What it means
Just as a dollar is made up of 100 cents, a bitcoin is made up of 100,000,000 satoshis, often shortened to sats. One satoshi is therefore 0.00000001 of a bitcoin.
The unit exists because a whole bitcoin can be worth a very large sum, so most everyday amounts are far smaller than one coin. Working in satoshis makes small numbers easier to read.
Saying that a payment is 250,000 satoshis feels simpler than saying it is 0.0025 bitcoin. Many wallets, exchanges and payment apps now show balances in satoshis for exactly that reason.
The unit is also important for how the bitcoin network works. Bitcoin transactions are recorded in whole numbers of satoshis, so nothing smaller can be sent, and fees on the network are often quoted in satoshis per byte of transaction data.
That is why fee levels are discussed in sats even by people who think of their holdings in dollars. For a business, the satoshi matters when accepting or accounting for bitcoin.
A merchant that prices a product at $20 must convert it into satoshis at the prevailing exchange rate, and the amount it receives will be worth a slightly different number of dollars by the time it is sold. Record keeping must capture both the quantity received and the dollar value at the time.
Because bitcoin prices change constantly, the dollar value of a satoshi is not fixed. It rises and falls with the market, and accountants treat bitcoin holdings according to the rules of the accounting framework they follow, which may require measuring them at cost less impairment or at fair value.
The word is sometimes used loosely to mean any tiny amount of cryptocurrency, but strictly it applies only to bitcoin. Other digital currencies have their own smallest units with their own names.
In practice
Real-world examples.
Example
A coffee shop accepts bitcoin for a $6 latte. At the prevailing rate of $60,000 per bitcoin, the customer sends 10,000 satoshis, which is worth $6, and the shop records both the satoshi amount and the dollar value. At the end of the month the owner reconciles the total satoshis received to the balance in the shop's wallet.
Example
An investor buys $300 of bitcoin each month. Because the price changes, the number of satoshis she receives differs every month, and she tracks her total in satoshis to see how her holding is growing. A steady stack of satoshis is easier for her to follow than a changing dollar value.
Example
A freelance designer in another country invoices a client the equivalent of $900 in bitcoin. The client sends 1,500,000 satoshis at an illustrative rate of $60,000 per bitcoin, and the designer converts it to local currency the same day to avoid price swings.
Formula
Calculation
Bitcoin Amount = Satoshis / 100,000,000
Dollar Value = Bitcoin Amount x Price per Bitcoin
Worked example using an illustrative price of $60,000 per bitcoin, which is not a forecast. A customer pays a merchant 2,500,000 satoshis.
Bitcoin Amount = 2,500,000 / 100,000,000 = 0.025 BTC
Dollar Value = 0.025 x $60,000 = $1,500
Value of one satoshi at this price = $60,000 / 100,000,000 = $0.0006Case study
Seen in the real world.
Lighthouse Publishing is an illustrative, fictional online magazine that decided to accept small bitcoin tips from readers. Early on, the finance team received hundreds of payments of 5,000 to 50,000 satoshis and struggled to record them consistently.
The controller set a rule: record each receipt in satoshis, convert to dollars at the exchange rate on the day received, and log both figures in a single spreadsheet. A monthly total in satoshis reconciled to the wallet balance, and a dollar total fed into the accounts.
By the end of the illustrative year the magazine had received 120,000,000 satoshis, or 1.2 bitcoin, in tips. The clear records made the year-end review straightforward, and the team noted that the dollar value had changed during the year even though the satoshi count had not. The accountants reported both figures to the board so that nobody confused a market movement with a change in the number of coins held.
Watch out
Common mistakes.
- Assuming a satoshi has a fixed dollar value, when its worth moves with the bitcoin price.
- Confusing satoshis with another currency's smallest unit, when the term applies only to bitcoin.
- Recording receipts only in dollars, which loses the information needed to reconcile to a wallet.
Questions
People also ask.
How many satoshis are in one bitcoin?
There are 100,000,000 satoshis in one bitcoin, so each satoshi is one hundred-millionth of a coin.
Can a bitcoin be divided further than a satoshi?
Not on the main network at present, because the satoshi is the smallest unit recorded, although that is a design rule rather than a law of nature.
Why do people quote bitcoin in satoshis?
Small amounts are easier to read as whole numbers, such as 5,000 sats, than as long decimals, such as 0.00005 bitcoin, and whole numbers reduce the chance of misplacing a decimal point.
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