A commonly used unit, or subdivision, of a single Bitcoin.
What are bits?
Bitcoin, like any currency, must have the capacity to be subdivided. This is especially important for the use of Bitcoin and other cryptocurrency as a unit of exchange rather than pure speculation. Subdivision also became increasingly vital when Bitcoin’s price rose so dramatically.
There is a long list of broadly agreed classifications of Bitcoin sub-units. Bitcoin has a metric system, and is divisible to eight decimal points. A deci-bitcoin (written as dBTC) is 0.1 of a coin. Centi-bitcoin (cBTC) is 0.01 — while the smallest unit of value, 0.00000001, is known as a Satoshi.
The use of bit as the standard subdivision grew out of a proposal originally published on the Bitcoin subreddit, suggesting that each coin be divided into one million units. These are referred to as bits.
The bit as a subdivision has several key advantages. Most standard financial software is only able to parse two decimal places, a key issue for the interoperability of Bitcoin. Bits can be expressed to two decimal places, for example 99.99 bits, making bookkeeping and accounting with bits possible.
Similarly, the simplicity of bits will, it is hoped, mean that it remains an easily understandable expression of value even if Bitcoin prices rise very significantly, in part because it is in line with the subdivision format of most global currencies.
Agreement on subdivisions is seen as an important element of Bitcoin’s route to mass adoption. If it is to become a widely used method of payment for real world goods and services, it needs to be easily understood by average consumers.