### Why Transaction Fees Are A Good Measure of Value Of Blockchains
Layer one blockchains have no standard method of measuring their value, other than the market capitalization which often has no correlation to the value of the network, as currently blockchains mainly serve as a speculative investment asset meaning market capitalization only reflects the expectation of the market to increase the investment value.
So another way of measuring the value of a layer one blockchain is by finding out how much the functionality of the network matters to the market.
We think that one good way to gauge that is by measuring how much the market is willing to pay for a blockchains’ core functionality - immutable transactions, via the total money spent on all transactions.
One counter-argument against transaction fees paid is that it’s a gameable metric. We would agree up to a certain point. BSV has an alleged billionaire backer who does anything to support it, but evidently the appearance of traction on BSV to him in 2020 is not worth more than $40,000.
Another argument for transaction fees as a good measure of value, even when it’s something as hidden and nebulous as liquidity, is with Bitcoin. One might argue that Bitcoin as a layer one chain is slow and expensive, and therefore shouldn’t command much value from the market via transaction fees. But Bitcoin has massive liquidity advantages, meaning that if I have Bitcoin anywhere in the world and want to exchange them for cash, I have the best odds of finding a buyer for those Bitcoin over any other digital currency. For money like instruments, liquidity is _the_ key factor that creates their value, and the market paying more than double for transaction fees on Bitcoin as the next chain Ethereum uncovers this hidden value of liquidity.
One unexpected outlier is the Terra blockchain (LUNA). Why does it command such high volumes of transaction fees compared to other networks with much higher market capitalizations? Our take is that it’s because the Terra team has built and marketed real-world integrations to e-commerce businesses and consumers which made the value that blockchains offer (low costs of trust) accessible to a wider audience that is happy to pay for the transaction fees. In this case, e-commerce companies who, before Terra, incurred payment costs of up to 2.5% and would only receive their money in 60 and who now pay a maximum of 0.7% and enjoy settlement the next day.
To summarize, total transaction fees paid are a good proxy for the value of non-functional properties like the above (liquidity, security, stability, usability, etc) that could not be provided by another platform at a cheaper rate.