Multi angle analysis of ENS: the key to the era of Web3
ENS (Ethereum Domain Name Service) has matured in technology and business, and operates infrastructure in the form of DAO. From the data, the short-term speculation foam of ENS is gradually digested, and there is much room for long-term imagination.
The traditional domain name market is saturated, and the Web3 domain name meets the new needs of users.The domain name market has grown rapidly in the past 20 years, but it is now close to saturation. In 2020, the scale of the global domain name registration market will be 374 million, with a year-on-year growth of 0.7%. The scale of China's domain name registration market will reach 43.08 million. Another domain name is emerging in the field of Web3. Web3 domain names are different from DNS domain names in terms of mapping objects, resolution methods, recording methods and ecological development. The Web3 domain name provides a readable name for the wallet address, which is a requirement that traditional domain names cannot meet.
Readable identity identifier, Web3 domain name is the cornerstone of DID development.Decentralized identifiers are the key to digital identity, but it is difficult to ensure readability while ensuring decentralization and security (Zooko Triangle Paradox). The identifier readability of Web3 domain name has significant social significance. At the early ecological stage, we can also see that when the Twitter name is changed to xx In ETH, the identity gap between Web2 and Web3 is bridged, and all the data associated with the user in the ecosystem can be seen through one name.
ENS (Ethereum Domain Name Service) has matured in technology and business, and operates infrastructure in the form of DAO.From the perspective of business income, ENS charges a fixed annual fee based on the length of the domain name registered. It is charged according to the number of characters in the domain name. The average registration price is about 28 dollars per year, with three characters of 640 dollars per year, four characters of 160 dollars per year, five characters and above of 5 dollars per year. In terms of technical implementation, ENS emphasizes the decentralization of domain name registration, without any third-party intervention, and achieves business logic through smart contracts. From the perspective of governance structure, the ENS project is still controlled by the core team, and governance is reflected in that the project income belongs to the community treasury and the use of funds is decided by the DAO.
From the data, the short-term speculation foam of ENS is gradually digested, and there is much room for long-term imagination.On the whole, ENS still has a foam of domain name speculation. The total number of domain names is about 2.35 million, while the actual number of users is about 550000, and the per capita domain ownership is about 4. However, from the perspective of the characteristics of domain name registration users, the proportion of merchant accounts holding a large number of domain names in total transactions has gradually decreased, and more and more are ordinary users of a small number of domain names. In the long run, Ethereum has 5 to 10 million live addresses per month, and there is still room for ENS to develop its income scale. From the perspective of tracking Web3, ENS is expected to become another phenomenal application after Opensea, and has the meaning of a lower level account, with a large imagination space.
The competition in the Web3 domain name market is intensifying, and the secondary transaction is worth looking forward to.According to the statistics of PANews, there are 16 domain names on the public chain, including both single chain solutions and multi chain domain name services. However, domain name registration requires consistent global records and ecological default compatibility, which has the characteristics of monopoly market. It is recommended to focus on the head project. With NFT as the carrier, Web3 domain name solves many problems of domain name conversion in the past, making the domain name more mobile. At the same time, due to the characteristics of open ecology, any platform and user can build their own secondary transaction applications. The secondary market of traditional domain names only accounts for about a quarter of the primary market, while the secondary market in the NFT ecosystem is more important. Whether it is entrepreneurship or investment, the secondary transaction of Web3 domain names is very noteworthy.
Risk warning:Code vulnerability risk; Blockchain policy regulatory risk.
Decentralized digital identity is another key component of the development of the meta universe after digital assets.In the last report, we discussed that DID is the core component of the meta universe. The traditional identity model of Internet fragmentation and user lack of control has been unable to meet the development of the digital world. Decentralized identity DID will be an important infrastructure direction of the meta universe. In our meta universe model, digital assets have been accepted by users with the emergence of NFT, and digital social relations with digital identity as the core will be the second half of meta universe deduction.
Name is the first step of identity, and domain name is the cornerstone of digital identity ecology.Although the decentralized identity is still in the exploration stage, the blockchain domain name led by ENS has basically matured in technology and business, and has become one of the infrastructure of the blockchain ecosystem. Compared with our common domain names, what are the differences between the domain names in the Web3 era? What user needs does it serve? How does it work?
The traditional domain name market is saturated, and the Web3 domain name meets the new needs of users
Traditional domain names are centralized device address tables.We can enter an IP address such as 184.108.40.206 in the browser to visit Baidu's home page, or click Baidu Com. In the earliest days of the Internet, users directly used IP addresses to access remote hosts; As the number of hosts increases, each computer uses an independent host table record (Hosts, used to record the mapping relationship between hosts and IP addresses in the network); However, with the exponential increase of networked machines, the updating and synchronization of host tables has become a big problem. So in 1983, Paul Mokapachos invented the domain name resolution service and domain name system. On January 1, 1985, the world's first domain name nordu Net was successfully registered. DNS, one of the core infrastructures of the Internet, is responsible for domain name resolution.
DNS resolves domain names through "hierarchical" queries.By accessing the DNS server and querying the distributed database, the domain name of the host (such as www.baidu. com) can be converted into an IP address (220.127.116.11). The DNS system is also a tree structure. Domain names at different levels are resolved by different domain name servers. The whole process is a "hierarchical" one. A domain name must be resolved by the root database before it can be transferred to the top-level domain name server for resolution, which is somewhat similar to the situation of asking directions in life. For example, in the 360.cn query, the root domain name server gives the address of the top-level domain name server responsible for the. cn query, and the cn top-level domain name service gives the address of 360.cn.
The operation of ecology requires three participants: ICANN, domain name management organization and domain name registrar.From the user's perspective, users directly contact domain name registrars, such as HiChina, GoDaddy, Cloudfare, etc. They purchase domain names from registrars, and the registrars manage and assist in resolution, as well as deal with many issues in the use process. Domain name registrars are corporate organizations responsible for the commercialization of domain names. They need to wholesale domain names from domain name management agencies and provide domain name services to make profits. The domain name management organization manages top-level domain name resolution, such as. com,. org Cn, etc. The domain name management organization is certified and managed by ICANN. ICANN (Internet Corporation for Assigned Names and Numbers) is a non-profit organization responsible for providing infrastructure for the Internet and managing the root domain name server to ensure that all addresses are unique and users can find valid addresses.
The traditional domain name market is almost saturated.With the rapid development of the Internet, the domain name market has grown rapidly in the past 20 years, but is now close to saturation. According to the data of the Chinese Academy of Information and Communications, by the end of 2020, the global domain name registration market size was 374 million, and the domain name registration market size in China was 43.08 million, of which the new generic top-level domain (gTLD) domain name registration market size was 31.252 million and 7.181 million, respectively, down from the previous year.
In the field of Web3, another domain name is emerging. "xxx. eth" account names are more and more popular in our social networks, including many influential social accounts. This form of name is "Ethereum Domain Name", a new form of domain name. Compared with traditional DNS domain names, what are the differences between domain names in the Web3 era?
ENS vs. DNS, understanding Web3 domain name from four perspectives
In comparison with DNS, taking ENS as an example, the differences of Web3 domain names are mainly reflected in four aspects: different objects, different ways, different carriers, and different ecology.
1) Different objects: server address vs wallet address
From the perspective of mapping objects, DNS mapping server and ENS mapping wallet address.Compared with a long random wallet address, ENS provides a definable human readable name (for example, 39; yourname. eth 39; maps to "0x01486C3891761E93e5107890286ABdC1834fC6d7"). Users can map blockchain addresses through ENS, which greatly facilitates user operations such as transfer transactions. Behind the wallet address can be a single user, an organization, a company entity, a blockchain project, etc. ENS provides a name for a digital entity.
2) Different methods: centralization vs decentralization
ENS records and resolves domain names in a decentralized way.In DNS, there are two ways to prove that you own a domain name: query the domain name registration information, and search the registrar's account. For second-hand domain name transactions, Web2 domain names can only prove their ownership through the records in the domain name registrar's (e.g. Godaddy) website. This centralized server is vulnerable to hacker intrusion and data loss, which has certain security risks. In addition, DNS domain names are not completely controlled by users, and the authorities and registrars can easily revoke the user's right to use them. The domain name of ENS is recorded on the chain, and any application or user can easily query and interact.
3) Different carriers: authoritative bookkeeping vsNFT
ENS records domain name property rights through NFT and uses NFT infrastructure.As an NFT, ENS naturally has advantages that traditional domain names do not have, including: transaction security is guaranteed based on blockchain transactions. The commission is low. Take Opensea, the largest NFT trading platform at present, for example, the commission for selling NFT is only 2.5%.The transaction procedures are simple.The buyer and seller only need to go to the NFT trading platform, use the Web3 wallet to connect and select the desired domain name to place an order. In the traditional domain name market, the secondary transaction process is cumbersome, and the security and cost are not satisfactory. The market lacks standardized liquidity infrastructure, often requires intermediary matchmaking, and charges a lot of commission fees. At the same time, there is a certain risk of default, and cross regional transactions will be difficult to safeguard rights. Take Godaddy, one of the largest second-hand domain name trading platforms at present, for example, about 20% of the platform commission is required to sell domain names.
4) Ecological difference: permissive vs. open
Web3 domain name ecological open construction can attract more participants.ICANN is the authority responsible for domain name resolution in the DNS ecosystem. Participants need to obtain permission from ICANN and have certain barriers to entry. In Web3 domain names, smart contract based domain name recording and resolution allows everyone to participate in ecological construction, such as building their own domain name trading website, domain name query service, etc. This open construction is also one of the core spirits of the Web3 industry.
Readable identity identifier. Web3 domain name is the cornerstone of DID
Zooko triangle paradox, decentralized identifier and readability are difficult to both.In the Internet identifier, the "Zooko Triangle Paradox" refers to the fact that the three characteristics that the participant name should have in the network protocol are difficult to realize simultaneously:
1) Human readability.Provide users with meaningful and memorable names.
2) Security.The damage that malicious entities can cause to the system should be as small as possible.
3) Decentralization.Names are correctly resolved to their respective entities without using central agencies or services.
Zooko conjecture is a summary of reality. For example, DNS realizes human readable and secure access, but it is centralized; Although the wallet address has achieved decentralized and reliable identification, it lacks human readability Although the onion address is a secure and decentralized access address, it also lacks readability.
Making identifiers human readable is the key to the development of DID.Decentralized identifier is the key to digital identity. Decentralization means that the identity mark is reliable and will not be erased by centralization or tampering. Human readability is the key to the development of social networks. Not only machines need to know "who the user is", but also people need to know. This demand is reflected in the picture of NFT as an identity symbol. The ENS can solve the Zooko Triangle well. The ENS has human readability, which ensures its decentralization and security. Although it is still in the early ecological stage, we can see some potential application scenarios.
The domain name serves as the nickname of the social account, connecting Web2 and Web3.Traditional wallet addresses are complex and error prone. No one will use a long string of numbers and letters as their social facade. The blockchain wallet address with their own name makes it easier for people to display themselves. More and more Twitter celebrities begin to use eth as their Twitter name. For example, Vitalik, the founder of Ethereum, changed his Twitter account to vitalik Eth, this behavior connects Web2 and Web3 accounts. You can not only browse the historical content of Vitalik account, but also query various behaviors on his address.
The domain name is used as a personal web address and accessed through a browser.The ENS can support users to deploy Web3.0 websites on IPFS and resolve the address through the ENS domain name. In addition, ENS also integrates all DNS domain names. Users can import traditional DNS domain names (such as google. com) into ENS and use the same functions as ENS. In addition, ENS also supports the EIP 1577 specification, which can store content hashes of IPFS/IPNS, Swarm, Onion, SIA and other addresses, and finally realize the complete decentralization of traditional domain names and Web3 domain names.
The domain name serves as the personal identity data set and the business card of Web3.Information integration can also be carried out in traditional Web2 websites, but the difference is that Web2 website servers are centralized, and the decision of information lies in the website rather than in the hands of users. However, through IPFS integration, users can establish personal decentralized website accounts, and integrate identity information data by combining the ENS name, NFTAvatar avatar, Web2 social media such as Github, Twitter, Discord, and other information such as the content hash of tax records. Users can even print the ENS name as their business card for offline communication to further open up online and offline identity authentication.
ENS Ethereum domain name service, Web3 infrastructure in DAO mode
With the rapid growth of ENS registration, the decentralized domain name infrastructure deserves attention.Ethereum domain name service is a distributed, open and extensible domain name service protocol based on Ethereum, which provides users with Ethereum domain name related services. Only one Ethereum account is required to purchase domain names and bind them to your own account. At present, there are more than 400 mainstream Ethereum projects supporting ENS resolution. When users access and inject Web 3 applications such as Uniswap and Etherscan, they can see that their account is no longer a long list of address characters, but a domain name they choose to purchase.
Recently, the number of domain name registrations of ENS has exceeded 2.35 million. Compared with the number in May, the number of registrations has doubled. The Ethereum domain name service has been used by more and more Web3 users. What is the business model and operation mechanism behind it worth paying attention to?
ENS DAO - How does the decentralized domain name service work?
From the perspective of business income, ENS charges a fixed annual fee based on the length of the domain name registered.At present, ENS charges according to the number of characters in the domain name, which is 640 dollars per year for three characters, 160 dollars per year for four characters, and 5 dollars per year for five characters and above. The registration fee is currently set by the team, and the price oracle is set to quote the smart contract. The account owner can renew the account at the original cost. When the domain name is overdue for more than 90 days, it will enter the auction mode, and the price will automatically drop. For registrable domain names, ENS only supports domain names with 3 characters or more. According to the data in August, the income of 5 characters and above was about 2.8 million dollars, accounting for 60.3%; The income of four characters is about 800000 dollars, accounting for 16.5%; The revenue of 3 characters is about 1.1 million dollars, accounting for 23.2%. In addition, ENS has no other income.
From the perspective of technical realization, ENS emphasizes the decentralization of domain name registration without any third-party intervention.The main functions of ENS are to realize business logic through three smart contracts, open source code and transparent process. The Registrar contract is mainly responsible for recording the domain name ownership, duration, parser and other key information, which is controlled by users in the NFT way to ensure the ownership of users. The resolver mainly implements the domain name to address resolution, while the controller controller is responsible for domain name sales, updates and other business logic. Through the oracle machine quotation, the user interacts with the contract to complete the process of payment and domain name acquisition. The distinction at the contract level is to ensure decentralization, in which the registrar is as simple as possible without change, but the security of ownership will not be affected when front-end business oriented contracts such as controllers are upgraded according to market conditions.
From the perspective of governance structure, the ENS project is still controlled by the core team, and governance is reflected in that the project income belongs to the community treasury and the use of funds is decided by the DAO.The project took a snapshot of the contract interaction before October 31, 2021, and carried out air drop on this basis. 25% of the air drops were to users holding domain names at that time, 25% were to hundreds of contributors (18.96% belonged to 11 core members), and the other 50% belonged to the community treasury. ENS has no external financing except for the sponsorship of the Ecological Foundation, so there is no proportion of investment institutions in the air drop. The treasury revenue mainly consists of two parts: the first part is the air drop part, which will be gradually unlocked and sold for project development within four years; The second is that the income of the project belongs to the treasury, which is jointly proposed and voted by the community to support the activities of the ENS ecological project, such as sponsoring ecological projects, holding offline activities, Hacker Pine, and so on.
Interpretation of ENS from the perspective of business model: domain name business constructs the margin of security, and traffic entry brings ecological imagination
From the perspective of business income, the domain name income with user stickiness constructs the safety margin of the project.ENS charges a fixed annual fee for a single registered domain name. According to the length of characters, the average annual income of the project is [the number of domain names registered × Average annual registration fee], the average annual income of domain names in the past year is 27.3 dollars, the current registration volume is about 2.35 million dollars, and the annual income can be about 64.15 million dollars. The domain name business has strong stickiness, while the ENS domain name mapping identity will be strengthened with the development of digital identity.
As a traffic portal, domain name business brings imagination to the ecological development of ENS.DNS domain name registrars often rely on the domain name as a traffic portal to develop other businesses. For example, Cloudfare provides security services for building websites, but only sells domain names at wholesale prices. Godaddy not only provides users with the whole process of domain name service, but also provides a complete set of tools for enterprise information operation. After users purchase the domain name, they can quickly choose convenient value-added services such as website deployment and mailbox building. As a well-known DNS domain name service provider, GoDaddy's domain name service revenue currently accounts for only 47% of the total revenue. The same is true of ENS. At present, in addition to the core functions of domain name sales, ENS is also developing mobile terminals. A set of mobile domain name management and query applications may not be so far away from the social address book of Web3.
Interpretation of ENS from data: short-term digestion of foam, long-term huge space
Judging from the transaction structure, the hyped foam is being digested, and the actual number of users is beginning to expand.On the whole, ENS still has speculation. The total number of domain names is about 2.35 million, while the actual number of users is about 550000, and the per capita domain ownership is about 4. according to Dune@andrewshvv By comparing the turnover of domain name merchants with that of ordinary users, the turnover of ordinary users is rising steadily, which means that more registered users are ordinary users or new users with fewer domain names. With the further expansion of domain name application scenarios, the proportion of domain name speculation will further reduce.
From the overall data of the industry, ENS has a large growth space and benefits from the expansion of Ethereum.In the long run, the number of ENS users will account for a certain proportion of the number of Ethereum users, which is affected by the importance of digital identity ecology. Due to the anonymity and decentralized generation of Ethereum addresses, there is no clear number of users, and the number of active addresses is often used. The monthly number of active addresses of Ethereum in August is 6.7 million, and the number of active addresses in 2021 is about 50 million. At present, the number of users of ENS is 550000, and the number of registered domain names is 2.35 million. Compared with tens of millions of Ethereum users, there is still nearly ten times the growth space. However, with the expansion of Ethereum and the gradual expansion of Web3's influence, ENS has steadily benefited from the growth of Ethereum users.
Compared with traditional domain name registrars, ENS has a promising future and can focus on three important growth points in the future:(1) Based on the ecological expansion of domain name business, can we rely on the entrance advantage of domain name business to strengthen the ecology; (2) Whether the proportion of Ethereum users can become the demand of Ethereum users; (3) The number of new users brought by Ethereum's ring out and Layer2 expansion. At the same time, we believe that the community treasury in the ENSDAO token mechanism is more similar to the regular additional issuance plan in the future, and should not be fully included in the total market value.
The future of Web3 domain name
Competition is fierce, and domain name registration is easy to monopolize. According to the statistics of PANews, there are 16 domain names on the public chain, including both single chain solutions and multi chain domain name services. The number of UnstoppableDomains registered reached 1.9 million. In the DNS era, domain names are managed by ICANN authorities, and there are also domain names that are not under the jurisdiction of ICANN. However, other applications in the Internet ecosystem often cannot identify non ICANN registered domain names. Domain name registration requires globally consistent records and ecological default compatibility. It has the characteristics of monopolizing the market. It is recommended to focus on the head.
NFT, secondary transaction is worth looking forward to.With NFT as the carrier, Web3 domain name solves many problems of domain name conversion in the past, making the domain name more mobile. At the same time, due to the characteristics of open ecology, any platform and user can build their own secondary transaction applications to provide personalized services, further promoting liquidity. At present, the ENS also has some play methods such as 3digitDAO (the dao of the 3-digit domain name). The combination of NFT and domain name brings a space for play exploration.
Blockchain policy regulatory risk:At present, the blockchain is in the early stage of development, and there are some uncertainties in the supervision of blockchain technology, project financing and tokens around the world, so there are uncertainties in the development of projects of industry companies.
The development of decentralized digital identity is not as expected:Decentralized digital identity DID is currently in the exploration period of the industry. Although the market demand is prominent, it is uncertain whether the DID solution can be widely adopted by users.
The number of real users of Ethereum is less than expected:The anonymous and decentralized generation of Ethereum accounts (key pairs) makes it difficult to count the real users behind them. One person can control more accounts through scripts, so the number of active addresses and addresses with non-zero balance may not reflect the real number of Ethereum users. The business development space of Web3 domain name service is directly affected by this factor.
Author: Song Jiaji, Tang Yao; Jishi Communication
Original text: From DNS to ENS, the Web3 era of domain names