Amazon.eth, Starbucks.bitcoin, Coke.dao? Crypto Domain Names Are The Next Big NFT Craze – Coin24h.com
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Web3 domain name services such as the Ethereum Name Service (“ENS”) and Unstoppable Domains have seen a great deal of interest and adoption in recent months. ENS just became the leading ethereum project on the leading NFT marketplace, OpenSea, by seven-day trading volume. It beat major NFT collections like Bored Ape Yacht Club (BAYC), CloneX and Moonbirds.
ENS is the leading decentralized domain name registry service. The platform allows users to register domains issued on the Ethereum blockchain that are programmable and interact with other Ethereum-based decentralized applications (“dApps”). ENS domains can be used as a user’s digital identity, storing usernames, fungible and non-removable tokens and assets, NFT avatars and other profile data for use in dApps in the crypto-enabled Web3 ecosystem. Because they use the ERC-721 token standard, ENS domains can also be traded as NFTs, and most of their trading takes place on OpenSea and LooksRare.
To date, a total of more than 2.2 million ENS names have been created among 546,000 unique users. In the last seven days, ENS reached 2,565 ETH ($4 million) on OpenSea, which was higher than BAYC’s 1,934 ETH ($3 million), Otherdeed for Otherside’s 1,767 ETH ($2.8 million), and CLONE X 1,353 ETH ($2.1 million) ).
Another popular Web3 domain service is Unstoppable Domains. Unstoppable Domains works similarly to ENS, but provides support for top-level domain nameservers. While ENS domains only follow the “name.eth” naming convention, non-stop domains allow users to purchase domains that can include top-level domain servers such as “name.crypto”, “name.wallet”, “name.nft”. “name.dao”, “name.bitcoin”, among others.
Since the launch of the platform in 2019, the Unstoppable Domains community has registered a total of over 2.5 million domains, completed $80 million in primary sales, and the project supports over 275 identities and 370 applications.
The wider context
New Web3 applications in gaming, metaverse, DeFi, DAOs, and social media require decentralized identity management and non-custodial wallets that can be seamlessly integrated into these digital environments. Domain services are proving to be breakout use cases that leverage human-readable names and simplify the user experience by allowing users to store their tokens and digital assets in non-custodial wallets and interact with Web3 dApps.
Instead of copying and pasting 42-character hexadecimal strings (ie “0x0CCfA1c…”) that represent wallet addresses on blockchains like Ethereum, Web3 domain providers allow users to easily send tokens and interact with human-readable name addresses like “kyle.” eth” or “kathy.crypto” from the crypto wallet of their choice. ENS and Unstoppable Domains are integrated with leading wallets, exchanges and dapps including Metamask, Rainbow Wallet, Brave Browser, Opera Browser, Trust Wallet, 1inch, Moonpay and many more.
Once purchased and registered through the ENS web portal, ENS domains can be freely traded between ETH wallets on the secondary market via NFT marketplaces such as OpenSea.
The increase in domain name trading comes at a time when the broader NFT market has subsided. OpenSea’s monthly trading volume has fallen sharply to $500 million in August, a 90% drop from its January trading volume of $4.86 billion. Meanwhile, ENS monthly name registrations have increased by 465% from 67,000 new registrations in January to 379,000 new registrations in July.
It is also worth noting that domain registrations are not exclusive to Ethereum. Similar services are also supported by some of Ethereum’s biggest competitors.
“I’m very excited about how NFT domains can become the single name on the Web3 that allows you to own your digital identity. In the future, your NFT domain will allow you to promote your reputation across all your favorite apps, games, and metas without giving up control over your data.” – Sandy Carter, SVP and Channel Manager, Unstoppable Domains
Outlook and implications
Investors and speculators have bought popular domains as potentially profitable investments. We hope that companies and existing brands would like to acquire an associated domain if they are looking to establish a presence on the Web3. Recently, an anonymous buyer made a million dollar bid for the ENS domain “Amazon.eth”. This offer came shortly after both “Samsung.eth” and “Starbucks.eth” were sold for 60 ETH (~$90,000).
This activity is reminiscent of the domain squatters of the Dotcom bubble era of the 1990s, where speculators hoarded popular keywords and brand domains in hopes of turning them into a profit. For example, the Ethereum address that owns “nike.eth” has accumulated 131 ENS domains, including “sony.eth”, “coke.eth”, “strawberry.eth”, and “nose.eth”.
As is typical of many Web3 projects, ENS released its own replaceable management token called ENS. The ENS token was first launched in November 2021, offering a retroactive airdrop to .eth token holders, and included 137,000 accounts at the time. The token is used to submit and vote on governance proposals, and the proposal requires the support of 100,000 tokens (or 0.1% of the total supply) before being voted on. These proposals may affect ENS domain pricing, treasury management, and other protocol parameters.
One such proposal raised the starting price of a temporary premium domain from $2,000 to $100,000 when the name expires. This change prevented bots from quickly buying premium domains as they expired before the owner had a chance to renew their registration. Another successful proposal awarded the Protocol Guild 200,000 ENS tokens for the past and ongoing work of these key contributors to the ENS Protocol. By granting management rights, ENS tokens act in the same way as shareholder rights, which act as the primary driver of the token’s value.
The dramatic increase in .eth domain registrations has resulted in ENS outperforming ETH by over 40% over the past three months.
It remains to be seen how valuable programmable, censorship-resistant and decentralized domains will be and whether they will serve as the primary way users manage their digital identity. Platforms such as ENS and unstoppable domains offer unique advantages over traditional DNS in that they provide stronger ownership rights and are less susceptible to security breaches. This directly affects the value of tokens such as ENS.
For investors expressing their view that Web3 Domain Services provides the key infrastructure to enable broader user growth and adoption of Web3, they have a couple of other ways to gain exposure. Like the Dotcom Era, investors can directly buy premium domains that they believe may be valuable in the future. A safer play may be to buy the tokens of the underlying platforms themselves, such as ENS.
Competing domain name services such as Unstoppable Domains, Avvy Domains, and Space ID have yet to release their own token, but may choose to use a similar strategy of retroactively sending tokens to existing domain holders. In the case of ENS, the average token reward for existing users was around $15,000 at the time of the airdrop.
To support a domain name provider, investors can view the list of apps and partners supported by each platform. Domain service providers that are able to achieve the highest quality and highest number of application integrations will provide the most benefit and reach the web efforts to become the standard in the Web3 space.
Potential decentralized domains that provide participants with a Web3 ecosystem have yet to be fully realized. However, it is clear that users still face significant friction to fully participate in the emerging Web3 crypto-economy due to user experience and security issues. Decentralized domain name providers solve at least one problem by making it easier for other users to identify and interact in the Web3 world.