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Okay so I'm trying to decide what to go with my 10 gal tank after my fiancee's catfish gets too big for it. It seems like everyone who has a saltwater tank uses 50gal or larger tanks. Is there a reason no one uses smaller tanks. Would it be possible to setup a healthy 10gal saltwater tank?

Most people use larger tanks for saltwater to lessen the chances of something going wrong and them missing it. This gives them a greater margin of error. Keeping a small salt tank is possible but requires more attention to detail. Keep everything on a smaller scale and take it very slow and you can do a nice tank even in a 10.

You have to be real careful with changes in a saltwater tank. Not only are things like temperature an issue, you also have to worry about evaporation. The evaporated water causes the salinity (salt content) of the water to go up. Most salt water inhabitants cost more and are generally not as hardy (from what I've read) as their freshwater counterparts. Most people say to go 30 gallons minimum for a first saltwater tank, with bigger being better. With today's knowledge and tech, though, their are people who keep nano (under 30 gallons) and pico (under 5 gallon) saltwater tanks. They take an attention to detail, so if you aren't one to always keep up with water changes and stuff, then I wouldn't suggest it. The best thing to do would be to google "saltwater nano." There are several forums dedicated to small saltwater tanks, I just can't think of them at the moment.

I definitely would not recommend a 10-gallon aquarium for saltwater. There is a lot less margin for error in saltwater, so a larger tank makes a more stable environment. A protein skimmer (AKA foam fractionator) should pretty much be considered a requirement in a saltwater tank. It would be difficult to find one that is properly sized for such a small aquarium.

Yes Mike is right anything under 40 gl should be left to experienced hobbyest they can be very unstable
and one mess up can leave you with a very stinky mess
ive had my 15gl pico for 2 years and it has been a challenge for me and ive been in salt for 19 yrs.
definetly do as much as possible research before you decide to risk that much money