Low transaction costs carve niches for digital money

The study about Bitcoin transaction costs and exchange risk by Liberty Street.

My take away, low transaction costs mean some digital currency can capture some part pf the risk tolerance map.  Digital currency, closure guarantees, tamper proof and peer to peer all lower transaction costs.  There is room for many bitcoin functions.

LibertyStreet: While inter-exchange price differences in the bitcoin market are interesting examples of deviations from the law of one price, they also have broader implications for the attractiveness of bitcoin relative to other payment alternatives (primarily the traditional banking system). Since bitcoin does not serve as a unit of account, most users need to convert bitcoin back and forth with traditional currency on exchanges, subjecting them to “microstructure” frictions and inter-exchange price uncertainty. This price uncertainty, in turn, inhibits the use of bitcoin as a store of value. Thus, while bitcoin may continue to develop as an alternative means of payment, it competes with more traditional value-transfer methods on a familiar playing field—offering transfers with lower fees relative to transaction risk.