The main objective of this diploma thesis is to find out the potential of digital currencies to replace contemporary fiat currency. Specifically, the thesis is focused on cryptocurrency Bitcoin, which currently has the highest market value. The thesis is divided into three main chapters. The first one focuses on money itself and its function, not only today but also throughout the history. Second chapter explains substance and functioning of Bitcoin, as well as its role in the current monetary system. Likewise the question of regulatory measures and competition of altcoins is being examined. Final part analyses the future of digital currencies and it compares pros and cons of Bitcoin and money we use today. Furthermore, it is discussed whether Bitcoin is the next bubble in the financial market. In the end, main problems which Bitcoin and other cryptocurrencies deal with are mentioned and a possible future development is outlined.