NFT domains’ success and what it means for the web3
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In times like these, it can be difficult to see how an industry is doing: everything seems to crumble, be it crypto, stocks, or even commodities like gold.
And yet, while prices do react to the macro factors, such as central banks raising interest rates, energy crisis or an escalating war, other metrics can show what’s happening behind the scenes. Helping see the value behind the price.
For us, one of the ways to measure the web3 industry development are NFT domain services, like ENS or Unstoppable Domains.
The ENS phenomenon
ENS stands for Ethereum Name Service, and it’s basically the web3 equivalent of the DNS, or domain name service, which maps the string of numbers that compose an IP address with human-readable website URLs, such as d.center. While this may sound trivial, DNS did a great job in simplifying the internet use and accelerating its adoption, and ENS looks well on a similar track.
ENS maps long hexadecimal strings of characters that compose an Ethereum address, like 0x71C7656EC7ab88b098defB751B7401B5f6d8976F, to easily readable addresses, like julia.eth. Technically these addresses are NFTs, which means that their buyers have full and disintermediated ownership of an address.
Launched in 2017 by two developers from the Ethereum Foundation, ENS has seen an explosion in interest in the recent year: from the total of over 2.5 million names created, over 1.9 million were created since the beginning of 2022 (and this September is about to break previous monthly records).
Last year ENS dropped to all its users newly minted ENS tokens, as part of preparations to transition from a Singapore-based NGO governance to a DAO. The token did not escape the market crash, falling from an all-time high of $75 in November 2021 to $8 in June 2022 (hence the danger of price bias), but it is faring pretty well comparing to other cryptos, regaining some ground and rising to $14. When everything else keeps falling, that’s quite a performance ?
What can ENS do?
…So now people can name their addresses, what’s so special about it?
Beyond its obvious role of simplifying crypto transacting between peers, ENS can facilitate the adoption of web3 in several ways:
Portable identity. Replacing 0x71C7656EC7ab88b098defB751B7401B5f6d8976F by julia.eth allows a smoother interaction with web3 services and opens the door to a self-sovereign identity: the tokens are NFTs and can contain hashes of information, which can prove that a user owns data (passwords, certifications… etc) without revealing it.
Web3 reputation builder. Human-readable names make it easier to trace the address’ history, and together with being able to map a domain with a Twitter account, this helps greatly in building a reputation in web3 without necessarily revealing one’s true identity.
Sub-domains. Users can create sub-domains to organize their activity or to let more people in, like ceo.company.eth and accountant.company.eth.
Censorship-resistance. An ENS domain can be mapped to a content hash, which, like an IP address, is a unique identifier for hosted content, but unlike IP, is not based on a location, but on the content itself. Now imagine a website uploaded to IPFS (a distributed P2P file sharing network) and mapped to an ENS domain – that’s a censorship-resistant internet ?
The problem here, though, is that the website in question cannot be easily updated (changing the data means changing the hash), so the most popular solution for many users now is to link their ENS domains to an existing website hosted elsewhere.
Non-Ethereum addresses are ok too. ENS can work as a router for .btc, .ltc…
Emoji addresses. Of course! ???.eth looks fabulous ?
Unstoppable Domains
One of the emerging competitors to ENS is Unstoppable domains, a San-Francisco company that also sells NFT-based domain names. Built mostly on Ethereum (.zil domain is on Zilliqa blockchain), Unstoppable Domains offer .crypto, .blockchain, .wallet, .bitcoin addresses, among others.
Comparing to ENS, it puts more effort into facilitating the creation of decentralized websites: providing website templates (there’s no WordPress on IPFS), publishing them to IPFS, and allowing to easily update the IPFS hash in the domain management service each time the website is updated.
Unlike ENS, Unstoppable domains are bought for life, with zero renewal fees.
Unstoppable Domains are not part of the current ICANN/DNS system, which means that not all the browsers can access them. For the moment only Brave and Opera allow an easy access, while other need users to download an extension.
In July, Unstoppable Domains raised an additional $65 million (series A led by Pantera Capital), which put the company valuation at $1 billion. It looks like the company started to use the money wisely, announcing in the end of August the integration with Skiff Mail, allowing users to send and receive end-to-end encrypted messages.
Privacy is so important now ?
Unstoppable Domains website indicated over 1.5 million names minted on Ethereum and Polygon by 383k owners.
Why NFT domains are important?
Services like ENS or Unstoppable Domains are reimagining the very lining of the internet, increasingly integrating it with the web3. They bet on the wider crypto adoption, development and maturing of web3, as well as an eventual change of standards.
To us, NFT domains are a good measure of public interest and faith in web3 – the emerging space that uses cryptocurrencies, of course, but is focused on decentralizing other activities and industries: e-commerce, media, healthcare, finance, IT, government… And so far, this measure shows an encouraging data.
It might be too early to speak about an eventual abandonment of the DNS or the HTTP, but the development of domain NFTs and their integration with IPFS could create an alternative, all while advancing a censorship-resistant, user-focused and privacy-conscious internet ✨
