Ethereum Name Service. What is it and why is it so expensive?
By Alex Panasenko 2686 8 Jul 2022
A short, distinctive, memorable domain instead of a long, unsightly, and complicated ETH address. It is the idea (plus some other interesting and useful features) implemented in ENS, a decentralized domain name service.
Why do you need ENS?
So, the first thing is convenience. Every owner of a cryptocurrency wallet can “stake out” a customized user address in the Name[dot]Eth format, to which can be linked some information that belongs to him/her and is recorded on the blockchain. This can be NFT and any other digital assets.
Today such domains are owned not only by influencers like Paris Hilton and Vitalik Buterin but also by thousands of ordinary blockchain enthusiasts. Of course, this is not done for free. And the cost of exclusive domains can reach several hundred ETH. It’s just like a “poser” license plate.
The second is security. ENS functions on smart contracts, so failures, backlogs, or errors during transactions are practically excluded. The developers also point out the high resistance of ENS to censorship. And it is more difficult to confuse an address like Vitalik.eth with another address.
The third point is a benefit. If ENS domains are well promoted and commercialized, they can be in high demand on the secondary market, being sold as ordinary NFTs. In the early days of the technology, many speculators tried to make money on the resale of catchy ETH names.
How does ENS work?
Everything old is new again. Ethereum Name Service works on the same principle as the DNS (Domain Name Service). By using DNS, a user can access any website just by knowing its domain name, which is essentially a more manageable form of IP address. The DNS will then map the domain to its assigned address and allow access to the corresponding page*.
*By the way, this is the principle used by hackers for phishing. If scammers manage to hide one incorrect or extra symbol in the domain name, the users may be misled. The fake domain will send them to a fake page that activates algorithms aimed at stealing their personal data. And, in that sense, ENSs look much more secure.
The only difference between ENS and DNS is that it is not the website that is identified but the information recorded in the NFT. Perhaps the most ideologically similar financial technology to ENS that you have probably come across is Apple Pay. Your grandmother may still think you pay with your phone (even though we know you also talk to your watch 🤭)
Why is it so expensive?
The shorter the ENS domain, the more expensive it is. A recent case everyone likes to mention now is the 000.eth address, for which 300 ETH was paid, which at the current exchange rate was more than $300,000. However, this amount is almost 50 times less than the record examples.
You should also know that ENS functions as a DAO, so there is a practice of auctioning ETH names where users can bid, which makes the final price rise to the size of the best offer.
But the truth is also that “regular” domain names are pretty affordable. In addition, they can be leased for one year rather than bought. ENS domains gained the image of “expensive” through high-profile and large deals.