A bitcoin is a digital Cryptocurrency, allowing reduced cost and high speed in transacting Bitcoins over the internet. Before 11 years itself bitcoin made its mark on the financial industry. With the introduction of blockchain technology in recent years, bitcoins usage has been tremendously increasing with a highly secured system and reached its financial peak. So, many of you will be confusing about what is the difference between traditional currency and a bitcoin, which will be discussed in the following sections of the article.You can visit below image for more information.
Traditional currency VS bitcoin
Anonymity
Bitcoin, Ethereum, Litecoin, and lots more are cryptocurrencies. US Dollars, Pounds, euros, etc. are fiat currencies. The main difference between them is, the traditional currency is a centralized system and bitcoins are decentralized one and peer-peer systems. Hence there are no central authorities to regulate rules and regulations on a bitcoin transaction. But a traditional currency is strictly regulated by the governmental authorities. Both the bitcoins and fiat currency have values which can be used for buying and selling of goods in the market.
Flexibility
With traditional currency functioning for five days a week and die to transaction restriction, there is a chance of freezing of currency. There is no limit in the number of currencies, being printed, and hence when there is inadequate currency, it will affect the buyers and sellers, resulting in inflation. But as the bitcoins have a maximum limit of 21 million bitcoins to be mined. Hence both the buyers and sellers will mine accordingly; thereby, there is no inflation in a bitcoin Cryptocurrency system.
No fraudulent activity
If you want to transact with a traditional currency system, the users have to provide personal details like name, address, phone number, and lots more. So, with the internet technology, the malicious user will be able to hack the account details of the traditional currency system easily. Traditional currency can suffer from double-spending, where the same money is used for more than one transaction.
In the case of bitcoins, every transaction is recorded as blocks in a blockchain, which is a large public ledger. A transaction will be stored as blocks, which consist of transaction history, time of the transaction, and hash code of the previous block. This will be moved to the memory pool, from where the miners used to solve the complex mathematical problem of 16-bit hashing digits to a single bitcoin.
After verification, the miners generate a hash code for that block and then encrypt them with an asymmetric encryption algorithm. After the block is provided with an encrypted hash code, it will be added to the transaction chain. Once the blocks are added to the blockchain, the blocks cannot be altered by any malicious users.
As every block structure has the hash code for previous blocks, the alteration will be known to all the users in the blockchain. If the malicious user tries to access the block, the hash code becomes more complex, and the input cannot be retrieved. The transactions are public, where every bitcoin user will know about the transaction details, but the user identity will never be disclosed to anyone, thus maintaining anonymity.
Reduced cost
In a traditional banking system, for making a national transaction, it will take 2-3 working days, and the transaction fees will be high. In the case of international transactions, the transaction fee will be very higher, and it will take 15 days to complete the transaction. In a Cryptocurrency system like bitcoins, there is no transaction fee for making a national transaction. The transaction will also take place in seconds or within 24 hours, as a bitcoin system function 24 * 7. For making an international transaction, a minimal transaction fee will be incurred.
In the future, there is a chance of merging cryptocurrencies and the banking system, which may impose rules and regulations. But still, the traditional banking system will be pushed to adopt to blockchain technology, when such merging happens. So, even with frequent fluctuations in the bitcoin system, many people wish to invest in bitcoins due to speed transactions and reduced costs. Bitcoins can be exchanged with any currencies, saving time and money at the same time. Many developing countries are taking steps for adopting blockchain in their business.