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The ENS Wave in a Bear Market:Logic and Expectations

Authored by Andy Hoo, Researcher at Huobi Research Institute

Ethereum Name Service (ENS) is a decentralized domain protocol backed by the Ethereum Foundation. The ENS Foundation is in charge of the issuance and update of domains ending with .eth. Domain names issued under ENS can be sold as NFTs that can be mapped via control panel to one’s ETH wallet, BTC wallet or other applicable wallet.

The ENS token is a governance token issued in Nov 2021. This protocol was first initiated in April 2017, which makes it the project with the longest maintenance time but latest issuance. Although the number of users was merely around half of that in Uniswap at launch, it is influential in non-financial areas under the Ethereum ecosystem. The total supply of the token stands at 100 million — 25% for airdrop, 25% to contributors, and 50% remains in treasury of the DAO community. Token holders may participate in governance of the community and control funds in the vault as well as future income.

ENS has not seen a boom since last April until July this year. According to Dune Analytics, as of July 13, the total number of ENS holders reached 500,000: 100,000 was registered in the first week of July, 29,727 on July 3 and 34,000 on July 4. According to the latest data from NFTGo.io, transactions of ENS in the most recent three months surpassed US$71.17 million with instant market cap of around US$68.35 million, cementing its position among the top 3 on OpenSea for over a week in early July.

From July 1 to July 13, ENS were sold daily at high sale prices. The highest sale price went to 000.eth, which sold for 300 ETH, followed by the name of well-known accounting firm “pwc”, the word “game”, and the term “porno”, alongside other domain names containing numbers.

For non-number domain names, the most sought-after ones were: calvin.eth (referring to the brand Calvin Klein), which sold for 11.88 ETH; aol.eth (referring to ISP AOL), which sold for 7.25 ETH; coom.eth, which sold for 10 ETH after a bidding process and ethsign.eth (referring to Web3 company Ethsign), which sold for 8 ETH. Key influencer @Josephdelong on Twitter bought joseph.eth for 35 ETH via bid; etherc20.eth (referring to ERC20) was sold for 7 ETH after a bidding process, and lemon.eth was sold for 15 ETH.

From the above, we can see that be it the macro ENS category or individual sale of domain names, ENS has gone through the following stages:

1.The prevalence of 3-digits and 4-digits categories

The 3-digits category consists of 1,000 domain names starting with 000 to 999 (999 Club), and the 4-digits category consists of 10,000 domain names starting with 0000 to 9999 (10K Club). As the 2-digits category has been reserved by The Ethereum Foundation, the 3-digits and the 4-digits domain names appear to be extremely valuable. Given the hype generated by the community and ENS, the hype surrounding the 3-digits category is almost commensurate with that of BAYC, and the same applies for the 4-digits category relative to MAYC. From the degree of rarity, symmetric names, such as AAA/ABA in the 3-digits category or AAAA/ABAB in the 4-digits category, are in shorter supply and therefore more likely to be in demand.

Further, some numbers connote special meanings in particular regions, which makes them more likely to become the object of hype. For example, the number 11 may be associated with the emergency call number 110 in China and 911 in the US, both of which are connected to the concept of justice. The number 139 may be related to business reputation for the pioneer generation of high net worth individuals in China, who have apparently never changed their cell phone numbers that start with 139 — according to rumors, 139.eth is held by a friend of image enhancement app Meitu’s founder, Wensheng Cai, and this domain name has an estimated value of more than 100 ETH. 182/183, meanwhile, signifies the ideal height for males in the dating scene; 747/767/777/787 are most common models of Boeing aircraft, which may appeal to business elites.

The hype associated with certain numbers was not a result of ENS’s emergence, but has existed for decades. Such numbers, however, have fueled the popularity of the ENS ecosystem.

2. Hype from family names and relatives

Family names too, may generate further revenue streams.

For example, if someone registers zhang.eth under his/her name, then holders of Lily.zhang.eth, San.zhang.eth, Andy.zhang.eth and other domain names ending with zhang.eth will be liable to pay the holder of the parent domain name.

So far, traditional Chinese family names, Chinese names in Asia (Cantonese, Taiwanese, Singaporean, Malaysian, Filipino), Japanese family names, Korean family names, Vietnamese family names and Arabic family names (Dubai, UAE, Mediterranean) have all been registered by ENS community members and listed on various domain name marketplaces.

Each ENS collection must have its own narrative and the domain names must be in series — the same rule applies to the aforementioned number collection. For example, 10K Club is a collection of 10K domain names. Similar to mainstream NFT collections, if a domain name is standalone and not part of a collection, or if there are too many units in one single collection (i.e., over 1 million units), then the collection will be unable to enjoy widespread community adoption. As such, domain names containing family names will remain rare. Besides, very few are currently for sale, and those listed were sold within the day they were put on sale.

3. The Web 3 Timekeepers

With continuous registration for the 3-digits to 5-digits categories, hype might zero in toward domain names representing times of the day. The Web 3 Timekeepers collection consists of 1,440 domain names from 00h00 to 23h59, with each standing for each minute in a 24 hour day. The narrative surrounding this collection is that each domain name holder owns each minute in the Web3 world, and each corresponding moment can be displayed as a picture on https://ensclock.com/ (ENS clock). Users can use these pictures from the ENS control panel as Avatars.

At the beginning of July, some holders in this category connected art works to each domain they own, and demonstrated their works by the minute.

The concept of the Web 3 Timekeepers originated from an AMA on Twitter Spaces. One speaker was from The Ethereum Foundation who proposed the concept of timekeeping, while another developer in the community shaped the concept. However, the momentum and value appreciation of Timekeepers has not yet reached its potential, as the current floor price is much lower than that of the 3-digits and 4-digits categories. This value of this collection could appreciate if it attracts the attention of watch companies, who might use this Web3 space to showcase their products.

4. Other narratives

Besides the narratives above, other partial and small-scaled innovations and new themes also exist, such as the following:

4.1 Derivatives of number series

There are various derivatives from the number series, but the most distinct ones are:

l 999CN Club: Comprising 000 to 999 in Chinese characters; the same collection exists in Korean and Japanese.

l ENS Date Club: Comprising 365 days in a year in the form of 1 Jan to 31 Dec. Some dates with special events, such as 11 Sep (911) and 31 Dec, would be more popular.

l SHA256 Club: Obtained from the process of the original 3-digits and 4-digits after SHA256 encryption, and hence the encrypted content would be registered as a domain name. The person who is aware of it must encrypt the number to receive the wire transfer address, only then can he/she initiate the transfer.

4.2 Emoji

There are countless units in the form of Emoji, most commonly seen as gifs plus numbers — other symbols are also available, such as the whale symbol. The comparatively popular ones are the country flag collection that was unavailable merely five hours after the discovery, and widely spread on Twitter.

4.3 Marketing campaigns tied to scenarios

On July 9, 2022, a newlywed couple in the ENS community (both of whom work in the blockchain industry) started a campaign named “Wedding in Metaverse” and uploaded their wedding picture. They received blessings from the whole 10K Club.

Their wedding took place on Discord and Twitter, and all participants with comments received airdrops as gratitude. During the wedding, the holders of 520.eth, 521.eth and 1314.eth sent their blessings and displayed the wedding photo on their own domains, demonstrating the strong sense of community within ENS.

5. Conclusion and expectations

From the perspective of the whole ENS narrative chain, the path starts from the 3-digits and the 4-digits, followed by other derivatives from numbers, plus subdomains and other new functions of ENS V3. More themes and narratives will emerge in the digital world via the combination and permutation of various elements, which has resulted in an unstoppable popularity wave for ENS for over half a month, till today.

The power of cultural origin (in digital) and the spread of hyper symbols played significant roles in the ENS hype.

The development of ENS may progress further with the launch of ENS V3 functions: separation of main domain and subdomain and rentals. Besides, with the widespread adoption of Web 3 DIDs, more Web2 companies from Web2 may hop onto the ENS bandwagon.

The 3-digits and the 4-digits categories of domain names possess characteristics of scarcity and a high degree of culture inherence. For other types of domain names, such as family names and famous brands, there is still room for their value to be determined. As the official token and the sole cryptocurrency from ENS in circulation, the ENS token will play a more vital role in the future, including but not limited to allocating funds in the vault of the community and receiving royalties from ENS transactions, etc.

About Huobi Research Institute

Huobi Blockchain Application Research Institute (referred to as “Huobi Research Institute”) was established in April 2016. Since March 2018, it has been committed to comprehensively expanding the research and exploration of various fields of blockchain. As the research object, the research goal is to accelerate the research and development of blockchain technology, promote the application of blockchain industry, and promote the ecological optimization of the blockchain industry. The main research content includes industry trends, technology paths, application innovations in the blockchain field, Model exploration, etc. Based on the principles of public welfare, rigor and innovation, Huobi Research Institute will carry out extensive and in-depth cooperation with governments, enterprises, universities and other institutions through various forms to build a research platform covering the complete industrial chain of the blockchain. Industry professionals provide a solid theoretical basis and trend judgments to promote the healthy and sustainable development of the entire blockchain industry.

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