With the advent of the internet, the entire world was at their fingertips. This led to a rush to register domains through the network’s newfound network. Amazon and many other businesses were created online.
Domain names are still an integral part the internet. They act as the flagpole for the most prominent brands, companies and institutions, as well as individuals. The advent of Web3 and blockchain technology has opened up new possibilities for domain name hosting.
This is where the fun began. The domain names of well-known companies and individuals was a smart way to make your website stand out. So domains. squatting as it is now known was born.
Domain names were purchased for staggering amounts as the Internet grew and became more accessible. Cars.com is now the most expensive domain name sold. The website holds that record. valued at $872 million in the company’s high-profile sale in 2015.
CarInsurance.com was sold for almost $50 million. It is also ranked second in terms of most expensive domains. This list is not complete and can vary depending on different sources. Domains such as internet.com, sex.com or beer.com are ranked among the most lucrative to trade.
This practice is still widespread, with stories of famous people having to pay large sums to purchase a parked domain that bears their name. This is all changing with the rise in Web3 and other blockchain-based domains.
The Ethereum Name Service (ENS), which has surpassed 1.8 million registered domain names at the end July 2022, seems to be following the lead of traditional domain names. This month, 38,000.eth domains have been registered. This generated a monthly revenue record of 5,400 Ether.
July 2022 Stats for ENS
– 378K.eth new registrations (total 1.86m name)
– $6.8m in Protocol Revenue (all proceeds to the DAO).
– 5,400 ETH in revenue (highest ever month)
48K new Eth accounts w/ at minimum 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 the original Domain Name Service (DNS), in that it uses dot separated hierarchical names. Commonly known as domains. Domain owners can control both the domain and 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, who was the founder and chief developer of ENS, outlined ENS’ original purpose and its subsequent success in correspondence to Cointelegraph. He highlighted two basic goals of the project: naming Ethereum accounts and decentralized resources such as Swarm and th InterPlanetary File System (IPFS).
Johnson admitted that Johnson did not know how valuable extensibility would be for the ENS until more people started to make.eth domains. Although headlines often highlight the high price tag for ENS domains but many registrations are made by individuals, the founder of ENS 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.”
There are many parallels between traditional DNS flipping and the new-age.ethdomain 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 that the motivation and market are similar. This is why the firm was aware of the possibility of traditional domain squatting becoming an integral part 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 that both DNS and ENS domains can be high-value assets if they are properly marketed. However, their market reactions will vary depending on the market conditions. Benjamin believes that traditional DNS names are likely to retain their value in a bearish market while ENS domains might be affected by 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.”
Benjamin highlighted three areas Benjamin believes make ENS domains worth their weight, despite the volatility. Firstly, ENS domains are a “great marketing tool” for retail and commercial use. Companies and big brands can easily flip ENS domains, and individuals love being able to personalize online.
“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 spread the internet, still faces significant challenges. What is the difference between registering a DNS and an ENS for a layman? Johnson saw this question as a barrier to entry and suggested that savvy ETH users could make easy work of a.eth registry.
“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 admits that speculators may continue to be an unfortunate side-effect of the limited system. However, Johnson says that efforts have been made in order to prioritize end users. The founder of ENS cautioned that what begins as a distraction may eventually hinder the ability for end users to obtain names that reflect them and use this service for their intended purpose.
Benjamin echoed these sentiments and admitted that some ENS domains were overpriced. 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.”
Benjamin believes that Web3’s rise has led to a greater number of ENS registrations. They will also be more targeted at larger companies and sports teams, as well as products who are interested in the space but have not yet registered.
In the last six months, the ENS community also contributed to the increase in registrations. 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.