi, which is not the most beautiful, but clearer than 0.00057206.
Jesse Xiong, an ambassador of JPMorgan Chase Quorum, has beliefs similar to those of Mezzacappa. Xiong believes that the SAT has become more popular because, in a nutshell, “decimals scare people.”
Most people do not like to work with fractions and decimals. If the price of things were set only in BTC, it could leave traders with unattractive price tags that could confuse consumers in the box.
That said, you should familiarize yourself with the SAT, because you could be here to stay, at least in the short term. After eight long years, the Satoshi has gained popularity. The Satoshi has created a more convenient way to fix the price of goods and services in BTC, without the price appearing unattractive or confusing to consumers. Both the price and its bias seem to contribute to the time lag in terms of the SAT gaining popularity, but in general, the industry seems to have made the SAT a meme in itself, finding its own unique ways of incorporating Satoshi into our lives – as the lightning torch – and doing it in such a way that these events in which it is involved have become vital in their own aspects, incorporating the Satoshi into the journey.
The Independent, UK based online newspaper, has published a report on Bitcoin and its future in 5th Of June this year. In the report, many analysts have argued on cryptocurrencies and explained the future aspects of the digital Satoshis. They were of the view that irrespective of how absurd and vulnerable it may sound, Satoshis are here to stay. They even predicted that the price of Bitcoin can reach an all-time high this year and even can cross the $25,000 mark. So like it or not, probably it’s the high time you must understand the terms like Satoshis related to digital currencies.