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ENS valuation: Not just domain names

2021-11-17 14:17

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ENS currently maintains a fairly large valuation to be realized.

ENS Valuation: More than just domain names

Mason Nystrom, Messari analyst

Original source: Unitimes

By its very nature, blockchains create fantastic ways to record assets, and one of the biggest digital native assets is a domain name. (domain names). Blockchain-based domain names are digital assets that map IP addresses to more human-readable names (such as 13.57.64.34 to messari.io). As one of the first native digital assets, it's no surprise that since the birth of Bitcoin, there have been numerous projects trying to bridge Internet domain names onto the blockchain.

ENS: Ethereum domain name Service

The Ethereum Name Service, or &nbSP; ENS) Is a domain name registration protocol designed to map a human-readable domain name (such as Alice.eth) to an Ethereum address. ENS provides several key use cases:

- Web3 identity/user name

- Native payment

- Enhance domain name property rights

- Decentralized networks

Let's describe each of these use cases.

1) Web3 identity & NBSP;

While ENS initially created.eth domains on the Ethereum blockchain, by August 2021, it included both. Eth domains and NBSP domains. DNS domain name & have spent (like.com,.cash,.money). In fact, a company such as Google could integrate its DNS domain name (i.e. Google.com) into ENS and use its domain name as a wallet, Web3 username, and a decentralized website.

Tweets: https://twitter.com/ensdomains/status/1430933399745798155?s=20

At the time of writing, there were 447,623 ENS domain names (including.eth and DNS domain names) are created, 72% of which are.eth domain names.

And just as Internet users can log into various sites using Their Google, Twitter or Facebook accounts, ENS has the potential to be a single sign-on in Web3. Since the ENS domain name is self-held, it eliminates the traditional use of a centralized middleman (such as Google) to log in to various platforms.

2) Native payment & NBSP;

All ens. eth domain names and DNS integrated domain names will workAs a cryptocurrency native wallet address, they can accept multiple cryptocurrencies including BTC, ETH, DOGE, and other integrated assets. By connecting ENS to DNS, transactions can be sent to a specific website for payment instead of going through a payment middleman.

3) Enhance domain name property rights & NBSP;

ENS is committed to integrating into our existing domain name system. DNS, for Domain Name System, underpins the way the world navigates the Internet. However, unlike traditional.com domain name registration providers such as Verisign or GoDaddy, the ENS protocol cannot revoke a user's.eth address because the user controls his or her domain name (unless the user stops paying for the ENS domain name).

4) Decentralized network & NBSP;

ENS addresses can be used with IPFS (Interstellar File System), Sia Skynet, and Arweave. For example, by connecting ENS or DNS integrated into ENS to IPFS,Websites can be stored on IPFS.

However,The ultimate benefit of ENS comes not just from a single use case, but from an aggregation of potential use cases. ENS is still in its early stages as a protocol with native payments and potential anti-censorship features. With the launch of the ENS DAO and its governance token, the future of ENS will become increasingly interesting. Let's take a look at the ENS DAO, the airdrop of the protocol, and the current state of ENS.

02. ENS DAO

ENS has been rolled out as part of the decentralized implementation of the ENS protocolYour own governance tokenAnd will pass. DAO Decentralized autonomous organizations.

1) ENS airdrop & NBSP;

The ENS airdrop was probably one of the fairer airdrops of late. In general, DeFi protocol rewards airdrops to users who inject money into DeFi protocol, while ENS airdrops do not favor users who spend the most; In contrast, ENS 'community token allocation is more pro-plutocrat than most other retroactive airdrops. Liquidity is arguably the most important added value in DeFi protocols, so retrospective airdrops tend to reward users proportionally based on the amount of money they deploy into the protocol. However, while the ENS agreement will generate revenue from fees paid by usersThis agreement determines capital and should be the ultimate factor in community contributions.

ENS also added one for active users during the airdropThe multiplierIn other words, if the user's account is set with an additional Reverse Record, they will get double ENS tokens.

ENS tokens are distributed as follows: & NBSP;

-25% allocated to.ETH holders (over 137,000 accounts)

-25% allocated to ENS contributors (over 100 organizations and individuals, and over 450 active Discord users);

- 50% allocated to the ENS DAO Community Treasury

A total of 137,689 wallet addresses are eligible for ENS airdrop and will be available for collection by May 4, 2022. ENS Scrip. The median airdrop was 180 ENS tokens, equivalent to about $10,000 at today's prices. While more than 60 percent of the 25 million ENS tokens used for the airdrop have been claimed (as shown below), 40 percent remain unclaimed. With such a high volume of airdrops, token sales could create potentially negative price pressures.

It is worth noting that while the ENS airdrop system is one of the best, it still allocates too many tokens to past participants who have been inactive in the ENS ecosystem.

2) ENS governance & NBSP;

According to its announcement, ENS token holders will have to formally apply to ENS root key holders for the ability to govern the protocol parameters (i.e., domain name pricing, price predictor, etc.) and control the money currently in the community vault. Any governance proposal will require the support of at least 100,000 tokens to proceed to the voting stage, and a majority vote of at least 1% of the total number of tokens will be required to pass the proposal. ENS Holders are encouraged to delegate their voting rights to a community member who represents their views.

ENS also established in the Cayman Islands.ENS foundation, thus representing the DAO organization in a legal capacity, facilitating any practical actions necessary in the real world, as well as electing or removing directors.

And perhaps most importantly, ENS token holdersYou are required to be direct when you claim a token. ENS Constitution to vote. Basically, the ENS Constitution Outlines several key principles, including that ENS governance must respect the property rights of ENS domain name users, avoid rent-seeking practices, avoid supporting other competing agreements, andMaximize integration with traditional DNS domain name systems without sacrificing ENS decentralization.

I don't think most people fully understand the importance of this last aspect, so I'll briefly explain its importance here.

3) DNS & ENS integration & NBSP;

Current DNS services have a centralized domain name registry called ICAAN (Internet Corporation for Assigned Names and Addresses). This approach is useful because it ensures that there won't be any conflicting domain names (e.g., there won't be two types of messari. IO domain names) so that the domain name will "resolve" to an IP address/website.Integrating ENS into the existing ICAAN domain name registry means there is no conflict between the two. Someone with an ENS address can parse/point to a similar ICAAN registration site. This is different from other domain name solutions that are not registered with ICAAN, as it may conflict with the existing DNS structure.

An example in stark contrast to ENS HNSHNS is trying to replace ICAAN by creating a new root domain registry. They have reserved top-level domain names (such as Google.com) for top-level IP addresses to prevent conflicts and allow existing companies to migrate there. However, if the HNS domain name conflicts with ICAAN, this can have detrimental effects and prevent integration from being implemented. So HNS essentially aims to create a new DNS system (which has its merits, but is beyond the scope of this article).

ENS, by contrast, aims to bring ethereum's functionality. (programmability, native payments, etc.)& NBSP; Added to a domain name to enable the domain name to act as a wallet/domain name while easily integrating with the existing DNS architecture. ENS The decision to integrate with DNS was a strategic decision by the protocol team with the goal of establishing a naming system and registrar that could be adopted worldwide.

03. Sustainability of ENS

ENS domain name is through ENS The Registrar will need to pay the registration and renewal fees to retain the domain name. ENS fees are an anti-encroachment mechanism designed to ensure that no one holds a domain name forever.

Therefore, the price of ENS domain name varies according to the domain length:

- 5+ character domain names: $5 per year;

- 4-character domain names: $160 per year;

- 3-character domain names: $640 per year.

For importing DNS domain names & NBSP; ENS system, ENS protocol does not charge, because DNS domain names already need to pay DNS providers (such as GoDaddy, etc.).

Although ENS obtains revenue from both domain name registration and domain name renewal, up to now, the vast majority of ENS revenue comes from domain name registration, as shown in the figure below: & NBSP;

Above: Growth of ENS agreement revenue. It can be seen that the protocol income mainly comes from domain name registration. (light blue), not domain name renewals (dark blue).

ENS has generated nearly $20 million in revenue from domain name registrations and renewals.In the past few months, ENS 'revenue has grown dramatically, exceeding $2 million in three of the last four months (see chart).Nearly 90% of cumulative agreement revenue was generated in 2021"Is a positive sign for revenue growth from the deal. But the key question is, is it sustainable? Time will tell, although I expect ENS agreement revenues to decline after reaching an all-time high at the end of November.

Interestingly, the ENS protocol had the highest sign-up fee and renewal revenue in early November, most likely as a result of individual users trying to participate in the airdrop following the announcement of the upcoming airdrop on November 1. However, the snapshot of the airdrop is October 31, 2021 (the day before the announcement), so any domain registration or renewal transactions that occurred in November will be ignored in the token distribution eligibility assessment.

Above: The ENS agreement has generated nearly $19 million in cumulative revenue.

However, the chart above does not tell the whole story because ENS receives fee revenue in ETH (not USD), and the agreement is likely to have held a significant share of ETH over time.

Since its launch, ENS has generated nearly 13,000 ETH in revenue, of which about $2.5 million is domain name renewal revenue and 10,000 ETH is domain name registration revenue. As shown below:

onFigure: ETH protocol has accumulated 13,000 ETH revenue since its launch.

As part of the decentralization of the agreement, funds from these ENS vaults will be allocated to the DAO organization. At the time of writing, ENS Registrar More than 4,000 ETH are under contract; (About $20 million).

At the time of writing, the ENS token used to govern the ENS protocol had a fully diluted market value of $5.5 billion (at $55 at the time of writing). Based on the $16m in agreed revenues so far this year, that implies a price-to-sales multiple of 334 times. The important thing is that ENS is a new type of protocol, the token has only been traded for a short time and the market is determining its value, but currently ENS maintains a fairly large valuation to be realized.

ENS future & NBSP;

ENS isn't the only player in this space, but it has created a clear path for its adoption by thoughtfully building a protocol that integrates with our existing world. As more and more individuals and companies use ENS,ENS fee income is likely to increase significantly. In addition, ENS as a naming protocol can support other protocols, blockchains and domain names, whichThat means its growth is not limited to the Ethereum network.

Ultimately, the benefits of public goods like ENS are difficult to assess accurately, and the governance value of these early new Internet protocols is murky. While the valuation of ENS may be based on the high likelihood that the agreement will generate higher revenue, ENS is for individual, website and Internet transactionsCreate an identity layerThe market is huge.