Why are crypto investors flocking to the Ethereum Name Service (ENS) NFT Collection?
The month of May 2022 marked the start of a gloomy period for the crypto community, with Ethereum and Bitcoin prices falling by as much as 40% and a number of other altcoins being battered.
The declines were so steep that many analysts began to argue that the space had entered a new “crypto winter”, similar to the one that gripped the burgeoning digital arena in 2014.
Non-fungible tokens (NFTs) were not immune to the sell-off. Many NFT projects were forced to shut down and cut losses as a result of Ethereum’s price drop, and liquidity and sales volume fell across the board.
But as the NFT market broke down, one rally seemed to stand out. Starting in April, sales of the Ethereum Name Service (ENS) skyrocketed the NFT collection.
By July, more than 1.86 million names had been registered and the community had gathered over 508,000 unique participants. Sales had also picked up on OpenSea, reaching over $5,400 ETH for the month of July – completely boosting the NFT space.
What is the Ethereum Naming Service?
Founded more than two years ago by Nick Johnson and his team of developers, ENS describes itself as a “distributed, open and extensible naming system” running on the Ethereum blockchain.
The purpose of ENS is to replace the long string of alphanumeric characters associated with Ethereum wallet addresses with human-readable names that make it easier to transfer ETH.
Just like the way the Internet’s Domain Name Service (DNS) translates name requests into IP addresses, making it possible to navigate to Amazon.com without entering a complicated string of numbers, ENS allows ETH users to easily find someone’s wallet address .
For example, if you buy the word “thomas” on the ENS app, a user can replace an address in this format “2c894a01b56E7B26d947AD3,” with thomas.eth (every domain ends in .eth).
It can be useful to think of an ENS domain as a decentralized profile that eliminates third parties and establishes a user’s digital identity.
What makes the ENS project so attractive?
An ENS domain is actually a non-fungible token (NFT) that acts as an ETH wallet address, a cryptographic hash, or a web address.
Since these domains exist as NFTs, an organic market has emerged that allows holders to buy and sell their addresses to the highest bidder, much like other NFT projects.
ENS domains have words instead of images, a feature that sets ENS apart from other NFT collections and allows users to buy and sell names, words and numbers in one place, like a spectator sport.
But like most success stories, there is more than one factor that has contributed to the success of the ENS project.
1.) Utilities
The main reason why ENS has generated so much interest is its usefulness. While other NFT projects may offer holders access to tickets, the opportunity to enter an exclusive club, or merchandise from a well-known brand, ENS benefits holders immediately after purchasing a domain name.
Those who purchase their preferred name can establish their digital identity for years to come, and can also set their name as their wallet address, making it easier to transfer ETH.
2.) Status
It is no mystery that factors such as status and influence play a large role in human societies, with many people willing to shell out eye-popping sums of money to climb the social hierarchy. ENS is no exception.
ENS holders with names of celebrities, sports teams and rare numbers are seen by other members as special and regarded with a degree of admiration.
Users can also set their domain name as their Twitter and other social media handle – associating their entire persona with their wallet.
Cougar have already done this on Twitter, giving their brand added appeal to the Web3 audience.
3.) ETH pooling
For several months now, rumors have been circulating in the crypto community that the long-awaited date of the Ethereum merger is imminent. The event, which is expected to take place within a few weeks, will switch the Ethereum blockchain from a proof-of-work consensus algorithm to proof-of-stake.
The merger is expected to speed up processing times on the blockchain and reduce Ethereum’s carbon footprint—two features that have been cited as drawbacks by ETH critics for years.
4.) Low gas prices
Like most other cryptocurrencies, Ethereum is in a bear market. While this means that NFT sellers are less likely to receive attractive offers, it also means that the blockchain is less busy, meaning the cost of confirming transactions is lower.
Speaking about the phenomenon, Jisu Park, founder of Sooho, a blockchain infrastructure company, said, “ETH gas prices are lower during this bear market environment. This presents the perfect opportunity for investors to register ENS domains on a large scale, as the primary cost to do so is the ETH gas fee.”
5.) Record sales
Many ENS holders have compared the current Web3 domain market to the early days of the Internet, where some early adopters made a fortune by registering the names of large companies and then reselling them at a profit.
These users aim to purchase desirable names of people and companies before the eventual mass adoption by the public. While this strategy may sound crazy to those unfamiliar with the ENS market, recent selling has given long-term holders reason to hope.
So far there have been 27 $100K+ sale of ENS domains, with “000.eth” changing hands for a record 300 ETH ($322,000) earlier this year.
Notable Buyers
Celebrities
The sale of ENS domain names has not been limited to the general public. Much like the Bored Ape Yacht Club, high-profile celebrities have purchased NFTs in the collection, with Jimmy Fallon (fallon.eth) and Anthony Hopkins (AHopkins.eth) acquire versions of their names.
Companies
A number of large companies have also put up money to buy their company names. So far, Puma (puma.eth), Nike (nike.eth), CocaCola (coca-cola.eth), Hublot (hublot.eth), NBA (nba.eth) and PWC (pwc.eth) have all been given their names .
Amazingly, Amazon.eth received a $1 million offer last week from an anonymous wallet address on OpenSea. While the offer remained unanswered and no transaction took place, many wondered if the unknown offer came from Amazon itself.
Recently, the largest domain registrar in the world, Go dad (GCD.eth), also got their name and encouraged brands to “defensively register” their names to get ahead of the market and avoid paying big prices down the road.
Top ENS groups
Anyone wishing to purchase their own ENS name must create an Ethereum wallet (MetaMask is the most popular) and navigate to the ENS page. From here, users can connect to the wallet and start searching for names.
If someone has already registered the desired name, you can make an offer on the secondary market on OpenSea. Another useful site is ENS Vision, a pioneer in the Web3 domain space that offers listings for very popular ENS categories, such as 999 Club, 10k cluband Surname.
