What is ENS?
In crypto, sending a payment requires a long public wallet address composed of seemingly random digits and letters.
If that isn’t bad enough, users also have a different public address for every cryptocurrency they trade in. This can make it intimidating, confusing, and time-consuming for crypto beginners. ENS, or the Ethereum Name Service, is a system that links information to a name. Similar to the regular domain name service, or DNS, but applied to blockchain technology. Basically, it allows you to register a domain name for your wallet address.
Yet, and perhaps more critically, it also allows you to purchase an ENS domain that grants you access to secure, private, and censorship-resistant domains with the .eth suffix stored and accessed through the Ethereum network.
Although, Ethereum was just the start. Now, ENS aims to become the naming protocol of the decentralised internet as a whole, allowing users to create portable Web 3.0 usernames that are interoperable across all blockchains and DAPPs..
As such, ENS no longer supports just .eth domains or the Ethereum network, but in addition to interoperability among competing blockchains, ENS also now includes the most popular DNS suffixes like .com, .org, .io, .app, etc.
Before we get too deep into ENS, let’s quickly refresh ourselves on DNS.
Wait, what is DNS?
Back in the early days of the internet, the only way to access an internet page was to go directly to its IP address.
The Domain Name Service came about as a solution to the problem of computers requiring a complex, correctly inputted, seemingly-random collection of digits to access the desired page, and the human need for everything to be as simple as possible for it to become widely adopted.
The DNS system worked well, as evidenced by the fact we’re still typing in website addresses by their names, like Google.com, rather than their associated IP numbers today.
Effectively, ENS takes all of this simplicity and applies the same logic and principles that made DNS so successful on Web 2.0 and brings them to what is being called Web 3.0.
For example, instead of hoping you’ve copied in the correct wallet address to, for example, pay a freelancer – because, let’s be honest, to all humans, wallet addresses are mostly unmemorable and indistinguishable from one another – instead, you could make a payment direct to firstandlastname.eth.
So, who is ENS aimed at, really?
ENS appeals to the same people attracted to cryptocurrencies (before Elon Musk took it mainstream). There are many reasons why someone might want a secure, private, and censorship-resistant domain – the last point about censorship resistance is a key one.
In the West, censorship resistance is often overlooked as a benefit of blockchain technology. However, just this year, we have seen events like the last major, free, pro-democracy newspaper, TV station, and website terminated by a more authoritarian government, and as such the idea of data permanence is becoming increasingly important.
Naturally, this media station’s termination included the deletion of its internet content, which coincidentally had some rather unflattering articles about said government.🙃
As you can imagine, the thought of having a private, secure, immutable, and uncensorable website built-in with the functionality of always being able to receive crypto-based donations, regardless of what anyone says or thinks about it, is a massively appealing prospect.
At the moment it is mostly not currently used for this service, despite it being one of its major benefits.
Typically, the average person has a .eth domain name for two reasons.
Firstly: Because it’s novel or cool to own one
Secondly: As a way for content creators and brands to set up easier integration for crypto payments on their web 3.0 domains.
The same way DNS turned an incomprehensible string of digits into a format humans can remember, ENS is looking to do the same for blockchain technology.
What does this mean for the future?
Given crypto’s perceived difficulty being one of the main hurdles limiting widespread adoption, this could be a game-changer for public adoption.
Rather than looking up someone’s wallet address, if you know the persons specific .eth address, you can instead send money directly to them via that address, which is a lot more convenient and can save a tonne of paranoia in the process.
Ultimately, the easier it becomes for brands to understand and integrate into these new financial systems, the quicker mass adoption will follow.
Can you give me an example?
Let’s pretend you want to buy some newly-imagined “Nike NFTs.” Instead of copying a remarkably unmemorable address, something like
0xAb5801a7D398351b8bE11C439e05C5B3259aeC9B (which is Vitalik Buterin’s public wallet address, just in case you were curious,) through ENS, you could instead purchase, for example, let’s say, “NFT.Nike.ETH”.
Giving your customers more confidence when purchasing through your blockchain app, as they can be sure their money will reach the correct account.
The same way having to write down or memorising IP addresses was a hindrance that delayed the mass adoption of the early internet, we can see ENS as looking to solve that problem and replicate that same success within blockchain technology.
But ok, now you know why it exists, you probably want to know how ENS works. Fundamentally, ENS is built on two Ethereum smart contracts.
First is the ENS registry.
The registry is where all domains are registered. The domain owner, the resolver for the domain, and the caching time for all records under the domain are also stored here, alongside your crypto-URL.
The second is the ENS resolver.
Here, the unreadable strings of alpha-numerical randomness are transformed into more memorable addresses for humans.
This second contract is where each domain is matched with its corresponding user, website, wallet, or address.
So, how much does an ENS domain cost?
.eth registration costs are currently set according to the number of characters in your domain address. Domains with 5+ characters are $5 in ETH per year. Next, four-character .eth names start at $160, and lastly, three-character domains start at $640 in ETH yearly.
Anyone can register for a Web 3.0 domain or username through an auction process on the ENS app. Once the auction is created, a notification is sent to everyone actively following that name on the ENS domain page. After registering your interest, anyone can bid on that domain name for the following 72 hours. Unlike regular bidding, here, you only get to make one bid, your maximum bid.
Additionally, and for a bit of extra anxiety, the bid amounts are hidden until after the 72 hours has passed, meaning you don’t know what everyone else has bid before placing your own.
Furthermore, prominent brand names are also reserved so those looking to buy Facebook.ETH to sell back to Mark Zuckerberg later may be disappointed.
Anyway, after 72 hours comes the reveal process. During this process, you must “reveal” your bid to everyone else. Seemingly put in place as an anti-spam measure, as failure to reveal can burn the entire bid. While all is well and good so far, you may be questioning, but who owns ENS?
Remaining faithful to the founding principles of cryptocurrency, ENS is run by a DAO, or decentralised autonomous organisation. Meaning the community dictates the management decisions, with those who have the most staked ENS having the most say in the voting process.
In practice, three main types of governance proposals can be made.
Firstly, we have an executable proposal.
This is a proposal for a series of smart contract operations to be executed by accounts the DAO controls. For example, this would include allocating funding to a workstream multi-sig wallet or upgrading an ENS core contract. For executable proposals to be considered, they must have a quorum requirement of 1% and require a minimum approval of 50% to pass.
Secondly, we have the social proposal.
This is a proposal that asks for the agreement of the DAO on something that cannot be enforced on-chain. This could include a proposal to change the royalty percentage for the ENS secondary market on OpenSea, or a petition to the root keyholders. As with executable proposals, social proposals have a quorum requirement of 1% and require a minimum approval of 50% to pass.
Lastly, we have the constitutional amendment.
This final proposal type is another social proposal that asks the DAO to amend the constitution. As you can imagine, they come with a slightly higher threshold for approval, given the importance of a constitution. As such, they currently require a quorum of 1% but a minimum approval of two-thirds, or roughly 67%, to pass.
Before discussing a proposal, it must first go through what ENS calls their “temperature check.” This is where proposals are tested informally through discuss.ens.domains to see if there is enough desire among the community to change the constitution. If there is enough support, the next stage is the draft proposal. This is where you set to establish a formal discussion around a potential upgrade.
Once you have written out your proposition, including any coding required, and successfully debated its merits, it’s on to becoming an active proposal.
From there, a snapshot is taken, and a five-day countdown will begin. This is where it would be wise to get those on board with your proposal to show their support. For social proposals, after five days, that’s it. Either your proposal passed, or it didn’t.
However, if it were a constitutional proposal, it would now be put on-chain, though, to prevent spam, it comes with a heavy price tag of 100’000 ENS, worth roughly A$5.5million at the time of writing. As you can imagine, with such a high price tag, proposals to the constitution tend to be rare and occur only if significant.
If the proposal is as good as the creator claims, then it is believed they should be able to round up enough donations from the community itself to reach this high barrier for entry.
But there you go, now you are updated with what ENS is, who it’s for, and how it works. We hope you have found this article insightful. If you have, you may enjoy some of our other articles too.
Disclaimer: The information on this website is purely for information. Elbaite is not a financial adviser, and nothing stated here is to be taken as financial advice. You should seek independent legal, financial, taxation or other advice relevant to your financial situation before making any investment decisions.
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