What is Bitcoin?
As appropriately explained in Bitcoin’s Whitepaper, Bitcoin is a peer-to-peer electronic cash system. Underpinning Bitcoin is a relatively new technology called blockchain. If you’re seeking to understand the technical, in-depth workings of Bitcoin, I highly suggest going through this free Coursera course by Princeton University.
Similarities: Bitcoin and Traditional Digital Currencies
Much of the way we currently spend our dollars, euros, and pounds is already in digital format. From a quick glance, Bitcoin acts much like these ordinary, government-backed digital currencies that are used for online banking, shopping, and transactions. In both cases we have a bank account that holds our money, we can transfer money to other accounts or other people, and we can spend our money on goods and services via the internet.
We call the Bitcoin bank account a Bitcoin Wallet. A wallet stores Bitcoins that belong to you. Your Bitcoin account number is called a public key, which you can give out to others in order to receive Bitcoin. Your password to access this wallet is called a private key.
Differences: Bitcoin and Traditional Digital Currencies
In the traditional digital bank account model, we rely on the bank to keep track of how much money belongs to our personal account. Bitcoin removes this by keeping a public ledger containing each account and its corresponding value. Since each person on the network owns a copy of this ledger and no particular member is in control of it, we achieve decentralization. Instead of relying on a central bank, Bitcoin users enjoy a more evenly dispersed power structure.