Exploring the status of the ENS . project

• main content
• About the ENS . project
• Performance analysis
• Using
• Revenue
• Qualitative analysis
• Administration
• Treasury
• Epilogue

main content

Ethereum Name Service (ENS) allows users to interact with wallets through a simple, easy-to-remember domain name, instead of a complex string of wallet addresses..

Despite the market weakness, ENS monthly active addresses have remained steady. Despite a 33% drop from the May 2022 peak, the number of monthly active addresses is still 2.5 times higher than at the same time last year.

ENS domain name registrations hit an all-time high of 1.12 million in Q3 2022, up 71% from the previous quarter. At the same time, the number of renewals has tripled QoQ to over 100,000 in Q3 22.

Revenue from ENS name registration and renewal is down 17% QoQ in USD (30% increase in ETH).

ENS treasury holds US$185 million in unlocked funds and over US$1 billion in locked cryptocurrency.

About the ENS . project

Handling blockchain addresses is error prone. That's because blockchain addresses consist of a series of alphanumeric characters, such as “0x57f1…” For humans, this is obviously an inconvenience. Ethereum Name Service (ENS) allows users to interact with blockchain addresses via human readable domain names. ENS provides a user-friendly solution when it comes to substituting blockchain addresses for easy-to-copy domains.

In contrast to a regular Web domain, an ENS domain has the following characteristics:

• Can be used as a payment gateway 
• The contents of the ENS domain cannot be deleted

At its core, ENS operates on a hierarchy of names. A top-level registry is implemented as an on-chain contract that holds records of each ENS domain (e.g. messari.eth) and subdomains (e.g. subgraphs.messari.eth). The ENS registry controls domains and manages the distribution of subdomains. The translation from ENS domains (e.g. messari.eth) to corresponding blockchain addresses (e.g. “0x6fA2…”) and vice versa is done by smart contracts called resolvers.

Performance analysis

ENS Quarterly performance can be assessed in terms of ENS domain usage and in terms of accumulated revenue.

Using

ENS domains can be registered and owned on a multi-year basis and the number of years chosen by the user (minimum one year, maximum eight years). Price and time period have a positive relationship: the price increases as the subscription period increases. To maintain ownership of the domain name, the user must renew it within 90 days of its expiration date. Unused domains after the 90-day grace period are available for registration.

ENS reached an all-time high of 1.12 million domain name registrations in Q3 2022, an increase of 71% compared to Q2. At the same time, ENS domain name renewals have tripled from 35,135 in Q2 to 105,546 in Q3. 

The increase in due dates in Q3, coupled with owners' willingness to keep their domains by renewing them before they expire, may have led to a corresponding increase in renewals. . This shows the overall level of engagement of ENS users.

Despite these registration increases and renewals, not all ENS domains are created equal. In fact, 3- and 4-character names appear less often than domain names with 5 or more characters. By default, it costs more to register and renew a 3- or 4-character domain name: $640 and $160 per year of registration, compared to just $5 per year for domains with 5 characters or more. go up.

In terms of ENS name length, domain names with 5 characters or more accounted for 1.06 million (96%) of the total 1.12 million registrations in Q3. Notably, with an absolute increase of 79% according to ENS. quarter from 0.6 million in Q2 to 1.1 million in Q3. The statistics also show that the number of domains with a character count greater than 5 grew faster than the overall ENS domain name registrations. . There are two potential explanations: longer domain names are cheaper, and popular 3- or 4-character domains are already largely registered. This combination of cost and scarcity resulted in an increase in the number of domain name registrations over 5 characters.

ENS sub-sales by character length show explosive growth in short-character names over the past two quarters. Even as the number of 3- to 4-character domain name transactions decreased from Q2 to Q3, the current transaction volume is still more than 10 times higher than Q1 this year. Despite the overall market weakness and lower liquidity, ENS is one of the few assets with strong sales, especially when it comes to scarcer digital assets. This increase in sales shows us the great potential of ENS domains with the investor community.

While sales of 3- to 4-character domain names are on the rise, the relative share of ENS registrations for 5-character domains and above has remained consistently above 90% over the past six quarters.

The number of 3- and 4-character domain name renewals has increased over the past six Quarters, accounting for 27% of total renewals in Q3. In contrast, the number of domain name renewals with 5 characters or more has been steadily declining. during the past six quarters. One potential explanation is that ENS name owners may want to keep 3- and 4-character names for a longer period of time, as they are rarer than 5-character domain names or more. This implies that 3- and 4-character domain names can represent a good long-term value asset class.

Potential performance metrics to account for ENS active addresses include one of three things:

• Have a registered or renewed domain name
• Commit to on-chain transactions
• Add metadata (such as an avatar, handle, link, or email address)

The data shows that ENS monthly active addresses are still growing strongly even as the broader Web3 market suffered a massive user drop in the past quarters. The current level of active addresses is still 10 times higher than in early 2021 and 2.5 times higher than a year ago, despite being down 33% from the all-time high in May 2022.

Revenue

ENS revenue is generated by charging two separate fees: the registration fee and the renewal fee.

In Q3, total revenue from both domain name registrations and renewals fell 17% in USD terms (up 30% in ETH). This was driven by a 27% drop in subscription revenue in USD from $18.6 million in Q2 22 to $13.6 million in Q3 22 (up 18% in ETH). In contrast, renewal revenue grew 66% in USD terms from $2.13 million in Q2 to $3.6 million in Q3 (up 127% in ETH). With two revenue streams, analyzing Q3 revenue at a more granular level provides a clearer picture.

In the past two quarters, the renewal of ENS domain names has seen a significant growth in the total revenue of the project. From a Q2 2022 low of 6% in May, the relative ENS domain renewal rate has quadrupled, representing 24% of revenue as of October.

One potential explanation for this growth is a spike in the number of ENS names released or expected to be released in the coming months.

While around 400 ENS domain addresses were issued in May, by August the number had increased 12 times to 4,900. As of October, more than 23,000 domain names have been renewed. The fact that a large percentage of ENS address holders are renewing their addresses may explain why the percentage of revenue from renewals has increased dramatically.

Another aspect worth considering when assessing ENS revenue is the type of subscription and renewal. Registering and renewing an ENS domain name with 3 – 4 characters is basically much more expensive than registering an ENS domain with 5 characters or more. As of September 2022, the average cost to register an ENS domain name can be grouped into three levels: $332 (3 characters), $92 (4 characters) and $7 (5 characters or more) ). Similarly, as of September 2022, the average costs to renew an ENS domain name are: $191 (3 characters), $66 (4 characters), and $6 (5 characters or more).

In Q2, people rushed to search for domain names with 3 or 4 characters. As the number of those types of ENS domains decreases, so does the chance of getting expensive names. With the ability to register these expensive names dwindling, the percentage of revenue that comes from registering 3 or 4 character domain names has dropped significantly in Q3 2022.

Qualitative analysis

Administration

ENS is run by a DAO with ENS native token holders. These holders can submit and vote on proposals.

The proposal to soon transfer ownership of treasury funds from multisig.ens.eth to the DAO contract at wallet.ensdao.eth resulted in ENS token holders being transferred governance of the protocol treasury.

There are three groups working in the ENS DAO: meta-governance, ecosystem and public goods. The Q3/Q4 draft budget overview describes the budgets for each group as follows:

Meta-Governance: $632,000, with a $200,000 allocation to support the ENS DAO engine, governance partnerships, and gas fee reimbursement. 

Ecosystem: $2,254,300, with the largest allocation of $1.5 million to support bug bounties, hackathons, gitcoin funding…

Public Goods: $430,650, with $173,000 allocated to the ENS DAO small grant program. 

Treasury

The ENS Treasury has grown 20% since its May low in Q2, reflecting the growth in ENS prices over the same time period. In total, the ENS Treasury holds $185 million in unlocked coins as well as an additional $1.07 billion in locked ENS tokens.

EP 2.2.4: ENS Grants: In September, the DAO recently submitted a request for proposals to find a fund manager to manage the treasury. The fund manager will take idle ETH and USDC treasury funds and deploy them with the goal of returning a minimum of $4 million per year to the DAO.

Epilogue

In terms of user experience, ENS has made a significant step forward for the entire Web3 space. ENS provides a user-friendly solution when changing blockchain addresses to easy-to-copy domains. Anyone can register and own an ENS domain every year. The number of ENS domain name registrations hit an all-time high in the third quarter of this year. At the same time, the number of renewals increased by 3 times compared to the previous quarter. It remains to be seen whether registrations and renewals will continue to increase, as more ENS names will be renewed in the coming months.

Despite the market weakness, ENS monthly active addresses remain strong. Despite a 33% drop from the May 2022 peak, the number of monthly active addresses is still 2.5 times higher than in the same period last year. This shows that ENS is being widely used at an increasingly fast rate. Although it is a very potential and unique project, the widespread application of ENS in the Web3 space still needs more time to get the answer.

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