ENS Domains: A short summary
ENS stands for Ethereum Name Service. With this service, a user can request that other users send cryptocurrency to a particular word — e.g. yolodice.eth— rather than a long complicated ETH address such as: 0xd19f7d075d55972De5a1BD6Fdb899D902e088E08. The important thing to appreciate is that you can send value to “yolodice.eth” without having to know/copy/paste the 0x….8E08 address. The clear advantage of these domains (which are a class of NFTs or non-fungible tokens) is that seller and buyer can interact verbally with no electronic intermediaries necessary. Under the old system, email & internet were required; a seller would have to advertise his/her ethereum address in a way that was easy to copy/paste, and buyers would typically save such addresses by copy/pasting into an email or text. Or, QR codes could be used, but they require an electronic apparatus (e.g. phone with camera) to work. In short, an ENS domain is a unique text identifier that replaces the conventional 0x…..8E08 addresses with a simple word or phrase.
Sales of short 3–6 letter words began September 1, 2019. ENS domains first sprang into mainstream news around October 1, when it was reported by Cointelegraph that a bug in the ENS registration system was exploited by one user to get apple.eth, however the ‘hacked’ domain was subsequently returned. This is when ENS domains popped onto my radar, and, candidly, my first thought was “how cute, the Ethereum kids are making a play internet.” Over the course of the next several days, my mind changed. I began by registering a few family names, and found that I really enjoyed the ‘game’; the wordplay. Finding undiscovered ENS domains is fun and addicting!
I also read more about ENS domains, and informed myself that they are actually very valuable in the real world as payment channels today. Presently, the most valuable ENS domains — such as apple.eth, google.eth, and popular names like josh.eth — are selling for hundreds, sometimes thousands, of dollars on the secondary market. The highest sale to-date was 100 ethereum (about $15,000) for amazon.eth. Cryptocurrency is used to pay for a domain, but at least one popular ENS secondary market (opensea.io) allows buyers to use a credit or debit card to get the needed cryptocurrency. If you are new, get started by downloading the MetaMask extension to Chrome, create a new wallet, and save the private key somewhere safe (I memorized mine but I wouldn’t recommend this for a first time user).
As I continued to purchase ENS domains, I began to focus less on my personal sphere (family names, family businesses) and more on general interest words. After cranking out over 600 ENS domains in about 2 weeks (average rate of ca. 40/day), the last domain I birthed was cityzoo.eth. I may make up more because I like the wordplay, but I’m noticing that good words are now getting scarce. Anyone can watch the ‘birthing-area’ and see that the words coming out are getting longer and more complicated, with more of the dashes and numbers that I tend to avoid. My ENS domains are made up primarily of first names of people and names of companies.
As of 12/6/19, there exist approximately 113,623 ENS domains in 8,222 wallets, for an average of 13.82 ENS domains/wallet. Preliminary analysis indicates that there exists a skewed normal distribution, such that one group of buyers bought between 1 and 10 domains, while another group of buyers (“ENS whales”) scooped up more than their share (data to be published at a future date). The biggest ENS whale owns over 17,000 domains; the OpenSea website and this Nov. 17 article from Nick Johnson (lead DNS dev) cite a number of interesting statistics that I won’t repeat here.
It feels to this author like there has been an explosion of interest in ENS domains in the last week, and I will model the increasing numbers of domains and wallets over time in a future publication (DM me on Twitter @CollinsCustomIP if you want to help): For now it is sufficient to cite three days of data:
Dec 5: 113, 393 domains.
Dec 6: 113, 635 domains.
Dec 7: 113, 821 domains
…to support the proposition that ENS domains are going fast — several hundred are ‘birthed’ per day. Additionally there is a vibrant secondary market where hundreds of domains are exchanged per day. The auction process is very intuitive, and will be familiar to anyone who has used ebay.
SHORT NAMES PREFERRED
While the maximum character length of an ENS domain is 70 characters, long names are not preferred in part because they are susceptible to mis-spelling, which would mean loss of sent funds. Because shorter words are more scarce, the ENS developers designed the system such that 3 and 4 letter words are more expensive to purchase (aka “birth”) than longer words:
3 letter: $640
4 letter: $150
5+ letter: $5
Users’ preference for short words is also clear from a thorough data analysis (thanks Christopher Shen!):
SUMMARY
ENS domains are ripe with opportunities to:
(1) make crypto. My best flip so far was sea.eth, which I bought for $45 in Dai (a stable coin pegged to the US $) and sold for 1.3 ethereum (approx $200) later that day. (I wanted to hodl it, but the wife gave me the stink eye)
(2) lose crypto. My worst flip so far was rust.eth, which I birthed for 1 ethereum (approx $150) and sold for 0.09 ethereum (approximately $15) about a week later.
(3) analyze data. All transactions are stored on the ethereum blockchain so the opportunities to analyze data — like Mr. Shen above — are endless. It’s all out for the taking so it doesn’t matter if you’re a 13 year old kid in Iowa or an ancient old man in Spain, you can probably make cool discoveries if you (A) have access to a computer, and (B) are interested in graphing and data analysis. (FYI, good data analysis skills can often be parleyed into a good job.)
(4) meet new people. Perhaps my favorites part of being part of the ENS revolution is meeting people who are woke to the potential of ENS domains also. From new users just learning crypto, to middle-weight startup projects, to crypto OGs, the excitement for these new digital instruments is palpable. All aboard!
How-To Guide
This publication was more of a retrospective & summary, and less a how-to. For an excellent guide, I recommend Chris Bell’s extremely thorough how-to blogpost.
[Disclaimer: I am not officially associated with the ENS domain project, OpenSea.org or any other cryptocurrency organization; I am merely an interested user. ]
