What Are the Units of Bitcoin & Is it Worth Investing in Satoshis?

Posted by Michael Cao on December 13th, 2019

Bitcoin and other cryptocurrencies are getting a lot of mainstream attention these days.  Digital currency was largely viewed as unnecessary. There were previous attempts in creating and using digital currency but they all failed.   So imagine the surprise of everyone when bitcoin came out.   Governments and central banks scoffed because Bitcoin was decentralized.  Cryptocurrency did not fit into the traditional model of monetary policy.  Unlike fiat money, bitcoin uses cryptography for its creation and management.  To its critics, bitcoin is an anomaly.  To its supporters, bitcoin is a groundbreaking disruptor.  In ten years, it has become an accepted medium exchange and won over institutional investors.

Satoshi Nakamoto used and combined ideas from cryptography in creating bitcoin.  The domain name bitcoin.org was registered on August 2008.  On October of the same year, Satoshi posted his white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”.  The Bitcoin network came alive on January 2009 when Satoshi mined the Genesis Block (block 0), which rewarded him 50 bitcoins.  The first-ever bitcoin transaction happened on January 12, 2009.  Programmer Hal Finney received 10 bitcoins from Satoshi for downloading the bitcoin software.  The New Liberty Standard set the first bitcoin exchange rate versus the US dollar.

The first bitcoin transaction happened on May 22, 2010.  Programmer Laszlo Hanyecz bought two pizzas from Papa John’s for 10,000 BTC.  He opened the transaction by offering users of the Bitcointalk.org forum the BTC in exchange for two pizzas.  A user accepted the bitcoins and sent him the pizzas.  Go ahead.   Google bitcoin’s current value and be prepared to be awestruck at the cost of those two pizzas in today’s market.

The Utility of Bitcoin

Papa John’s pizza purchase was followed by other transactions.  It was important to run “proof-of-concept” transactions to test the bitcoin network.  Programmers spotted a major weakness in the bitcoin protocol.   Transactions that were not properly verified were added in the blockchain.  This flaw will let users create an indefinite number of bitcoins.  This loophole was exploited in August 2010 when a large number of bitcoins were generated in a single transaction.  Fortunately, the hack was spotted and the bug was fixed just in time.  The bitcoin network forked to improve its protocol.

The major use of bitcoin was on the infamous Silk Road website.  Before it was shut down, Silk Road exclusively accepted bitcoin as payment.  It’s estimated that 9.9 million bitcoin was used on the site.  Mt. Gox and Silk Road controversies put bitcoin in a negative light.  However, the next couple of years marked mainstream adoption by companies.  Microsoft began accepting bitcoin payments on December 2014, paving the way for bitcoin acceptance by well-known corporations.  Some major cities around the world have become bitcoin hotspots.

The Units of Bitcoin

Bitcoin has gone through a lot of price fluctuations over the years.  Its volatility made serious investors wary at first.  Satoshi designed Bitcoin to have finite quantity.  This will increase the price of bitcoin over time as it gets challenging to mine new coins.

Bitcoin Units

There are three main denominations of Bitcoin:

1. Bitcoin block reward. This is the amount of bitcoin released when the math problem is solved for that block. The reward started at 50 bitcoin per block, which is halved approximately every four years. It means that the rewards will be halved on every 210,000th The precise time of the halving depends on the mining difficulty. It is estimated that no new bitcoins will be left to mine at around 2140.

2. Bitcoin (BTC). Bitcoin refers to one unit within the network similar to US or €1 in the money market. Satoshi made sure there will only be 21 million bitcoins.  A bitcoin is divisible down to eight decimal points.  Developers would be able to create further divisions if it is necessary.    In the foreign exchange market, bitcoin is pegged against currencies like the dollar and euro.  In 2011, the price of bitcoin versus the US dollar was only --content--.30.   Bitcoin’s international ticker symbol is BTC.

   a. Millibitcoins (mBTC). A millibitcoin or “millibit” refers to one-thousandth of a bitcoin or 0.001 BTC. The prefix “milli” is from is the International System of Units (SI) prefix meaning “one-thousandth”. The millibitcoin was introduced in May 2011 when the value bitcoin reached .   The ticker symbol of millibitcoins is mBTC
   b. Microbitcoins (µBTC). A microbitcoin or a “bit” is one-millionth of a bitcoin or 0.000001 BTC. The international ticker symbol of microbitcoin is µBTC.

3. Satoshi. A satoshi is a hundred millionth of a bitcoin or 0.00000001 BTC. The unit was named in homage to Satoshi Nakamoto. In November 2008, Nakamoto designed bitcoin as a system of 100 million sub-units. It is estimated that Nakamoto may possess 1 million bitcoins or 100,000,000,000,000 satoshis.

Are Satoshis Worth It?

Bitcoin is hovering at the ,000 range. This is good territory considering that its value was at ,000 on January 1, 2019.  Based on its history, bitcoin generally increase in value followed by a decline until it stabilizes.  The wild volatility has passed and bitcoin is on firm ground.

The investment climate for bitcoin is good.  Cryptocurrency used to be ridiculed but it’s winning more users from the traditional financial sectors.  There’s news of big companies who want to jump on the cryptocurrency wagon.  The cryptocurrency market is estimated to be worth 0 billion, bitcoin has the lion share of the market in terms of usage and value.  The co-founder of Mobius Capital Partners, Mark Mobius, who once branded bitcoin a “real fraud”, said that cryptocurrencies will flourish in the future.

Since its debut in 2009, bitcoin has inspired the creation of alternative cryptocurrencies such as Ripple and Litecoin. The world’s biggest social media corporations, Facebook and Twitter are eyeing cryptocurrency as new sources of revenue. For now, bitcoin investors are waiting for next year’s bitcoin halving event where miner rewards for new bitcoin will drop from 12.5 bitcoin to 6.25 bitcoin.   Investors are expecting a bull run when this happens.