If there is any name that defines the reason for the success of cryptocurrency, then without having a second thought, the answer that comes to mind is Bitcoin. Ever since it became a well-known cryptocurrency, people have been showing interest to know the latest news on Bitcoin. Many supporters are even optimistic about this cryptocurrency in eliminating frictions present in the payment systems, by curtailing the need for monetary mediator present in the traditional currencies. Even though transfers of Bitcoin prove to be frictionless for the user, still some frictions persist in the trading of bitcoins exchange markets. This results in constant differences in the price across exchanges of Bitcoin. The incentive of the market participants gets minimized by these exchange frictions to use Bitcoin as an alternate choice for payment. Today in this blog, we will discuss whether is it right to say Bitcoin frictionless?

Brief Introduction Of Bitcoin

Before hopping on to know whether is it right to say Bitcoin frictionless, let us have a brief introduction about Bitcoin. Cryptocurrency or digital currency, whatever you name it, is a digital form of money, which is free from any regulations and is supervised by developers. Bitcoin is a big name in the world of cryptocurrency that made its debut on 3rd January 2009. It runs without control of any central authority. Bitcoin shows its difference with the regular fiat currencies like Euro and Dollar. These two fiat currencies are regulated and issued by the government and comprise a claim that is legal to the issuers. For example, the assets of banks are being claimed by the bank deposits, whereas, assets of the Federal Reserve System are claimed by Federal Reserve notes.

Is It Okay To say Bitcoin Frictionless?

B2b (bitcoin to bitcoin) transactions happening between digital wallets can be implemented at a trivial cost in corresponding amounts of transactions. In comparison to regular currencies, Bitcoin doesn't have a wider acceptance unit for the account itself. That is why if you want to buy Bitcoin, then you have to buy it from exchanges of the third party by using regular currency.

When Bitcoin is received as a transaction, the user has the opportunity of holding it with the hope of utilizing it in an upcoming transaction. But unfortunately, the negligible correlation with regular currencies and volatility of large exchange rate erodes the worthiness of Bitcoin as a store of value and unit account. Hence, bitcoin payee finds it better to exchange of bitcoin with regular currency.

Instead, third parties are also referred, who take Bitcoin from the customer and sends the retailer, the dollars. The whole process of transaction exchange between the regular currency and Bitcoin implies counterparty risk and transaction fees. This results in different Bitcoin prices across exchanges through frictions that are related to exchange. This indicates about Bitcoin frictionless nature.

Bitcoins are stern equivalent in nature. This is because Bitcoin which is bought on one exchange shares similarity to other Bitcoin bought on a different exchange. Hence it spawns the possibility of differences in the price across popular exchanges of Bitcoin will be curtailed by hedge investors in purchasing Bitcoin when it is no more expensive.

If you are abreast of all crypto news, then you must be knowing of this fact about serving of account is not done by Bitcoin. The cryptocurrency has to be converted back and forth with regular exchanges and currencies. This brings the microstructure frictions and uncertainty regarding inter-exchange price. This justifies the fact about whether it is right to consider Bitcoin frictionless. The dominating cryptocurrency might find its best use as an alternative form of payment. Bitcoin continues to struggle with methods of traditional value and offering low fee transfer related to the risk of the transaction.

Conclusion

The answer to the question whether is it right to consider Bitcoin frictionless? So yes, Bitcoin has the potential of being free from friction. Proponents have been confident about this cryptocurrency in removing the frictions present in the payment systems, by eliminating the need for monetary mediators present in the traditional currencies. Even though transfers of Bitcoin prove to be frictionless for the user, still some frictions persist in the trading of bitcoins exchange markets. This results in constant differences in the price across exchanges of Bitcoin. Bitcoin is a prominent and worthy digital crypto coin which eliminates the need for financial intermediaries.