Ethereum Name Service (ENS) registrations have spiked over 200 per cent, and in the secondary market, they are being traded for millions of dollars. Here’s the importance of ENS and the sudden interest in it.
Ethereum Name Service (ENS) registrations have spiked by over 200 per cent in the past week, and as per data from Dune research, OpenSea marketplace saw $85,010,261 (218,111.169 ETH) worth of ENS domains being traded. This phenomenon caught the eyes of various retail crypto traders, who are otherwise facing deep losses due to the ongoing crypto market-wide crash.
As per data published by Ethereum Developer Nick Johnson it was outlined that over the last two days (Sunday and Saturday), about 64,000 ENS domains were registered, and in the past week, 108,000 ENS domains were collectively registered.
So, what is ENS and why is it important for Web 3.0?
ENS is an open-source, decentralised autonomous organisation (DAO) whose primary function is to sell (register) shortened long-format Ethereum (ETH) Blockchain addresses into easy-to-comprehend human-readable addresses.
A Blockchain’s public address is a combination of 42 hexadecimal characters, and each time someone needs to send or receive crypto or other assets, they need to quote these 42 hexadecimal numbers.
The ENS shortens these 42 hexadecimal numbers into simply ‘name.eth’, and this name can be anything like 000.eth or 007.eth or Rahul.eth, and so on.
According to data published by Delfi Digital, the specific domain 000.eth was sold for 300 ETH recently, which is equivalent to $342,600 as of 11.20 am July 11, 2022. (Present price of Ethereum is $1,142 as per Coinmarketcap data).
Scarcity: While some companies, Web 3.0 developers, and others are buying ENS domains to register their business, website, applications, and so on, the present spike is not due to that.
Rather, the current trend is because crypto traders have understood that there can be only so many .eth addresses, and certain domain names are unique. This is what makes them valuable.
According to a Delphi Digital note, “traders tried to capitalise on the hype (limited and unique .eth domains).”
FOMO: Delphi Digital also noted that the spike started right after the 000.eth domain name was sold for 300 ETH, and there could be a phenomenon of FOMO (fear of missing out) at play here.
“This spike could be due to the ENS address 000.eth being bought for a record-breaking 300 ETH,” Delphi Digital said.
Also, this is not the first time that this phenomenon has occurred. Back in April 2022, due to heavy speculation by market participants, three and four-letter ENS domains surged on the secondary trading platform OpenSea. This was due to the fact that three- and four-letter ENS domains were rare and unique, and hence, irreplaceable.
Ethereum’s co-founder Vitalik Butterin had previously said on Twitter two years ago on August 2020, “Three and four-letter ENS names: they’re a fixed-supply asset *and* you can do things with them!”
Gas Fees: Crypto Blockchain gas fees refer to the cost of doing a transaction on the respective Blockchain. This fee is paid to the Blockchain’s miners for them to include the user’s transactions to the Blockchain’s block. The fees are not static, and revolve upon various factors like the Blockchain’s quality, network congestion, types of transactions, and others.
Earlier this week, Ethereum Blockchain’s gas fees fell below $2, which is the lowest in two years. In May 2022, the highest gas fee for Ethereum was $200. Now traders are trying to take advantage of the low gas fees of Ethereum, and are racking up ENS domains at lower cost only to sell them later in the secondary market at a profit, reported CNBC.
ENS is a Blockchain domain naming protocol built specifically for the Ethereum Blockchain. Using it allows customers to create human-friendly and readable usernames for their Ethereum-based crypto wallet, and decentralised websites and apps.
Similar to Web 2.0 domains which we call URL and which end with .org, .com, .net, and others; ENS too aims to do that, but for Web 3.0, Blockchain websites, and apps. In the Web 2.0 era, IP addresses of a website’s server or computer were converted into simple English or other human language texts, and domain name service (DNS) was used to register them, while Google and other search engines were used to index them.
Without this service, Internet browsing in the Web 2.0 era would not have been this much easy as today. Blockchain-based search engines (BBSE) and ENS Ethereum domain name registration services are trying to build this same technology, but for the next iteration of the Web.
And just like Web 2.0, every domain name has to be unique. This is what creates scarcity of domains, and that is the only plausible reason why domain names like 000.eth are selling for hundreds of thousands of dollars.