Why are Four Digit ENS Domains so Popular Right Now? The Economics of Scarcity and BAYC NFTs
Over the past few weeks there has been an observable trend within the blockchain space. If you frequent NFT Twitter, you may see an unusual amount of people with numbers as their display names followed by a “.eth.” Why is this the case and what are these users attempting to accomplish?
The numerical display names were purchased through something known as “ENS,” or “Ethereum Name Service.” So, what exactly is an ENS?
An ENS domain’s primary function is to link unmemorable Ethereum addresses (as they contain a random mix of numbers and characters) to fully customizable names that are available for purchase. For instance, you could find the same wallet by searching for “0x40699c20e25615733abd802f70af54c0af4c3ad2” or you could simply type “Kevin.Eth.” It’s clear looking up Kevin.eth is much more convenient.
Thus, website domain names and Ethereum Name Service share a very similar purpose. They allow users to seamlessly locate “things” on the internet.
Some website names are more valuable than others. As a rule, the more applicable and general the domain name, the more valuable it is. As an example: basketball.com would be much more valuable than something specific like basketballusa.com. The same holds true for ENS names.
Since this service is relatively new in the grand scheme of things, people have been collecting Ethereum names ranging from common first names like “Josh” to names of mega corporations. These early adopters are banking on the possibility of these large corporations buying the ENS domain names in the future.
The trend of buying numerical ENS domain names first started gaining traction on April 21st. On April 24th there were a total of 379 numerical Ethereum names registered. A little over a week later, on May 2nd there were 29,790 numerical Ethereum names registered.
This trend is reflected in ENS’ volume on OpenSea. On the 21st of April, ENS had a volume of 24 Ethereum in total. As of writing this article, the volume has dramatically risen to 2,053 Ethereum. One ENS 555.eth recently sold for around $160,000 USD to a collector.
So what’s the deal with people buying numerical ENS domain names?
Those who are buying the Ethereum names call themselves the “10kClub” and set up their own Discord. The name “10kClub” itself speaks to a large reason for the demand increase.
Over the past year or so, profile picture projects (PFP) have been all the rage in the NFT space. These PFPs usually contain 10,000 unique generated images. Some of these projects include BAYC, Cool Cats, and “mfers.” Each image is labeled according to its number. For instance, Tom Brady has BAYC #3667. Similar to most PFP projects, four digit ENS has 10,000 different possible combinations. Therefore, some in the 10kClub theorize that PFP holders might want an ENS name that reflects their favorite profile picture.
Scarcity is a large reason the demand for ENS domains with digits are so high. ENS domains with three digits have 1,000 possible combinations, for instance. By comparison, Bitcoin has a supply of 21 million and is worth $40,000 USD a piece.
The most inexpensive three letter domain sale that took place this year was lnw.com which sold for a little under half a million USD. By comparison, the cheapest three digit ENS you can get is around $5,600 USD (as of today).
So why are the 10kClub so infatuated with numerical ENS domains? It is because they are making a bet that the Ethereum network will be mainstream in a similar fashion to traditional domains. They are also buying these ENS domains because NFTs follow a similar numerical pattern. Finally, people are buying these domains because they are rare and irreplaceable. This means that big players will have to (hopefully) cough up a lot of cash to obtain one in the future.
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