All-in-one domains for Web 3.0

The Ethereum Name Service is an ETH protocol that allows users to create decentralized names for crypto wallets, websites and more. Basically, ENS offers a platform on which users can create domain names for the Web 3.0 world. The special thing about these domains is that they can be linked to information from blockchains (wallet addresses, transaction hashes, etc.), among other things.

The aim of the project is to make the Ethereum ecosystem more accessible and understandable by simplifying interaction with it. However, the project is not completely free of controversy – you can read here why a former developer of ENS is currently in prison:

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What is the Ethereum Name Service?

The Ethereum Name Service Protocol is a special system that basically associates information with easy-to-remember names (e.g. leon.eth, amazon.eth, etc.). Users can use ENS to create Internet domains with URL addresses ending in “.eth”. These created URL addresses or names can then be linked directly to Ethereum wallets or other information.

The project is thus similar to the Domain Name Services (DNS) of Web 2.0, which allows us to access information on today’s Internet by name and makes surfing the net much easier for us. Because it wasn’t always easy: In the early phase of the Internet, you could only find information if you knew the exact IP address – DNS changed that.

If you call up information on the Internet today, thanks to DNS you only have to enter a domain name (btc-echo.de, wikipedia.de, etc.) instead of a complicated IP address, which then automatically forwards to the corresponding IP address.

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The crypto world is currently at a similar juncture as the internet prior to the introduction of DNS. Users are currently forced to use long alphanumeric codes like their wallet address or transaction hashes to navigate Web 3.0. The Ethereum Name Service project wants to change just that.

For example, a domain like amazon.eth or volkswagen.eth can be created with ENS, which can be linked to an Ethereum wallet. Normally, such a wallet looks something like this: 0x5bsfjbk634bssf1iwark … But with ENS, crypto users can now interact directly with the ENS domain name and do not have to first enter the obscure wallet address.

How does the Ethereum Name Service work?

The ENS protocol converts domain names into machine-readable addresses using smart contracts. Each ENS domain name is automatically assigned the right user, the right website or a specific address.

A major difference between ENS and DNS is that ENS is based on the Ethereum blockchain. For this reason, domain names are generated as NFTs on the ETH blockchain and can be created, bought and sold at will, with each ENS domain name only existing once on the Ethereum blockchain.

In theory, this makes the Ethereum Name Service more secure, private, and censorship-resistant than traditional DNS domains.

The user who registers a .eth domain first gets the rights to it. As long as he owns the ENS domain, he can trade it freely, lease the name or create subdomains (e.g. donate.amazon.eth or electriccars.volkswagen.eth) and design them according to his own ideas. However, if a user does not extend their rights to an ENS domain, the domain will be released after a further 90 days.

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What is the ENS Governance Token?

The Ethereum name service protocol did not have a protocol-owned token for its first three years of operation. Only since the development team announced in November 2021 that they intend to further decentralize the Ethereum name service protocol by creating a DAO (Decentralized Autonomous Organization) has the ENS token come into being.

The ENS community treasury got nearly 50 percent of the total token supply at the time, while .eth domain name owners and ENS developers got 25 percent each.

Ethereum Name Service Token Distribution
Source: Token distribution ENS, messari.io

Since then, ENS has served as the protocol’s governance token. The token grants its holders the right to vote on changes to parameters of the protocol.

ENS token holders can thus influence the development of the ENS protocol, similar to shareholders in companies.

For example, ENS owners can vote on what ENS domain name registration fees are. They can also determine what happens to the earnings from the protocol.

Currently, the ENS protocol collects money in two different ways. On the one hand there are registration fees that users pay when they create an .eth domain name and on the other hand there are renewal fees.

In the last 30 days alone, the Ethereum Name Service has generated over $3.74 million in log revenue as .eth domain names are consistently sold for hundreds of thousands of dollars.

ENS log revenue
Source: Price vs log earnings over the last 30 days. Source: tokenterminal.com

Also, the scope of the ENS token may be expanded through the passage of amendments to the ENS statutes. However, changes require an approval of at least 67 percent of the votes and a quorum of at least 5 percent of the tokens.

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summary

Due to its complexity, the crypto space is not particularly beginner-friendly. ENS wants to reduce this complexity and remove the barriers to entry into the crypto world. By turning machine-readable, public addresses into short, memorable links, the protocol makes the blockchain world more accessible and less technical.

In addition, ENS plans to not only offer .eth domain names in the future, but to open up the entire DNS name space. This means that conventional websites such as amazon.de could be linked to amazon.eth in the future.

This would allow users to easily view content on one domain and send money to the same domain at the same time. This could be particularly useful for online shops or other service companies.

With over 1.67 million registered domain names owned by over 482,000 different people, ENS is currently the largest name service protocol in crypto space.

ENS will not be worth much if a similar protocol prevails on another more popular blockchain in the future. However, it is not only through similar projects on other blockchains that ENS could get into trouble, competition within the ETH ecosystem could also pose a threat to ENS. In particular, Unstoppable Domains and Aave’s Lens Protocol are serious contenders.

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