The advantages of web3 domains, in addition to why speculation might be problematic
- 6 minutes read - 1085 words
Table of Contents
Like in Web 2.0, web3 domains are helpful to make resources like websites or wallets accessible for users. Domains do replace a technical address with a human-readable and recognizable name.
Since Internet Domains exist, there also was a virtual land grab; this is also true for web3 domains. The land grab is even amplified by marketplaces simplifying trading domains.
How the ENS/web3 domains function
ENS domains function similarly to traditional domain names. Still, with the new web3 infrastructure, they can also create decentralized applications and websites and store data or files on the blockchain.
The Ethereum Name Service (ENS) is a domain naming system built on top of the Ethereum network. It allows users to create addresses or usernames that are memorable and distinctive. It uses Ethereum smart contracts to supplement regular DNS and manage domain name registration and resolution.
ENS allows users in a distributed ecosystem to create a single username that can be used for all of their wallet addresses, decentralized apps, and websites.
Registrar, Registry, and Resolver
The three types of smart contracts used by ENS are the registry, registrars, and resolvers.
The database
The registry is the ENS’s top-level contract. It keeps track of all domain names and their smart contracts. It also explains how to set up and maintain a.eth domain name, such as who can do it, how long it lasts, how to renew it, and so on.
The registrar
A registrar is a service that allows users to register and manage.eth domains. It contains domain names and will enable users to create subdomains based on predefined rules.
A permanent registrar and controller allow name owners to outsource their names. Currently, there are two types of registrars: open and auction.
The resolver
A resolver is a contract that demonstrates how an Ethereum address is linked to a.eth domain name. The resolver returns the corresponding Ethereum address when users type an address or username into their browser or wallet. The resolver contract is set up by the domain name’s owner and can be changed if the mapping needs to be changed. In a nutshell, the resolver keeps track of how each character is associated with a record.
Features of the Web3/ENS domain
ENS domains, like ICANN Internet domains (.com, etc.), allow users to use a domain to represent themselves or their brand by using unique identifiers.
Registration of names
Any name (company name, brand name, etc.) can be registered on the ENS the same way a domain name can, but on the blockchain. ENS domains can be bought from Unstoppable Domains .
Identity administration
The ENS can be used to manage digital identities and avatars decentralized, giving users control over their data. The ENS can have a decentralized reputation system that allows users to rate each other based on how they interact.
Certificates
The ENS can be used to issue and verify credentials decentralized, allowing users to verify the authenticity of a certificate without relying on a central authority.
Privacy
ICANN domains were previously registered with personal information; however, the privacy of domain ownership has improved over time. Either through the law or by providing privacy services. By default, web3 domain names can be registered anonymously.
ENS Applications Crypto wallets
Because the ENS supports all cryptocurrencies, it can be used to trade and store cryptocurrency wallets.
decentralized Apps
A web3 domain name can be used to create and host a website. Web3 app hosting necessitates using a front-end service (such as an app or HTTP server), with the blockchain serving as the backend. The frontend server can be a Node.js server or IPFS-based (Interplanetary File Service).
End-to-end encryption of messages
When a user registers an email address with ENS, they will be able to send an encrypted message to another user . Only the recipient can read the news after it is on the blockchain. The performance of the blockchain service limits the message volume.
Token exchanges and transactions
Because each token is represented by its own ENS domain name, two users can trade different tokens without needing a central exchange. ENS domains also can be sold at OpenSea . You can send money from wallet to wallet using a domain name rather than the wallet id (which is somewhat cryptic).
Prices for ENS/web3 domains
ENS/web3 domain prices fluctuate far more than Internet domain name prices. Internet domain names follow a classic price curve that describes market saturation in a highly competitive market.
They gradually get closer to a low price. Some domains are much more expensive than others. Domain names are three or fewer digits long, such as “name.com.”
The costs per domain are lower and more predictable when compared to web3 domain names . ENS/web3 domain names are priced based on speculation and the exchange rate between Ethereum and the US dollar.
As a result, eth domain prices began to fall in the first half of 2022. The fact that web3 domains can be traded on NFT platforms such as Open Sea also contributed to price fluctuations. They are classified as speculative assets.
Domain names are marketing tools that help human users gain access to services. They do convey a brand. It’s as if your brand’s color or the paper’s cost determines your digital marketing efforts. Price fluctuations benefit speculators but are harmful to any planning.
In June 2022, four-digit.eth domains sold for the equivalent of 6,000-7,000 USD. Most of them were selling for less than 1,500 USD by June. Three-digit domains that were once worth 50,000 USD or more are now worth less than 15,000 USD.
There are also web3 domains for other Blockchains, for example, for Solana , which are not compatible with Ethereum domains.
Conclusions
By replacing cumbersome alphanumeric codes with user names that people can understand, ENS contributes significantly to making blockchain technology less complicated—making the user experience easier will also result in more people using the technology and the beginning of web3.0.
Internet domain names move along a price curve representing market saturation, becoming less expensive over time. In 2022, ENS domain prices plummeted dramatically. Changes in prices benefit speculators but harm planners. Buying a domain becomes gambling.