The Bitcoin White Paper: 9. Combining and Splitting Value…
“Bitcoin: A Peer-to-Peer Electronic Cash System
Satoshi Nakamoto
October 31, 2008″
Bitcoin can be combined and split up. The smallest unit is a “Satoshi” aka “sat” and there are 100 million sats in a Bitcoin. If needed, Bitcoin can be updated to go into even smaller units. Think of it like the liquid metal mercury if it wasn’t toxic and couldn’t be absorbed by anything. You could pour a tiny drop out to another vial. You could combine a bunch of droplets and vials of mercury into one big glass. Satoshi doesn’t mention sats below but they are the smallest amounts that can be transferred.
“9. Combining and Splitting Value
Although it would be possible to handle coins individually, it would be unwieldy to make a separate transaction for every cent in a transfer. To allow value to be split and combined, transactions contain multiple inputs and outputs. Normally there will be either a single input from a larger previous transaction or multiple inputs combining smaller amounts, and at most two outputs: one for the payment, and one returning the change, if any, back to the sender.
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Satoshi lays out how a single transaction can have many wallets sending some bitcoin and many wallets receiving that bitcoin.
“It should be noted that fan-out, where a transaction depends on several transactions, and those transactions depend on many more, is not a problem here. There is never the need to extract a complete standalone copy of a transaction’s history.”
So transactions are flexible and can include many different wallets of bitcoin on both ends of the transaction. This is helpful to companies like exchanges that deal with tens of thousands of different customers and have a way to reduce the number of transactions needed to settle all their individual bitcoin transactions.
Thanks to the Nakamoto Institute for making the whitepaper available freely via an Attribution-ShareAlike 4.0 International (CC BY-SA 4.0) license. More info on that here: https://creativecommons.org/licenses/by-sa/4.0/
Source: https://nakamotoinstitute.org/bitcoin/