Let's take a look at some of the smaller denominations of the common cryptocurrencies and their utility here-
Most fiat currencies have divisibility of up to 2 decimal places ($0.01). However, since many cryptocurrencies have a hard-capped supply, they have divisibility of up to 8 decimal places or more (.000000001 ETH). This ensures that, even when the supply limit of these cryptocurrencies is reached and/or their valuations soar, it is still possible for everyone to own some amount of the token.
Let's look at some of the smaller denominations of the common cryptocurrencies and their utility.
Bitcoin has a fixed supply of 21 million bitcoin, of which 18.5+ have already been mined. Moreover, 1 BTC is currently trading at approximately $22,000. However, its all-time high so far is around $69,000.
With such a scarce supply and towering valuations, how can Bitcoin become the world's future currency? The answer is simple: denominations. Instead of owning whole bitcoins, users can purchase fractions of BTC, the smallest of which is known as a satoshi or SAT (named after its pseudonymous creator).
One satoshi is 0.00000001 BTC. One decimal point higher than the satoshi is the finney (0.0000001 BTC), after which comes the microBitcoin (0.000001 BTC). These are followed by the milliBitcoin (0.001 BTC), the centiBitcoin (0.01 BTC) and the deciBitcoin (0.1).
Also Read: A look at backtesting, a tool that can help you optimize your crypto trades & investments
Satoshi’s are mostly commonly given away in faucets, where users complete small tasks to earn free crypto. You can keep completing these tasks and collecting SATs until you have a sizeable amount of BTC.
Ethereum's total supply isn't limited like Bitcoin. However, it still offers extremely small denominations to ensure trading of any amount is possible. These smaller denominations are also used to pay transaction fees on the Ethereum network.
One of the smallest amounts of ETH you can purchase is known as gwei, which is equal to 0.000000001 ETH. If you paid 0.000000020 ETH as transaction fees, you would say the transaction cost you 20 gwei.
However, gwei is not the smallest denomination of ETH; that distinction goes to a unit known as wei. One ETH can be broken into
100,000,000,000,000,000 wei. Interestingly, wei was named after Wei Dai, the founder of b-money, the predecessor of Bitcoin.
Wei is also used as a unit of measure for several other ETH denominations. For example, one kwei equals 1,000 wei, one mwei equals one million wei, and one gwei equals one billion wei.
Other denominations in the crypto world
Apart from Bitcoin and Ethereum, several other popular cryptos have tiny denominations. For instance, the smallest unit of Binance (BNB) is known as a jager, which is equal to 0.00000001 BNB. The name behind this unit of BNB comes from the Telegram handle of a Binance Community Manager.
This individual was one of the project's first angel investors and became a Binance Community Manager. At the time, the individual's Telegram handle was simply 'Jager', which Binance co-founder Changpeng Zhao (CZ) decided to name the smallest unit of BNB after.
On the Ripple (XRP) blockchain, the smallest unit of an XRP is a drop. One drop is equal to one million XRP. The name plays into the metaphor of drops, rain, and ripples. Lovelace is the smallest unit of Ada, Cardano's native currency. It was named after the 19th-century mathematician Ada Lovelace who is popularly referred to as the first computer programmer.
For now, gwei, SATs, jager and the other smaller denominations do not have much utility. However, as the value of cryptocurrencies rises in the future, these smaller units will surely come into play. They will also ensure everyone can grab a piece of the crypto pie when circulation limits are reached, and no new coins are minted.