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Will there ever be a need to create a unit of Bitcoin smaller than a Satoshi?

See also: What is a 'Satoshi'?

10

It is very unlikely that anything smaller than a Satoshi will be needed. See the math below.

After a little math provoked by a comment... it's unlikely to ever need a smaller than a satoshi (1/100,000,00 of a BTC). I calculated about 52500 satoshi's to $1 if all bitcoins have been mined and they are worth about $1900 each.

So even up to $9975000 per bitcoin still puts 1 satoshi at 1 cent.

  • 6
    It would be nice to see a back-of-the-envelope-calculation that supports this answer. – ripper234 Aug 31 '11 at 5:57
  • You start off saying yes, then no. What should we vote on? Could you make your answer consistent? Since SE keeps full edit history, there is little need to retain stuff you don't agree with any more, though you should note major edits so the context for comments remains clear, and people can check the edit log for details. – nealmcb Aug 31 '11 at 20:11
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    "So even up to $9,975,000 per bitcoin still puts 1 satoshi at 1 cent." No it does not, $9,975,000 per bitcoin put 1 satoshi at 9.75 cent $1m per bitcoin means 1 satoshi = 1 cent – user19068 Aug 22 '14 at 15:36
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    total_bitcoins / population * satoshis/BTC) = 21e6 / 7e9 * 1e8 = 300000 satoshis/person. Assuming a net worth of $300000/person, the smallest possible transaction would be a whopping $1. This is not a small enough division. – Mateen Ulhaq Oct 30 '14 at 7:43
  • How is 1 cent (USD 0.01 I assume) a small enough "granularity" of a currency - even an electronic one? I't perfectly normal to book fractions of cents for small values. Just the exchange is rounded to cents. – Volker Siegel Mar 29 '18 at 13:21
10

TL;DR: If transaction volume explodes, Bitcoin is adopted for micro-payments, and the value of bitcoins increases sufficiently, we will need greater divisibility.

First of all, since there are 100,000,000 satoshi to a bitcoin, obviously one satoshi would be worth $0.01 if one bitcoin were valued at $1 million.

Beside the questionable math in tysat's answer, his answer is based on the assumption that there are no use-cases for payments smaller than a cent.

I don't believe that it is a valid assumption to make:
Next to there being other currencies with subunits of smaller value than $0.01, when one satoshi is worth $0.01, that would also be the smallest possible transaction fee one could attach! This would be prohibitively expensive for any micro-payment based business scheme, such as for example Bitcoin based content paywalls, direct internet traffic payments to ISPs, or other automated micro-payment driven schemes: Paying five cents to read an article, you'd have to add a 20% fee.

Now, such services could possibly move off-chain where further precision could be added, yet that would require users to have accounts for each of those services, and to tie up their resources unnecessarily, while reintroducing counter-party risk; essentially reverting a lot of the key selling points of Bitcoin!

Assuming that the Bitcoin protocol will develop to scale even beyond the transaction capacity of today's credit card systems as recently suggested by Gavin Andresen, it seems plausible that business ideas will appear to challenge even such transaction capacity. As those would though be prohibited by a minimal transaction fee of $0.01, we could see a push towards even smaller fees.

Should the above lead to a scenario where somebody finds uses for payments with a value of a tenth of a cent ($0.001), and transaction fees for that should be less than 10% of the payment's value, we'd need smaller subunits if one bitcoin becomes more valuable than $10,000. Since we already have breached $1,000 once, that doesn't sound impossible.


Update 2017-03-23: AFAIU, adding further divisibility to Bitcoin would require a hard fork, and therefore is not something that will simply manifest. If necessary, it would require a massive overhaul of all software currently used in the Bitcoin ecosphere. On the other hand, Lightning actually already implemented support for probabilistic sub-satoshi payments.

Update 2018-05-17: Lightning uses millisatoshi to account for channel balances, adding another three magnitudes of precision. Payouts on the blockchain are rounded as the precision there is only to the satoshi.

5

As the Bitcoin Wiki explains on "Coin Destruction":

Bitcoin has 2.1 quadrillion raw units, making up 8 decimals of BTC precision, so the entire network could potentially operate on much less than the full quantity of Bitcoins. If deflation gets to the point where transactions of more than 10 BTC are unheard of, clients can just switch to another unit so that, for example, it shows 10 mBTC rather than 0.01 BTC.

The maximum number of raw units might not be enough if the entire world starts using BTC, but it would not be too difficult to increase precision in that case. The transaction format and version number would be scheduled to change at some particular block number after a year or two, and everyone would have to update by then.

Doing some rough calculations, one can see that it might be the case that complete universal adoption of the Bitcoin could result in equivalent values of 1 (future) satoshi = $1 (current) USD.

  total_bitcoins / population * (satoshis/BTC)
= 21e6           / 7e9        * 1e8
= 300000 satoshis/person
  • Nice formatting and supplementary information, but the answer is missing a conclusion concerning the question whether or not further divisibility will be needed. – Murch Oct 30 '14 at 11:17
1

I don't think there will ever be a necessity to build support for smaller denominations into the actual Bitcoin code base. When the network caps out, Satoshis will most likely still represent a fraction of a cent or possibly up to a cent.

However, just like there are institutions you can go to with fiat money to make microtransactions, there will be such places for exchange when it comes to Bitcoin.

1

Will there ever be a need to create a unit of Bitcoin smaller than a Satoshi?

Actually, the correct answer is depended on meaning of "ever" in your question. If you are trying to look far away (e.g. more then one century), the answer can be "Yes, there will."

It can in case Bitcoin would spread as widely as seen by bitcoin evangelists.

Keeping in mind all known mankind history and the idea of bitcoin as "digital gold", we can notice that value of gold is raised constantly. This is a result of simple process: amount of goods and services that people can pay for increased quicker then amount of gold.

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    Please don't get pedantic over the meanings of words like "ever" or "always" we understand what he means. – David Perry Sep 1 '11 at 0:30
  • Yes, some times I can be a little bit pedantic since I'm software engineer =) But I just try to express a possible state market in the far far future... Let's say "Global Solar System Market" as it described by Robert A. Heinlein. – Maverick Crank GRey Sep 1 '11 at 7:29
0

I cannot write comments yet, else I would. Just chiming in with some math.

1 Bitcoin is worth 100.000.000 satoshis (100 million). That makes 1 satoshi worth 1 USD cent when 1 Bitcoin is worth $1 million.

If 1 Bitcoin would be worth 1 million dollars, the market cap would be 21 trillion dollars, which is approximately as big as the USA GDP in 2019.

If bitcoin ever reaches that kind of market cap (210x increase in value from today's $4750), I'd say we should consider implementing smaller values, which can be done easily from programming perspective (we would just need to fork).

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Be serious, if bitcoin reaches $100,000/bitcoin then the developers need to develop a hard fork to add at least another 3 digits below a satoshi for mining and transaction fees to become reasonable again. When Bitcoin reached over the $10,000 level, the transaction fee costs became over $10 regardless of the size of the coin transfer amount. The level of usage and asset appreciation of the cryptocurrency will determine what level of technology needs to be applied to make the asset viable in the future.

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