A Satoshi is a one hundred millionth of a single Bitcoin (0.00000001 BTC). It is the smallest unit of Bitcoin that can currently be sent and received over the blockchain. The name “Satoshi” comes from the pseudonymous creator of Bitcoin, known as Satoshi Nakamoto. The Satoshi has proven to be an important part of Bitcoin’s underlying technology network and development environment. Because the amount of BTC in a Satoshi is so small, it makes it much easier for developers to test code without having to invest large amounts of money into real Bitcoins.
Additionally, users who hold small amounts of bitcoin may find that using Satoshis is more convenient than using actual BTC due to transaction fees. The satoshi is not the only subdivision of bitcoin. A millibitcoin is a term for one-thousandth of a bitcoin or 0.001 BTC. A microbitcoin is one-millionth of a bitcoin or 0.000001 BTC.
On the Lightning network, it is possible to transact using a unit even smaller than the satoshi. Known as the millisatoshi, it represents one-thousandth of the size of a single satoshi, but this is not usable on the bitcoin network itself. Dividing bitcoins into fractions is necessary to facilitate microtransactions, such as buying a coffee – though due to the asset’s high volatility it’s not regarded as a suitable medium of exchange.
Satoshis have become indispensable since a single bitcoin rose to be worth tens of thousands of dollars. It also means prospective investors can purchase as little as $1 worth of BTC, rather than having to purchase a whole bitcoin.
As bitcoin’s block rewards halve roughly every 4 years, the new tokens being minted every 10 minutes will at some point be counted in satoshis rather than bitcoin. The minting of new bitcoin will eventually have to stop sometime in the next century because satoshis exist. It will not be possible to continue minting new bitcoin forever in smaller and smaller quantities.