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Why usable capacity is lower than listed capacity?

There're 2 reasons caused the usable capacity will be lower than the listed capacity:

1.     When your USB flash drive is formatted, some storage capacity is allocated for overhead, such as the boot data and file system. Therefore, although this storage capacity is present on the USB Drive, it is not available for the user.

2.     The major reason comes down to differences in the way our operating systems (such as Windows and Mac OS) use storage devices, and how USB flash drive manufacturers (as well as hard drive manufacturers, and manufacturers of other storage devices) advertise the storage capacity.

The second point requires some more explanation. To a USB Flash drive manufacturer, 1KB  = 1000 bytes
1MB = 1000KB
1GB = 1000MB

This means the 128GB USB Flash drive you see in the image above contains 128 * 1000 * 1000 * 1000 = 128,000,000,000 bytes of space. This USB drive is hence labelled as an 128GB USB drive, which is what you purchased.

Now the above situation arises because RAM manufacturers and operating systems do not use the same denominations of 1000. Instead, they choose to use denominations of 1024. To them,
1KB = 1024 bytes
1MB = 1024KB
1GB = 1024MB

and so on. For example, when a 128GB USB flash drive read by the RAM manufacturers as: 128,000,000,000 / (1024*1024*1024), which around 119GB. Plus the reason 1 I mentioned above, so the usable capacity for end user is 117GB.

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