The divisibility of bitcoin is what allows it to be utilized by any amount of people in a myriad of use cases.
Bitcoin is unique in that when the last bitcoin is mined, around the year 2140, there will be approximately 20,999,999.9769, rounded off to 21 million, bitcoins in circulation. Also, by 2140, there’s going to be more people on the planet than there are right now (expectedly).
Here’s a question to ponder on: Are 21 million bitcoins enough for the human race?
The Beauty Of Divisibility
The Bitcoin protocol can absorb huge amounts of capital through its transactions across digital borders. It is able to do this through one of its key characteristics: divisibility.
Divisibility is one of the properties of any form of money, commodity, fiat or cryptocurrency that makes something of use or value into exchangeable money. In order to exchange goods of varying values, money has to be broken down into smaller units so it can be accounted for. In order to adopt and encourage the practical usage and purchase of bitcoin as an everyday currency alternative, bitcoin divisibility is crucial. Just like a one dollar bill can be broken down into 100 pennies, bitcoin can also be divided into smaller units. As the value of one bitcoin has increased, it is reasonable to buy a fraction of the digital currency instead of an entire bitcoin all at once. Bitcoin is divided into units as small as 0.00000001 BTC, which makes bitcoin perfect for micropayments. The divisibility of bitcoin comes from the currency’s maximum supply and other factors, such as the block reward. The smallest fraction of a bitcoin, 0.00000001 BTC, or 1 satoshi, was named to honor its mysterious creator, Satoshi Nakamoto. A single bitcoin is made up of 100,000,000 units called “satoshis.” Bitcoin’s divisibility could be a factor that contributes to its adoption because it will facilitate a wide range of payments that will not be possible with traditional currencies and payment methods. Online monetization and international remittances services can benefit from this feature. Successful currencies are divisible into smaller units. In order for a single currency system to function as a medium of exchange across all types of goods and values within an economy, it must have the flexibility associated with this divisibility.
A further breakdown: 21 million bitcoins is vastly smaller than the circulation of most fiat currencies in the world. Fortunately, bitcoin is divisible by up to eight decimal points. This allows for quadrillions of individual units of satoshis to be distributed throughout a global economy.
This is why bitcoin has a much larger degree of divisibility than the U.S. dollar, as well as many other fiat currencies.
For example, whilst the U.S. dollar can be divided into 1/100 of one USD, one Satoshi is 1/100,000,000 of one BTC. It is this extreme divisibility which makes bitcoin’s scarcity possible. If bitcoin continues to gain in price over time, users with tiny fractions of a single bitcoin can take part in everyday transactions. In contrast, without any divisibility, a price of $1,000,000 for one BTC would prevent the currency being used for most transactions.
Traditional cross-border payment solutions usually require a minimum amount and generate a fee, making micropayments unfeasible; however, micro cross-border payments are possible with bitcoin and more use cases will continue to appear as it evolves.
There are over two trillion galaxies with over one hundred billion stars in each. Such large numbers exist in the physical world but are difficult to understand. If my math is correct, 21,000,000 bitcoins can be broken down into over two quadrillion satoshis, which is an insane number that I find difficult to even wrap my head around. You may be put off by the current price of bitcoin. A friendly reminder that you don’t need to buy a whole coin to join in on the future.
Keep Stacking Sats Plebs!
There is enough room to split bitcoin to get it into the hands of those who really need it the most. Have a great day!
This is a guest post by Paul Opoku. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.