Due to the proliferation of the internet the world is at the forefront of users, resulting in a rush to register domains on the junior web. Companies like Amazon were born on the internet, and many others have done their business online by creating a website.
Domain names remain an integral part of the internet, serving as a standard bearer for the largest brands, companies, institutions and individuals. However, the advent of blockchain technology and Web3 brought a new paradigm to hosting domain names.
This is where things got interesting. Savvy people have realized that there is tangible value in registering websites with the names of brands, companies, or celebrities, knowing that the same people would eventually want to do the same thing. This is how domain squatting, as it is known today, was born.
Fantastic sums were 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 during the company’s high-profile sale in 2015.
CarInsurance.com has grossed nearly $50 million and is the second most expensive domain sold in history. The list is long and varied between sources, with domains such as internet.com, sex.com, beer.com and hotels.com ranked among the most profitable DNS addresses to trade.
The practice is still common, with stories of celebrities trying to shell out huge sums to buy a reserved domain bearing their name. The process is repeated today with the proliferation of Web3 and blockchain-based domains.
ENS thrives
The Ethereum Name Service (ENS) appears to be following in the footsteps of traditional domain names, surpassing 1.8 million registrations by the end of July 2022. In that month alone, 378,000 .eth domains were registered, generating a monthly record of 5,400 Ether ( ETH) in income.
July 2022 statistics for ENS
– 378K new .eth registrations (1.86m names in total)
– $6.8m in protocol revenue (all goes to the DAO)
– 5,400 ETH in income (highest month ever)
– 48K new accounts with at least 1 ENS name (total 508k)
-> 99% of OpenSea domain theft pic.twitter.com/TdD16FOX2d— ens.eth (@ensdomains) August 1, 2022
July 2022 statistics for ENS
– 378,000 new .eth domain registrations (total 1.86 million names)
– $6.8 million in protocol revenue (all goes to DAO)
– 5,400 ETH in income (highest month ever)
– 48,000 new accounts with at least 1 ENS name (508,000 in total)
– >99% of OpenSea domain theft 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 goal is to match human-readable names, such as alice.eth, with machine-readable information, such as cryptographic addresses and URLs.
ENS is similar to the original Domain Name Service (DNS) in that it uses hierarchically separated names, usually called domains, with a domain owner controlling both the domain and any subdomains. An ENS domain is a non-fungible token (NFT) that serves as an ETH wallet address, crypto hash, or website URL.
Also read: Interest in Ethereum Name Service reaches “critical dimension”
Nick Johnson, founder and lead developer of ENS, described the original purpose of the project and its success since its inception in a correspondence with Cointelegraph. He highlighted two fundamental goals of the project: naming Ethereum accounts and decentralized resources such as Swarm and the Interplanetary File System (IPFS).
Johnson admitted that the team did not realize how valuable the ENS extension would become as users began to plot the .eth domains. Although headlines have shown some of the highest prices paid for ENS domains, many registrations are done by individual users, as the ENS founder explains:
“Most people register ENS names today because they serve as a ‘decentralized profile’ – they allow people to identify themselves with a name, profile picture, social media handles, etc. in a way that works across many apps and platforms.”
It’s hard to ignore the similarities between the traditional DNS exchange and the new era of trading in .eth domains. A great example is the Amazon.eth domain, which made headlines in July 2022 after the owner auctioned off $1 million for the USD Coin (USDC), which initially paid $100,000 for the .eth domain name which was very trying.
Johnson believes that the motivation and the market are similar, which is part of why the company was aware that domain hijacking could be a feature of its ecosystem:
“Whenever a resource is scarce, people look to profit from it, and namespaces are no different. We certainly knew from day one that this could happen, and we tried to structure the service to prioritize end users over speculators.”
Cointelegraph also contacted John Benjamin, Head of Growth at Quantum Economics, to get an idea of how crypto analysts see ENS and its current trajectory.
Benjamin believes that both DNS and ENS domains are high-value assets if traded correctly, with very different responses to current market conditions. According to Benjamin, traditional DNS names tend to hold their value in a bear market, while ENS domains can suffer from market volatility:
“That said, the potential profit margins on early access to ENS have allowed the market to continue to flourish, especially as larger companies seek to acquire a particular ENS.”
Putting aside the volatility of these assets, Benjamin highlighted three key areas that he believes make ENS domains valuable. First of all, ENS domains are a “great marketing tool” for retail and commerce. ENS domains signed by big brands and companies are also easy to redeem, and individuals seem to appreciate the ability to personalize their online presence:
“People like to have their own personal identifier, and the ENS allows them to do that. They can use their Twitter handle and connect their whole personality to their portfolio, which is no small feat in a space where people like to be discreet.”
A bright future
.eth domains and their potential to spread across the internet still face significant hurdles. Would it be easier or more difficult for a layman to register a DNS rather than an ENS? Johnson sees this issue as a major barrier to market entry, while also suggesting that savvy ETH users will have no trouble registering a .eth domain name:
“For people who are already in the Ethereum ecosystem and have already set up a wallet, I would say it’s easier to register an ENS name than a DNS name.”
Johnson admits that speculators are likely to continue to be a natural byproduct of the scarcity system and that efforts have been made to prioritize end users. The ENS founder also warned that what starts as a distraction could hinder the ability of end users to find names that represent them and use the service for its intended purpose.
Benjamin acknowledged those sentiments, admitting that the value of some ENS domains is overstated. That said, some ENS holders may “strike gold” when the cryptocurrency markets enter a new swing. Benjamin’s reasoning is driven by the steady increase in the number of cryptocurrency users with each new boom:
“Although it will take another two years for the majority of integration to occur, these early adopters will clearly have an advantage. The more ENS they own, especially from companies that have yet to enter the Web3 space, the more likely they are to resell them at a profit as mass adoption continues.”
Due to the rise of Web3 Benjamin believes that ENS registrations will continue to grow as they focus more on large corporations, sports teams and products that have not yet entered the space but have shown interest.
The ENS community has also participated in the growth of enrollments over the past six months. Johnson previously told Cointelegraph that the platform is reaching critical mass in terms of awareness and adoption, thanks to community groups such as the 10kClub, made up of users who have registered four-digit ENS domains from 0 to 9999.eth. . The group’s Discord channel had nearly 7,000 members as of August 5.
