Ethereum Name Service founder reflects as 2 million registration mark nears
The proliferation of the internet brought the world to the fingertips of users, and with it came a rush to register domains on the nascent network. Businesses like Amazon were born on the internet, while many others took their real-life business online by registering a website.
Domain names remain an integral part of the internet, acting as the flagpole of the biggest brands, companies, institutions and individuals. But, the advent of blockchain technology and Web3 has ushered in a new paradigm for domain name hosting.
That is where things got interesting. Savvy tech sleuths realized that there was tangible value in registering websites with the names of prominent brands, companies or famous individuals knowing those same people would eventually want to do the same. Thus domain squatting as it is known today was born.
There have been some mind-boggling sums paid for domain names as the world gradually went online. Cars.com now holds the record for the most expensive domain name ever sold, with the website itself valued at $872 million as part of its assets in the company’s high-profile sale in 2015.
CarInsurance.com fetched almost $50 million and is ranked as the second most expensive domain sold in history. The list goes on and differs according to different sources, with domains like internet.com, sex.com, beer.com and hotels.com ranked as some of the most lucrative DNS addresses to be traded.
The practice is still common today, with anecdotes of famous individuals having to fork out large sums to buy a parked domain bearing their name. The process is now repeating itself with the rise of Web3 and blockchain-based domains.
The Ethereum Name Service (ENS) is seemingly following in the footsteps of conventional domain names, surpassing 1.8 million registrations at the end of July 2022. 378,000 .eth domains were registered in that month alone, generating a monthly record of 5,400 Ether (ETH) in revenue.
July 2022 stats for ENS
– 378K new .eth registrations (total 1.86m names)- $6.8m in protocol revenue (all goes to the DAO)- 5,400 ETH in revenue (highest ever month)- 48K new eth accounts w/ at least 1 ENS name (total 508k)- >99% of OpenSea domain vol pic.twitter.com/TdD16FOX2d
— ens.eth (@ensdomains) August 1, 2022
ENS describes itself as a “distributed, open, and extensible naming system” that runs on the Ethereum blockchain. Its purpose is to map human-readable names like “alice.eth” to machine-readable information like cryptocurrency addresses and URLs.
ENS is similar to the original Domain Name Service (DNS) in that it uses dot-separated hierarchical names, commonly known as domains, with the owner of a domain in control of it and any subdomains. An ENS domain is effectively a nonfungible token (NFT) that serves as an ETH wallet address, a cryptographic hash or a website URL.
Related: Interest in Ethereum Name Service reaching ‘critical mass’
Nick Johnson, the founder and lead developer of ENS, outlined the original goal of the project and its subsequent success since inception in correspondence with Cointelegraph. He highlighted two basic goals of the project: naming Ethereum accounts and decentralized resources such as Swarm and InterPlanetary File System (IPFS).
Johnson admitted that the team did not realize how valuable the extensibility of the ENS would become as more users began to mint .eth domains. While headlines have highlighted some of the biggest price tags paid for ENS domains, many registrations are carried out by individual users, as the ENS founder explained:
“Most people today register ENS names because they serve as their ‘decentralized profile’ — they let people identify themselves with a name, profile picture, social media handles etc., in a way that works across many apps and platforms.”
It is hard to ignore parallels between conventional DNS flipping and new-age .eth domain trading. A prime example is the Amazon.eth domain, which grabbed headlines in July 2022 after a $1 million USD Coin (USDC) bid was left to expire by the owner, who’d originally paid $100,000 for the highly sought-after .eth name.
Johnson believes the motivation and the market are similar which was part of the reason the firm was cognizant of the potential for conventional domain squatting to be a feature of its ecosystem:
“Any time there is a scarce resource, people will look for ways to capitalize on it, and namespaces are no different. Certainly we were aware from day one that this would likely happen, and we tried to structure the service to prioritize end-users over speculators.”
Cointelegraph also reached out to John Benjamin, growth hacker at Quantum Economics, to get a gauge of how cryptocurrency analysts are looking at ENS and it’s current trajectory.
Benjamin believes both DNS and ENS domains are both high-value assets if marketed correctly while having drastically different reactions to prevailing market conditions. Conventional DNS names typically maintain their value through a bear market, according to Benjamin, while ENS domains may suffer during market volatility:
“That being said, the potential profit margins on early ENS access has allowed for the market to continue to bloom, especially as larger companies look to acquire their specific ENS.”
Setting aside the volatility of these assets, Benjamin highlighted three key areas which he believes make ENS domains valuable. Firstly, ENS domains are a “great marketing tool” for retail and commercial use. ENS domains bearing the trademark of big brands and companies are also easily flipped, while individuals seem to relish the ability to personalize their online presence:
“People love being able to have their own personal identifier, and an ENS allows for that. They can use their Twitter handle and associate their whole persona with their wallet, which is no small thing in a space where people love to be private.”
A bright future
The future of .eth domains and their potential to proliferate the internet still faces some significant hurdles. Would it be comparably easier or more difficult for a layman to go about registering a DNS as opposed to an ENS? Johnson considered this question as a key barrier to entry while suggesting that savvy ETH users would make light work of a .eth registration:
“For people who are already in the Ethereum ecosystem and already have a wallet set up, I would argue that registering an ENS name is even simpler than a DNS one.”
Johnson concedes that speculators are likely to continue being a natural side-effect of the scarce system and that efforts have been made to prioritize end-users. The ENS founder also cautioned that what starts as a distraction could eventually impede the ability of end users to get names that represent them and use the service for its intended purpose.
Benjamin echoed these sentiments, conceding that some ENS domains are overinflated in value. With that being said, some ENS holders may “strike gold” when cryptocurrency markets shift into another bull run. Benjamin’s reasoning is driven by an ever-increasing number of cryptocurrency users during each subsequent bull run:
“While it may take up to another two years for a majority of integration, these early adopters will clearly have the advantage. The more ENS they hold, especially of businesses that haven’t entered the Web3 space yet, the greater chance they have of flipping them for a profit as mass adoption continues.”
The rise of Web3 leads Benjamin to believe ENS registrations will continue to increase while becoming more targeted at larger companies, sports teams and products that are yet to enter the space but have indicated interest.
The ENS community has also played its part in the growth of registrations over the past six months. Johnson previously told Cointelegraph that the platform was reaching a critical mass in awareness and adoption — driven by community groups like the 10kClub, which is made up of users that registered four-digit ENS domains from 0-9999.eth. The group’s Discord channel has almost 7,000 members as of Aug. 5.