Thursday, September 21, 2023

Game case: Decentralized domain services are reflected in the progress of the industry


The emergence of Web3 functionality has been a boon for decentralized domain name services over the past couple of years, with millions of blockchain-based domains registered to date. Tough market conditions may have hindered exponential growth, but industry leaders believe utility-based adoption will continue into the future.

Web3 is fundamentally changing the way companies, brands and retailers serve customers, who are in full control of their data, wallets and identity online through blockchain ecosystems like Ethereum.

Decentralized domain names are valuable tools for users and businesses to integrate with Web3 functionality. From providing human-readable names that replace digital wallet addresses to serving as a decentralized profile across the Web3 ecosystem, decentralized domains offer an alternative to traditional domain services.

The Ethereum Name Service (ENS) and Unstoppable Domains are the two most prominent platforms serving the space, with over six million domain registrations since their respective inception. Both services saw significant increases in newly minted domains during 2021 and 2022.

Cointelegraph has come up with a few decentralized domain name platforms to gauge the current state of the industry, who is driving registrations and what the future holds.

2022 is under review

2022 is proving to be a huge year for both ENS and the Unstoppable domain, as both companies highlighted some key metrics from the year in correspondence with Cointelegraph.

ENS is a distributed, open and extensible naming system that runs on the Ethereum blockchain. It maps human-readable names such as “alice.eth” to machine-readable data such as cryptocurrency addresses and URLs.

ENS mimics traditional Domain Name Service (DNS) using dot-separated hierarchical names, known as domains, with the domain owner controlling it and any subdomains. An ENS domain is actually a non-fungible token (NFT) that acts as an Ethereum wallet address, crypto hash, or website URL.

ENS developer Makoto Inoue said the platform’s total official registered domain was 2.8 million as of January 2023, excluding any names registered after expiration. When subdomains and DNS names are included, that number rises to 3.9 million — excluding off-chain names like Coinbase’s internal domain solution for decentralized wallets and identities.

Nora Chan, Vice President of Communications at Unstoppable Domains, breaks down the premise of a blockchain-based domain name service. Unstoppable Domains offers Web3 domains on Polygon with no gas fee, providing an affordable way for users to create a secure and portable Web3 identity.

Domains can be linked to Ethereum and used for various purposes, such as sending and receiving cryptocurrencies, logging into hundreds of apps and metaverses, building decentralized websites and creating a Web3 identity.

The platform has registered 3.1 million domains to date, with 1.2 million registered in 2022 alone.

Measure growth in a bear market

Inoue and Chan reflect on the 2022 bear market conditions and offer different perspectives on their impact on decentralized domain registrations. Subdued market conditions have actually been a boon for ENS Records, as Inoue explains:

“During the bull market, high gas fees actually hindered the growth of ENS because registering a .eth used to cost $50-$100 when an annual one-year registration was only $5 a year.”

But with gas fees slowly dropping, ENS name registration has become more affordable. Inoue also noted that the discovery of “categories influenced the growth of ENS enrollments for 2022.”

This included minting ENS domains based on a list of names with common attributes such as “10K Club”, which are four-digit domain names from 0000.eth to 9999.eth; and ENS Domains from the Age of Formation, a selection of ENS names minted prior to June 2017 — before the rise of the popular CryptoPunks NFT pool.

Meanwhile, Chan acknowledged that the rate of registrations with Unstoppable Domains may have slowed in 2022. However, the 1.2 million domains registered in 2022 still represented more than a third of the total domain list.

Third party integration

Companies, brands and users are increasingly aware of the functionality of Web3. With the decentralized domain, users can carry their entire digital identity with them, pay for items on an e-commerce site, and collect NFT versions or add-ons associated with specific products in the real world.

As more of these services are plugged into Web3, ENS and Unstoppable Domains provide the infrastructure for companies and users to enter this new paradigm.

For ENS, the emergence of Coinbase’s prominent subdomain integration was the biggest third-party service integration story, according to Inoue.

Cross-Chain Interoperability Protocol (CCIP) is a global standard for developers to build services and applications that can handle and transmit information actions across multiple networks. The ENS developer said CCIP Read provides a way to store ENS names outside of the Ethereum layer 1, which reduces overall gas costs.

Chan highlighted that despite the recent cryptocurrency bear market, Unstoppable Domains’ broad integration footprint includes partners like Brave, Opera, Trust Wallet, and Etherscan. The company has also launched several Web3 top-level domains – including .x, .x, and .x. nft, .wallet, . crypto – with major brands and companies.

Unstoppable Domains’ work with saw the creation of the Web3 top-level .blockchain domain, opening up the potential 83 million users of who might be looking for a customizable blockchain domain or human-readable wallet address.

What’s in 2023 in store?

Subdomain registrations could increase in 2023 if Inoue’s predictions are correct. The ENS developer told Cointelegraph that continued development could give users more control over subdomains:

“2023 will see an increase in subdomain registrations. This will be driven by the release of the ‘Name Wrapper’, a feature for converting subdomains to NFTs (currently .eth is NFTs only), allowing the community to more easily sell and transfer subdomains.”

Inoue also highlighted subdomain integration with the likes of Coinbase as an adoption driver, making ENS names more accessible to users. It also lowers the gas costs of interacting with the Ethereum protocol, “making it gas-proof in a bull market.”

While the registration of these subdomains does not bring direct revenue to the ENS organization itself, Inoue said they are driving the overall adoption and usefulness of the protocol within the Web3 ecosystem.

Chan said the focus on creating more facilities, building partnerships and improving the user experience of the service will be key to continuing accreditation this year.

alternative point of view

Cointelegraph also spoke to Vasil Toshkov, founder and CEO of PeerName, whose platform was founded in 2014, to sell Namecoin-based .bit domains. The platform now sells a few Emercoin blockchain domains — including .coin, .bazar, .lib, and .emc — and currently manages about 8,000 domains.

Toshkov said PeerName sells “truly decentralized domains” to business sites and offers no NFT domains nor centrally managed services. It previously sold a more comprehensive range of domains from different platforms but now focuses on decentralized practical applications.

PeerName sold about 700 domains in 2022, with Toshkoff highlighting growing competition and high fees at the bull market end as major challenges:

“Our business does much better during a bear market. Then the competition with dummy domains disappears. Fees are low, and users can pay seamlessly. We also have users who buy domains for use, not as speculation.”

PeerName’s top selling domains include .bit, .coin, and .onion. The latter domain is not based on the blockchain but is used in the Tor browser and client system. Toshkov believes that the possibility of .bit domains also being integrated into the Tor project and the browser could lead to adoption.

“If this happens, the interest in them will be huge. These are the first and most decentralized domains based on the blockchain. Kind of like bitcoin, but for domains,” he said.

Cointelegraph has previously explored the prevalence of domain “hijacking” and “takeover,” which is led by imagined users who register domains with well-known brands or names.