The demand for Ethereum domains seems to be rising in July, with over 126,141 registrations taking place in the first week of the month. The spike appears to have come after the domain '000.eth' was purchased for 300 ETH (or USD 315,000) — the second-largest sale measured in both ETH and USD.
Last weekend saw a 200 percent rise in domain registrations, with over 108,000 registrations, as per data by ENS developer Nick Johnson. Spurred by these sales, Ethereum Name Service's (ENS's) daily revenue rose to over USD 680,000 – rising by as much as half a million dollars.
On Monday, the registrations peaked at 34,457, pushing ENS to the top of the seven-day non-fungible token (NFT) sales collection, as per data from Dapp Radar. Simultaneously, ENS's social media mentions also saw new highs, with the engagements rising over 100 percent within a week, as per data from Lunar Crush.
But what is ENS, and what's behind the sudden spike? Let's find out.
What is Ethereum Name Service (ENS)?
The ENS is an open and distributed naming service and the domain name protocol built on the Ethereum blockchain. Essentially, it is a lookup system that links information to a name. ENS allows users to create a simple username for all their wallet addresses and decentralized websites.
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These names are similar to domain names on Web2 and are sold as NFTs. They aim to replace a wallet's private address with a human-friendly name that is easier to remember. For example, it can map machine-readable wallet addresses like '6f867cm28ih8wk' to a human-readable name such as 'XYZ.eth'.
ENS allows crypto users to buy and manage their own domain/usernames on Ethereum. It aims to simplify decentralized transactions without putting the users through the hassle of remembering long-winding, machine-readable addresses. Replacing wallet addresses with domain names also decreases the chances of input errors while typing the address.
In a way, it is very similar to the Domain Name Service (DNS). DNS replaces IP addresses with human-readable tags we know as URLs. Before the invention of DNS, users had to remember complex, machine-friendly IP addresses to browse the internet.
Why are ENS registrations spiking now?
As per Delphi Digital, the spike could be due to '000.eth' being bought for 300 ETH, a record-breaking number. This event may have triggered a chain reaction of purchases, causing a spike in registrations. At the same time, gas fees on Ethereum fell to single-digit levels in the past few days.
On July 3, 2022, Ethereum's average gas fee fell to $1.57 — a number not seen since 2020. Gas fees are the transaction charges for nodes to approve any transaction. It is also one of the roadblocks to Ethereum's mainstream dominance.
In the past two years, Ethereum's average gas fee has barely slid below USD 40, nearly touching $200 in May 2022. However, the narrative seems to be changing now. The gas fee had surged as a bull rally gripped the markets, and the hype around NFTs and decentralized finance (DeFi) spiked.
Now, the crash in gas fees has occurred at a time when daily NFT sales have dropped to one-year lows amid a ruthless bear market. June was the worst month in 2022 for NFTs, as daily sales fell to 2021-levels of 19,000 per day. In September 2021, daily sales were the highest at 224,768 NFTs per day.
First Published: Jul 7, 2022 8:31 PM IST
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