Sometimes the web3 space moves too fast, way too fast we lose track of essential concepts. What is a satoshi? Isn’t Satoshi the man who created Bitcoin? Maybe you heard that NFTs are now inscribed inside satoshis.. and you’re like.. the human Satoshi ?! If not a person then is it a currency? And why is it rare? What’s the big deal with a satoshi anyway? So many questions and blurred lines. Let’s clarify everything here, and step by step you’ll be an expert on Satoshis, Sattributes, and Satoshi hunting!
Blockchain technology is indeed overwhelming and anything new about it sounds alien-sent. Especially when we’re talking about the Bitcoin blockchain. To understand satoshis, you should first understand how the Bitcoin blockchain works.
Bitcoin Blockchain: Basics First
Before we dive into what a satoshi is, we must recap basic ground on how the Bitcoin blockchain works. If you want to go in-depth about Bitcoin’s history, we got a full guide here!
Every 10 minutes → A new Bitcoin block is mined → 144 Bitcoin Blocks are mined per day
In every Bitcoin Block → there are 6.25 Bitcoins → 900 Bitcoins are mined per day
First Mined Bitcoin → in the year 2009 → Called the Genesis Block
Total Cap of Bitcoin → 21,000,000 → will be reached in the year 2140
Current Supply: 19,409,775
Total Bitcoin Blocks: 3,360,000
Current Block Supply: 795,564
What Is A Satoshi?
At the time of writing Bitcoin is worth $30,025. So when we say 1 BTC we are talking about a lot of money. Created in 2014, Satoshis are smaller units of Bitcoin that use the same SHA-256 hashing algorithm. Just like Gwei is a subdivision of Ethereum, Satoshi is a subdivision of Bitcoin. Whoever decided to use subdivisions of Bitcoin in 2014, named them Satoshis in honor of the pseudonym of Bitcoin’s creator – who remains anonymous to this day.
1$ = 100 Pennies → 1 Bitcoin = 100,000,000 Satoshis
1 satoshi = 0.00000001 BTC
For example at Bitcoin’s current rate:
you want to get a $100 item:
with one bitcoin → your charge is 0.00333056 BTC → it’s easier to understand 333,056 satoshi.
Importance of Satoshis
- It’s necessary for a currency to be able to be divided into smaller subdivisions if it aims to act as a global medium of exchange. Fiat currencies can be divided into smaller denominations, such as the penny for the British pound or the cent for the US dollar.
- Satoshis have become indispensable since a single bitcoin rose to be worth tens of thousands of dollars.
- Using terms like satoshis, or other small units, means users avoid having to write out strings of zeros when very small volumes of the cryptocurrency are involved.
- In 2023, Satoshis were used in the Ordinal Theory to create Bitcoin NFTs.
What Is the link between Ordinals and Satoshi?
There will only ever be 21,000,000 Bitcoins
1 Bitcoin = 100,000,000 Satoshis
There will be 2,099,000,000,000,000 Satoshis in existence. Here’s a glimpse of how it would look.
So how is it possible to identify the location and position of a satoshi in the Bitcoin blockchain? That’s where the Ordinal protocol comes in. You can know all about the Ordinals backstory here.
Briefly, the Ordinals Protocol allows for the ordered identification of satoshis. it enables each of them to have an individual identity. Consider this protocol like a serial number given to each Satoshi to identify its exact location and position in the sea of bitcoin blocks.
Now why do we need to identify the location of a satoshi?
- To inscribe an NFT to it.
- OR simply own a BTC mined in a historically-significant block ( aka flexing).
What is a Satoshi Inscription?
Basically , the ordinal theory allows the identification of each satoshi. This way you can attach (inscribe) a JPEG file for example, to the Satoshi ON the Bitcoin blockchain. The process of assigning each Satoshi with a value (image or video) that dictates a digital asset (NFT) is called inscription. Since digital assets are inscribed within a satoshi currency, they can be easily transferred through Bitcoin transactions.
Note that referring to inscribed satoshis as “Bitcoin NFTs” might not be right. In fact, Rodarmor, the creator of Ordinal Theory, makes sure to differentiate between regular NFTs and Bitcoin’s digital artifacts by saying that:
“Inscriptions are digital artifacts, and digital artifacts are NFTs, but not all NFTs are digital artifacts”.
The main difference lies in the fact that NFTs often link to off-chain content, while Bitcoin’s digital artifacts will be completely on-chain. But that’s not all, Bitcoin artefacts are not all inscribed on the “kind” of satoshi. Simply because some Satoshis have more desirable attributes than others.
Satoshi Attributes & Bitcoin Blockchain
Alas, we reach the big deal about Satoshis. Bitcoin’s digital artifacts (NFTs) belong to a Blockchain with a limited supply. This means that Bitcoin’s blockchain has a special sequence to reach the end of 21 million BTC. Which ultimately means that not all satoshis are the same. Some are more rare and happen less frequently. Therefore, with ordinals’ theory comes Satoshi’s attributes, or for short Sattributes.
Let’s get familiar with three important keywords in Bitcoin’s mechanism:
- Difficulty adjustments: Every 2,016 blocks (approximately every two weeks) the Bitcoin network responds to changes in hashrate by adjusting the difficulty target which blocks must meet in order to be accepted.
- Halvings: Every 210,000 blocks (roughly every four years) the amount of new sats created in every block is cut in half.
- Cycles: Every six halvings the halving and the difficulty adjustment coincide.
- This is called a conjunction
- The time period between conjunctions is a cycle.
- A conjunction occurs roughly every 24 years.
- The first conjunction should happen some time in 2032.
Rodarmor created a Bitcoin clock to track the difficulty adjustments, halvings, and cycles of Bitcoin over time till reaching its cap in the year 2140. Here’s chainwitcher’s simplified explanation of the clock:
Sattributes & Satoshi Hunting
In a nutshell, Satoshi hunters want to collect all the special satoshis in existence. Check this article for a full guide on Satoshi hunting!
Every 10 minutes → A new Bitcoin block is mined.
After every 2,016 Bitcoin blocks → It gets more difficult for miners to solve the equation that results in a mined block.
‘Rare Satoshis’ are the FIRST Sat of the first block in a new difficulty adjustment epoch.
Every 20,160 minutes (14 days) → 1 Rare Sat is created
- 26 Rare Satoshis are Created per year.
- There are 375 Rare Sats in 15 years of Bitcoin.
- Collectors known as “satoshi hunters” are collecting rare satoshis from Bitcoin
- Rare Sats are worth WAY more than regular Bitcoin.
BUT that’s not all! There are 12 different attributes that make a Satoshi special and sought after by Sat hunters.
- Every ten minutes → an Uncommon Satoshi
- Every second → 1M Common Satoshis
- Every two weeks → Rare Satoshi emerges
- Once per 4 years →An Epic Satoshi rises
- Every 24 years → Legendary Satoshi appears
- First ever Mined Satoshi is Mythic
→ un-spendable in the genesis block
→never to see the light of day
→treasured forever where it belongs
The Dilemma of Satoshis
In 2014 Satoshis were introduced as subdivisions of Bitcoin to facilitate the currency’s trading. In 2023, after the introduction of Ordinals theory, Satoshis took on another level of importance. It all started with the idea of creating NFTs on the Bitcoin blockchain itself.
Regardless of whether people support the introduction of NFTs into the BTC network, the increase in block size is a pressing matter. The Bitcoin blockchain already suffers from congestion issues, and it will get worse.
→Larger Bitcoin blocks will typically bid higher fees in order to take part in the validation process.
→That will lead to miners prioritizing the Bitcoin blocks that include ordinal inscriptions over regular BTC transactions.
→In contrast, those who are conducting regular transactions will have to bid EVEN higher to get their transactions into the next block.
Attaching (inscribing) arbitrary data (images,videos,etc.) to Satoshis is an innovation indeed. But this sparks a debate on the nature of the Bitcoin blockchain. Recently, bitcoin pumped back up after Blackrock filed for a BTC ETF. Which, if accepted by SEC, can be a huge deal for the future of Bitcoin as cryptocurrency.
Is Bitcoin going to be a global cryptocurrency or “rare” digital artifact museum? And how will these two thing co-exist on a blockchain with a limited supply and scalability issues? Is it a recipe for success or failure? So many questions and no clear answers. We just have to wait and see.