Your Guide to Satoshi Tests, Satoshis and Everything Between

Bitcoin is the first known cryptocurrency, while a satoshi, also known as sat, represents the tiniest unit of BTC. Converting satoshi to bitcoin entails a ratio of 1 satoshi to 0.00000001 BTC.

To confirm ownership of a self-hosted wallet’s address, a predetermined amount of satoshis (a fraction of bitcoin) is transferred from the withdrawal address to a virtual asset service provider (VASP). If a wallet user can complete this process, it signifies they have control over the address.

You may need to prove you own your self-hosted wallet to be able to transact with crypto-regulated entities like virtual asset service providers (VASPs). In some countries, VASPs must know who a self-hosted wallet's owner is before allowing a deposit from or withdrawal to such an address. This is part of anti-money laundering efforts.

This depends on the coin that you are trying to send. The objective of a Satoshi Test is to prove address ownership, which can be done with a blockchain’s native token. 

For example, you would use satoshis if you are trying to send bitcoin. However, if you were to send ETH, you would have to use any token of the Ethereum blockchain (ETH). 

Typically, the transferred amount is around the equivalent value of USD 1, representing a fraction of a Bitcoin, with the smallest unit being a satoshi. This explains the origin of the term "Satoshi Test."

A Satoshi Test is used to prove address ownership linked to a customer's self-hosted wallet, which is associated with a virtual asset service provider (VASP).

A predefined amount of cryptocurrency (coins) specified by the VASP is transferred from the wallet owner's address to the VASP within a specified timeframe to establish ownership. Despite the name, this method can be employed for various cryptocurrencies.

If the wallet owner completes the transaction by sending the coins, it is evidence of address ownership. However, the test is unsuccessful if the wallet owner fails to complete the transaction within the given timeframe.

The duration for which a Satoshi Test serves as valid proof varies depending on the VASPs' jurisdiction and anti-money laundering (AML) policies. After a certain period, such as one week, it must be repeated, even if the wallet user's address remains unchanged.

A Satoshi Test may be called a Penny Test or a Micro Transfer by certain VASPs and regulators.

Satoshi Nakamoto is the pseudonym of the individual or group responsible for the development of the Bitcoin blockchain. This entity authored the Bitcoin white paper, designed the initial reference implementation of Bitcoin, and played a significant role in deploying it. To date, Nakamoto’s real identity is unknown.

Everyone who has bought bitcoin has satoshis! There are 100,000,000 in 1 BTC. Although most investors own satoshis over bitcoin, it is more common to refer to the coins as bitcoin.