The month of May 2022 marked the start of a dismal period for the crypto community, with Ethereum and Bitcoin prices falling by as much as 40% and a host of other altcoins getting battered.
The declines were so steep that many analysts began to assert that the space had entered a new "crypto winter," similar to the one that gripped the burgeoning digital arena in 2014.
Non-fungible tokens (NFTs) weren't immune from the sell-off. Scores of NFT projects were forced to shut down and cut their losses as a result of Ethereum's price dip, and liquidity and sales volume fell across the board.
But as the NFT market cratered, one collection seemed to stand out. Starting in April, sales for the Ethereum Name Service (ENS) NFT collection skyrocketed.
By July, more than 1.86 million names had been registered and the community had amassed over 508,000 unique participants. Sales had also surged on OpenSea, reaching over $5,400 ETH for the month of July - completely upending the NFT space.
What is the Ethereum Name Service?
Founded more than two years ago by Nick Johnson and his team of developers, ENS describes itself as a “distributed, open, and extensible naming system” that runs on the Ethereum blockchain.
The purpose of ENS is to replace the long string of alphanumeric characters associated with Ethereum wallet addresses with human-readable names that make it easier to transfer ETH.
Much like the way that the Domain Name Service (DNS) of the Internet translates requests for names into IP addresses, making it possible to navigate to Amazon.com without entering a complicated string of numbers, ENS allows ETH users to easily find someone's wallet address.
For example, buying the word "thomas" on the ENS app would allow a user to replace an address in this format "2c894a01b56E7B26d947AD3," with thomas.eth (every domain ends in .eth).
It can be helpful to think of an ENS domain as a decentralized profile that eliminates third parties and establishes a user's digital identity.
Why Makes the ENS Project So Attractive?
An ENS domain is effectively a non-fungible token (NFT) that serves as an ETH wallet address, a cryptographic hash, or a website URL.
Since these domains exist as NFTs, an organic market has emerged that allows holders to buy and sell their addresses to the highest bidder, much like other NFT projects.
ENS domains feature words instead of pictures, a characteristic that sets ENS apart from other NFT collections and allows users to buy and sell names, words, and numbers all in one place, like a spectator sport.
However, like most success stories, there's more than one factor that has contributed to the success of the ENS project.
1.) Utility
The main reason ENS has generated so much interest is its utility. Although other NFT projects may offer holders access to tickets, the ability to enter an exclusive club, or merchandise from a notable brand, ENS gives holders utility immediately upon purchasing a domain name.
Those who buy their preferred name can establish their digital identity for years to come, and can also set their name as their wallet address, facilitating simpler ETH transfers.
2.) Status
It's no mystery that factors such as status and clout play a large role in human societies, with many people willing to shell out eye-popping sums of money to climb the social hierarchy. ENS is no exception.
ENS holders with the names of celebrities, sports teams, and rare numbers are viewed by other members as special and looked on with a certain degree of admiration.
Users can also set their domain name as their Twitter handle and other social media sites - associating their whole persona with their wallet.
Puma has already done this on Twitter, giving their brand an added appeal to the Web3 crowd.
3.) ETH Merge
For months now, rumors have been circulating in the crypto community that the long-awaited date of the Ethereum merge is imminent. The event, which is expected to occur within a few weeks, will switch the Ethereum blockchain from a proof-of-work consensus algorithm to proof of stake.
The merge is expected to speed up processing time on the blockchain and reduce Ethereum's carbon footprint - two characteristics that have been cited as drawbacks by ETH critics for years.
4.) Low Gas Prices
Like most other cryptocurrencies, Ethereum is in a bear market. While this means that NFT sellers are less likely to receive attractive offers, it also means that the blockchain is less busy, meaning that the cost to verify transactions is lower.
Speaking on the phenomenon, Jisu Park, founder of Sooho, a blockchain infrastructure company, said, "ETH gas prices are lower during this bear market environment. This poses the perfect opportunity for investors to register ENS domains at scale, as the primary cost of doing so is the ETH gas fee.”
5.) Record Sales
Many ENS holders have compared the current Web3 domain market to the first days of the Internet, where some early adopters made a fortune registering the names of large companies and then reselling them for a profit.
These users aim to buy coveted names of people and companies before the eventual mass adoption by the public. While this strategy may sound crazy to those unfamiliar with the ENS market, recent sales have given long-term holders reason to hope.
So far, there have been 27 $100K+ sales of ENS domains, with "000.eth" changing hands for a record 300 ETH ($322,000) earlier in the year.
Notable Buyers
Celebrities
Sales of ENS domain names have not been limited to the general public. Much like the Bored Ape Yacht Club, high-profile celebrities have bought NFTs in the collection, with Jimmy Fallon (fallon.eth) and Anthony Hopkins (AHopkins.eth) acquiring versions of their names.
Companies
A number of major corporations have also shelled out cash to buy their company names. So far, Puma (puma.eth), Nike (nike.eth), CocaCola (coca-cola.eth), Hublot (hublot.eth), the NBA (nba.eth), and PWC (pwc.eth), have all acquired their names.
Amazingly, Amazon.eth received an offer for $1 million last week from an anonymous wallet address on OpenSea. While the offer went unanswered and no transaction took place, many were left wondering whether the unknown bid came from Amazon itself.
Recently, the largest domain registrar in the world, GoDaddy (GCD.eth), also acquired their name and urged brands to "defensively register" their names to get ahead of the market and avoid paying massive prices down the road.
Top ENS Groups
Anyone looking to buy their own ENS name will need to create an Ethereum wallet (MetaMask is the most popular) and navigate to the ENS site. From here, users can connect their wallet and begin searching for names.
If someone has already registered your desired name, you can make an offer on the secondary market on OpenSea. Another helpful site is ENS Vision, a pioneer in the Web3 domain space that provides listings for ultra popular ENS categories, such as the 999 Club, 10k Club, and Surnames.
