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A bit is short for “binary digit”, and is either a one or a zero. Bits are the atomic unit of digital data. All computer data is stored as bits. Bits are grouped into sets called bytes, which have 8 bits each.

You may be familiar with megabytes (MB) and gigabytes (GB). A megabyte is a million bytes or eight million bits. Likewise, a gigabyte is a billion bytes or eight billion bits. This means that when a file is 1MB large, it consists of 8 million ones and zeros.

The term 'bits' is occasionally used to refer to 1,000 satoshis or sats.
Occasionally, the term bits is used to reference an amount of bitcoin. In this context, a bit is 100 sats, or 1 millionth of a bitcoin. This usage has faded over time.