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As the title says, we all know 1 Bitcoin can be divided to 1/100,000,000th (1x10^8) of a decimal place, aka as a satoshi, but Monero divides down to 1/1,000,000,000,000th (1x10^12). Why is this? Is there some benefit to having greater divisability due to Monero's design or incentives? Or is it just because that was how the original cryptonote creator coded it so it was left in place?

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The answer is both fascinating and altogether boring, in that it makes you look back to the very beginning of Monero (then "Bitmonero") and the period right after the clear-net debut of the supposedly two-years-old, dark-net-only Bytecoin.

Basically, for reasons beyond this answer's scope, Bitmonero was created as a fork of Bytecoin, the original Cryptonote implementation, shortly after people first heard of Bytecoin in 2014. It's goal was to have a fair launch of a cryptonote currency, and the original creator "thankful_for_today" decided to change up a few of the parameters of Bytecoin so it would not be a carbon copy.

One of those parameters that was changed was that the decimal point was moved: Bytecoin shared Bitcoin's definition of 1 coin = 10^8 atomic units, but had a much larger money supply of ~184 billion coins (2^64 - 1 to be exact). Because of this, block rewards were 4 orders of magnitude higher for Bytecoin than Bitcoin, which thankful_for_today did not like. So he changed it. BUT, note that he did not change the approximate money supply, 2^64 - 1 atomic units. He simply moved the "coin" decimal place 4 places, to where Monero has an approximate money supply (before tail emission) of 18.4 million, instead of 184 billion.

We can speculate all we want about what the main motivation here was... one that comes to mind is a desire to have a money supply similar to Bitcoin's 21 million coins... but the simplest explanation is probably the best: thankful_for_today wanted to less coins and small block rewards because smaller coin quantities "is much easier for practical use" [1]. In other words, why pay 100,000 coins when you could pay 10? As for why he moved the decimal instead of changing the maximum number of coins? Most likely because it was the simpler change, and probably also because he liked the idea of having 12 decimal places because that helped make Monero more unique.

References:

  1. Original Bitmonero Announcement Thread on bitcointalk.org
    https://bitcointalk.org/index.php?topic=563821.0
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Perhaps the authors of the CryptoNote whitepaper saw how big Bitcoin got, which is something Satoshi had no idea would happen, and added another four decimal places to help with the use of the coin if it ever gets significantly valued. Eg: if XMR becomes a world currency and a single Monero is eventually worth $100M then people buying a candy bar might use those extra decimals.

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    While this may be a nice side effect of the decimal value, your answer doesn't really help answer the question any, and confuses the history of CryptoNote and Monero. When Bitmonero was forked from Bytecoin, the change from 8 decimal places to 12 was made. So that feature was not inherited from the original CryptoNote implementation. – bigreddmachine Sep 15 '16 at 21:46

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