How Does Bitcoin Work Compared to Traditional Currencies?

How Does Bitcoin Work Compared to Traditional Currencies?

Although virtual currencies are gaining momentum around the world, many still struggle to understand exactly what they are and how they work. The most famous of these virtual currencies is the Bitcoin, so it is worth learning more about this particular cryptocurrency.

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The Basics of Bitcoin

Bitcoins are not the same as traditional currencies used by nations. They are a universal, online currency that’s recognized in only a small number of countries.

With that being the case, there are still some noticeable similarities between traditional currencies and Bitcoins.

Take a look at the information here to see what makes bitcoins different from traditional currencies, as well as any similarities they also share.

What Makes Bitcoin Different from Traditional Currency?


Bitcoin WorkThere is no central body governing the use and distribution of Bitcoin. This is a significant difference from traditional currencies with central banks governing the money supply. Bitcoins are not subject to any ruling from a large bank or government, so no one can claim any ownership over Bitcoin in this way.

Because of the decentralized nature of Bitcoin, there is no risk of inflation or an oversupply of available money. The coins are released at a relatively steady rate when people engage in the act of mining, using a specific software to solve coded encryptions and earn new Bitcoins.


There are some physical bitcoins that can be ordered, but they don’t serve any real purpose. Bitcoin is a virtual currency that exists almost entirely online. You will send payments, make transfers, and manage your money through a digital wallet that holds the unique coin information.

Relies on Cryptographic Coding

Without the complex coding algorithms programed into Bitcoin, there would be no security or assurance in the currency. This is a cryptocurrency, which means it relies on the use of advanced cryptography in the coding to keep it secure and self-regulated.


Your payment details and information are not connected in any way to your online Bitcoin payments. Rather than using a credit/debit card, where you are required to give away more information than you may be comfortable with, bitcoins can be used anonymously in the same way as a physical cash payment.

Transactions Automatically Recorded

Every time a transaction is made using bitcoins, it is automatically recorded in the blockchain, which acts as a public ledger for all transfers made. This process only takes around 10 minutes, on average, and it is both permanent and irreversible once it is complete.

How are Bitcoin and Regular Currencies Similar?

Value can fluctuate

Just as inflation or demand can drive the value of a certain currency up or down, the
demand for bitcoins controls the value of the coins themselves. Higher demand for bitcoins increases the value, while lower demand can decrease the value.

Can be used for purchases worldwide

You could theoretically use bitcoins anywhere in the world if they were not illegal or restricted in some countries. Online payments are standard with Bitcoins, but you can also use them in some physical locations where they are accepted.

Exchangeable for other currencies

Just as you can trade currencies on a financial exchange market, you can also buy and sell other currencies with Bitcoin. This virtual currency has a rate of exchange, just like any other currency, and can earn you money if you trade between currencies when it is in your favour to do so.

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