Simply put, Bitcoin is a currency just like the Rupee or the US Dollar. Like any other currency, Bitcoin can be used to buy, sell and trade things electronically. Having said that there are many reasons why Bitcoin is different.
Bitcoin’s most important characteristic is that it is decentralized i.e. there is no entity that controls the creation or distribution of Bitcoin. Group of volunteer coders maintain it and it runs on an open large-scale network of computers spread around the world. This decentralization is possible because of the inherent use of blockchain which helps make sure that users do not cheat on the network.
Currencies like the rupee, dollar, euro are issued and controlled by central banks. This control helps the central bank and the government of that country to change and manipulate the value of the currency when required. Historically, changes in money supply have both lead to development and slowdowns globally.
Bitcoin generation, on the other hand, is controlled by an algorithm with a small number of Bitcoins being 'Mined' every few minutes. A small number of new bitcoins trickle out every hour and will continue to do so at a diminishing rate until a maximum of 21 million has been reached. This makes bitcoin more attractive as an asset – in theory if demand grows and the supply remains the same, the value will increase.
While using electronic payment methods like NEFT, Wallets, UPI, the sender and the receiver are both directly identifiable. Bitcoin has no need for such an identity to exist since there is no central “validator”. Users do not need to identify themselves when sending bitcoin to another user. When a transaction request is submitted, the protocol checks all previous transactions to confirm that the sender has the necessary bitcoin as well as the authority to send them. The system does not need to know his or her identity.
Unlike electronic fiat transactions, a transaction in Bitcoin is irreversible. Once a transaction is recorded on the bitcoin network, it becomes nearly impossible to change the transaction. This means that any transaction on the bitcoin network cannot be tampered with.
The smallest unit of a bitcoin is called a satoshi. It is one hundred millionth of a bitcoin (0.00000001) – at today’s prices, about one-hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.
All of these properties make Bitcoin an ideal candidate to function as a global, network controlled, inflation-free currency, a currency of the future!
PS: According to the laws in multiple countries, Bitcoin can currently not be used as a 'Legal Tender' which means to say that bitcoin cannot be used to pay for things.