A satoshi is the smallest unit of Bitcoin that can be transacted on the blockchain. A satoshi represents one hundred millionth of a bitcoin (0.00000001), and was named after the pseudonymous group or individual, Satoshi Nakamoto, who created the Bitcoin protocol.
The overall unit structure of Bitcoin can be broken down as follows:
- 1 Bitcoin (BTC)
- Millibitcoin (mBTC) = 1000th of a Bitcoin
- Microbitcoin (μBTC) = 1,000,000th of a Bitcoin
- Satoshi = 100,000,000th of a Bitcoin
Similarly to fiat currency, Bitcoin can be sub-divided into smaller denominations, just like 1 US dollar can be further sub-divided into cents. The reason for this is because Bitcoin was designed to make its use easier as its value increased. The total circulation of Bitcoin is limited to 21 million Bitcoins; a system that only permitted a denomination of 1 Bitcoin for transaction purposes would become increasingly more difficult to use as more individuals began adopting the digital currency. Breaking Bitcoin into smaller units makes circumvents this problem, that way if 1 Bitcoin rises to thousands of dollars, individuals can still use it for smaller purchases.
Denominations of Bitcoin can be transacted using cryptocurrency exchanges. Cryptocurrency exchanges allow for users to send, receive and even trade various cryptocurrencies. You can learn more about cryptocurrency exchanges here.