Answer by Adam Gering:
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Bitcoin is something of a limited supply, that can be securely transferred between parties in a verifiable manner without relying on the trust of third party or a central entity. It cannot be counterfeited. It has no intrinsic value what-so-ever, only what people are willing to exchange it for.
In this sense, bitcoin is analogous to fiat physical cash, which more or less shares all the same characteristics listed above. However, bitcoin has two specific characteristics physical cash doesn’t have which are huge advantages:
(1) it is digital and not physical, therefore can be transferred between parties without physical exchange (e.g. over the Internet), and…
(2) the supply of bitcoins cannot be arbitrarily inflated (e.g. central banks inflating the monetary supply or printing money).
The mining of bitcoins serves purely to allow the supply of bitcoins to inflate in a controlled and predictable manner. It wasn’t really required, but it both encouraged early adoption of bitcoin, encourages network distribution of the bitcoin chain (which facilitates the transfer/verification function) and moderately reduces its value appreciation.
Bitcoin has two clear disadvantages to fiat physical cash, and one shared disadvantage:
(1) It is not legal tender for debts public and private. (i.e. no one is obligated to accept it and you cannot pay your taxes in it).
(2) It does not have a geographic monopoly, and can be subject to competition by other digital currencies.
(3 - Shared) It is targeted by thieves and can be stolen without recourse.