Bitcoin/Cryptocurrency versus $/Regular Currency

Both can be used for regular transactions

While Bitcoin is less accepted today than your domestic currency, more and more merchants and Payment service providers are increasingly accepting Bitcoin as a form of payment. For example, Google now accepts Bitcoin With Payments API Update.

Partial anonymity: Cash versus Bitcoin

Using Bitcoin doesn’t require revealing any identifying information and yet all transactions are public and available in blockchain for anyone to investigate. Bitcoin’s pseudonymity can be broken in many ways, by following the money trail (transactions) to monitoring IP address nodes. There are certain software and hardware that can help, there is no bulletproof solution.

Cash can also be partially anonymous if you resort to cash-only transaction which can work if you do business locally or use often illegal transaction systems like hawala. However demonetization, like it was done in India, can force you to deposit them in Banks, thereby making them traceable and you accountable, or ditch them.

Bitcoins can be mined

You can create new/mine bitcoins on your computer or with specialized hardware like ASIC miners. You cannot mint money unless you are the Government or one of the few Government approved organizations.

Taxes: Bitcoin versus Regular Money

Regular currency is taxable as you know. Bitcoin is treated as property in the US and hence taxable. Legality and taxability of Bitcoin varies from country to country as with regular money.

Banking

Bitcoin banks are a new phenomenon. Every wallet can be considered a mini-Bank and you are it’s Banker. Saving your bitcoins in an offline wallet may be your best bet for protection.

Hackable

Banks have often been hacked in the past as also ATM. Bitcoins can be stolen from your computer. It is easier because you most likely do not have state of the art security as most commercial Banks. On the other hand, you can use offline air-gapped wallets for the highest security. Your Bitcoin is just a number. You can even write it down on a piece of paper and store it securely. Remember to take regular backups. Your bitcoin is as safe as your least protected backup.

Interest on deposits

There are few services providing interest in Bitcoin deposits. Considering how rapidly it is increasing you won’t need it in the short term.

Trading

Cash-only bitcoins are traded in various exchanges and you can even earn on margins.

That’s, in brief, some of the key differences between Bitcoin (or other Cryptocurrency) and your regular currency. Let me know if you would like me to elaborate on any of the above items or if I missed something big.