Bank of America Says Blockchains Have Intrinsic Value, Citing Transaction Fees

The bank's report, however, noted that the fees on the Bitcoin and Ethereum chains have fallen this year.

AccessTimeIconAug 3, 2022 at 10:56 a.m. UTC
Updated Aug 3, 2022 at 1:26 p.m. UTC
Alex Thorn
Head of Firmwide Research
Galaxy
Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.
Alex Thorn
Head of Firmwide Research
Galaxy
Consensus 2023 Logo
Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.

Will Canny is CoinDesk's finance reporter.

Alex Thorn
Head of Firmwide Research
Galaxy
Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.
Alex Thorn
Head of Firmwide Research
Galaxy
Consensus 2023 Logo
Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.

Blockchains and the applications that run on them have intrinsic value, Bank of America noted in a research report, saying it rejects regularly heard claims to the contrary.

In June, Bank of England Governor Andrew Bailey echoed negative sentiment about cryptocurrencies in comments to Parliament, saying the asset class has no “intrinsic value.”

The Ethereum blockchain has generated about $3.9 billion in transaction fees so far this year and generated about $9.9 billion in fees last year. Last year's total was 1,558% more than the year before, the report published Friday said.

The Bitcoin blockchain has produced around $93 million in fees year to date, compared with about $1 billion for all of last year, the report added.

Ethereum transaction fees likely declined year to date as holders “moved to the sidelines,” the bank said. Bitcoin fees have probably fallen since April 2021 because of the adoption of the Lightning Network, which allows for smaller and instant bitcoin (BTC) payments.

Bank of America says it is not yet able to forecast cash flows for blockchains because they are unpredictable in the “nascent industry." Blockchains generate cash flows via transaction fees from validating native token transactions or by validating transactions from applications that run on top of the blockchain.

Cash flows in the form of transaction fees are expected to accelerate for blockchains that have strong user growth and development in addition to a clear use case, the note said.

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Author placeholder image

Will Canny is CoinDesk's finance reporter.


Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Author placeholder image

Will Canny is CoinDesk's finance reporter.