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At the protocol level bitcoins don't actually exists, but rather base units (recently called “satoshis”). Bitcoins are defined as 108 base units, meaning that for a 50 BTC mining reward, you are actually earning 5 000 000 000 units.

So, why was 108 chosen as the value of one bitcoin relative to the base unit?

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    I think, 50 BTC mining reward, 10 minutes block confirmation time and 4 years reward halving were fixed first. 21 million bitcoins is just a result of those 3 parameters. 8 digit precision comes from gold ounce (XAU). End of mining (2140) is a result of this 8 digits precision. If you add 2 more digits, mining can continue another 24 years, or so..
    – vi.su.
    Oct 14, 2014 at 5:18

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When developing Bitcoin, Satoshi had already come with the idea that no more than 21 million of them will ever be made. However, there was an unsolved issue: how to accomodate all bitcoins in case it was actually used as a worldwide currency? Comparing to the current (2008?) world's M1 supply, it was determined that 8 decimal places was enough to cover the supply and still have the smallest division smaller than enough for daily usage.1

It's also worth noting that this decision means the total Bitcoin supply is approximately 250.89, which means it's smaller than the maximum value for a 64-bit integer (263-1), and smaller than the first integer that can't be exactly represented in a double-precision floating-point number (253 + 1), so that standard programming languages can deal with Bitcoin amounts without requiring custom implementations or dealing with overflowing.2

  1. Ray Dillinger's response to: Why 1BTC should equal 10^8 satoshi ?
  2. Satoshi’s Genius: Unexpected Ways in which Bitcoin Dodged Some Cryptographic Bullets
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    Additionally, the protocol can be easily extended to 16 decimal places with a hard fork.
    – Zoey Mertes
    Oct 13, 2014 at 23:55
  • Yes, but as far as I understand, this was planned in such a way that more decimal places would never be needed.
    – Arturo Torres Sánchez
    Oct 14, 2014 at 0:03
  • Also, more decimal places would break the Int64 and Double storages (see the second paragraph)
    – Arturo Torres Sánchez
    Oct 14, 2014 at 0:05
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    @ArturoTorresSánchez: "Never" is such a strong word. Whether it will be needed or not will depend on how Bitcoin is used. You can go up to 11 places within the confines of int64; double isn't really an issue since you shouldn't use double for exact amounts anyway; and in the future the cost of switching to int128 won't be prohibitive.
    – Meni Rosenfeld
    Oct 14, 2014 at 9:23
  • OK, I see your point.
    – Arturo Torres Sánchez
    Oct 14, 2014 at 12:31
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The world GDP is $74 trillion footnote: a according to the World Bank in 2017. The max supply of Bitcoin with 108 base units is 2,100 trillion Satoshis.

If Bitcoin is to back the world's money, markets and real estate, not including debt nor derivatives, then the valuation of Bitcoin might be:

Global Stock Markets: $73 trillion
Global Broad Money: $90.4 trillion
Global Real Estate: $217 trillion
Total: $380.4 trillion footnote: b

With a $380.4 trillion economy and 2,100 trillion satoshis in existence there will be plenty to go around. Additionally, because of the scarcity model built into bitcoin (21 million max supply), we won't need additional bitcoins or more decimal places, the valuation of Bitcoin will naturally change with our economy.

I believe we will use Bitcoin as a form of digital gold to back other digital currencies and online marketplaces, allowing people and businesses to move credits from one online marketplace to another or from one currency to another.

a The $74 Trillion Global Economy in One Chart:
http://www.visualcapitalist.com/74-trillion-global-economy-one-chart/

b All of the World’s Money and Markets in One Visualization:
http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/

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  • Your argument assumes a $1=1 satoshi exchange rate
    – BTC Novice
    Nov 9, 2017 at 18:59
  • Dollar is not the smallest amount, but cent is. If world GDP is $74 trillion, that means we have 74*1E12 = 7.4E15, while bitcoin has 21*1E6*1E8 = 2.1*E15. That means we need to compare 7.4E15 and 2.1E15.
    – Paulius K.
    Jan 19, 2019 at 12:50
  • @PauliusK. I surmised that you replied to Travis rather than tried to provide a comprehensive answer. Since comments don't allow superscript, I've edited your comment to use scientific notation.
    – Murch ♦
    Jan 22, 2019 at 22:34

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