Say Bitcoin goes to 1 a million dollars. We need more decimals, but btc core only supports 8 decimals? By that time its safe to assume everyone will be using lightning to do transactions, but will lightning have support for more than 8 decimals?
Lightning uses millisatoshis as the unit of account for all transactions and routing fees, but the sub-satoshi balances are not reflected on the bitcoin blockchain in the event of channel closure.
When a channel is closed, any sub-satoshi amount held by each party is dropped from the commitment/closing transaction and goes towards payment of the on-chain transaction fee which miners collect.
Amounts below a satoshi, or rather, below
dust_limit_satoshis, are made cooperatively between the parties of a channel and are not enforcible on-chain, but if many of such transactions are made, they add up to whole satoshi amounts which will be enforcible in later commitments.
Generally lightning transfers the currency of the baselayer. In the case of Bitcoin the smallest unit of account is 1 Satosh. However the base unit on lightning is
1/1000 of 1 Satoshi. This means that smaller transfer of value than 1 Satoshi is possible. With this comes an issue: the base layer can't enforce sub Satoshi amounts. So while it is possible to make such payments and calculate with such amounts on lightning in the case of channel closing the amounts will be rounded and channel partners cannot rely on such amounts.
There are two solutions to have an enforcement of sub Satoshi amounts on chain. First one could do a Bitcoin fork that enables sub Satoshi amounts. Second there could be a sidechain line laid which peggs Bitcoin but internally supports a smaller denomination than Satoshi. The lightning network could also be extended to that base chain.
Lightning doesn't use its own token or currency, it only uses Bitcoin when on the Bitcoin blockchain. Lightning sends payments using the transaction format of the underlying blockchain. When running on Bitcoin, Lightning is actually exchanging native Bitcoin transactions—without the need to broadcast every transaction to the chain.
This suggests that Lightning transactions use the same units as Bitcoin, and that it is not possible to use Lightning (in its current form) to exchange amounts in denominations smaller than 1 satoshi.