first level title
Original compilation: BlockTurbo
The main points
Ethereum Naming Service (ENS) allows users to interact with wallets via human-readable domain names;
Despite market weakness, ENS monthly active addresses remain strong. Although down 33% from the peak in May 2022, monthly active addresses still increased by 2.5 times year-on-year;
The number of ENS domain name registrations reached an all-time high of 1.12 million in 3Q22, an increase of 71% quarter-on-quarter. At the same time, in 3Q22, the number of renewals increased 3 times QoQ to over 100,000 times;
ENS domain name registration and renewal revenue decreased 17% sequentially in USD (+30% in ETH), due to a 27% decline in registration revenue in USD;
The ENS treasury holds $185 million in unlocked funds and over $1 billion in locked tokens.
Getting started with ENS
Dealing with blockchain addresses is prone to errors. This is because blockchain addresses consist of a series of alphanumeric characters, such as 0x57f1... which is by no means intuitive to us. The Ethereum Name Service (ENS) allows users to interact with blockchain addresses through human-readable domain names. ENS provides a user-friendly solution for mapping blockchain addresses to easily reproducible domain names.
Compared with ordinary web domain names, ENS domain names:
Can be used as a payment gateway - for example, to send money to sassal.eth instead of typing or copy-pasting a Sassal hex address.
They cannot be aborted, nor can their contents be deleted.
performance analysis
performance analysis
ENS quarterly performance can be measured in terms of ENS domain usage and accrued revenue.
Usage amount
ENS domain names can be registered and owned for many years, the number of years is selected by the user (minimum one year, maximum eight years). There is a positive correlation between price and time period: the price increases as the registration time increases. To retain domain ownership, users must renew within 90 days of expiration. Domains not renewed after the 90-day renewal period are available for registration.
ENS reached an all-time high of 1.12 million domain name registrations in 3Q22, an increase of 71% QoQ. Meanwhile, ENS domain renewals tripled from 35,135 in 2Q22 to 105,546 in 3Q22. The significant quarter-over-quarter increase in renewals must be understood in the context of expected expiration times when renewals occur.
image description
Source: Twitter
Despite the increase in registrations and renewals, not all ENS domain names are created equally. In fact, names of 3 and 4 characters appear less frequently than names of more than 5 characters. By default, it costs more to register and update 3- or 4-character names: $640 and $160 per year for registration, respectively, and $5 per year for names with 5+ characters. Within the range of name length, different character combinations have different rarities. The distribution of registrations and renewals relative to name length reveals ENS name holders perceptions of rarity.
In terms of ENS name length, names longer than 5 characters accounted for 1.06 million (96%) of all 1.12 million registrations in 3Q22. Notably, from 0.6 million in 2Q22 to 1.1 million in 3Q22, a 79% QoQ increase in absolute value, registrations of names longer than 5 characters grew faster than overall ENS registrations (71% QoQ ). There are two possible explanations: longer names are cheaper, and popular 3 and 4 character names are heavily registered. This combination of cost and scarcity has resulted in many more 5+ character names being registered.
ENS secondary sales by character length show the explosive growth of short character names over the past two quarters. Although the transaction volume of 3-character and 4-character names decreased from 2Q22 to 3Q22, the current transaction volume is still more than 10 times higher than that of 1Q22. Despite overall market weakness and low liquidity, ENS is one of the few assets that has seen strong sales, especially when it comes to scarce digital assets. The increase in sales means that the perceived value of ENS domains ranks high among digital asset users.
Despite an increase in sales of 3-4 character domains, the relative percentage of ENS registered domain names with 5+ characters has remained above 90% for the past six quarters.
Renewals for 3-character and 4-character names have increased over the past six quarters and accounted for 27% of all renewals in 3Q22. In contrast, renewals for domain names longer than five characters have been declining for the past six quarters. One possible explanation is that ENS name holders may want to keep 3 and 4 character names long-term, as they are rarer than names of 5+ characters. This means that 3 and 4 character domain names may represent good long-term stores of value.
Potential indicators of activity illustrating ENS active addresses include the following three:
Register or renew a domain name
Submit an on-chain transaction
Add metadata (such as an avatar, handle, link or email address)
income
income
ENS revenue is generated by charging two different fees: registration fees and renewal fees.
In 3Q22, total domain registration and renewal revenue was down 17% in USD (up 30% in ETH). This was due to a 27% drop in registration revenue in USD terms from $18.6m in 2Q22 to $13.6m in 3Q22 (+18% in ETH terms). In contrast, renewal revenue in USD terms grew 66% from $2.13 million in 2Q22 to $3.6 million in 3Q22 (127% in ETH terms). Given these two revenue streams, analyzing 3Q22 revenue at a more granular level yields a clearer picture.
Over the past two quarters, ENS domain name renewals have accounted for a significant percentage of total revenue. From a 2Q22 low of 6% in May, the relative share of ENS domain renewals has quadrupled to 24% of revenue as of October.
One potential explanation for this increase is a substantial increase in the number of ENS names released or expected to be released in the coming months.
While about 400 ENS domain addresses were published in May, that number had grown 12-fold to about 4,900 by August. As of October, more than 23,000 names are up for renewal. The fact that a large percentage of ENS address holders are renewing their addresses could explain why the percentage of revenue from renewals has increased substantially.
Another aspect worth considering when evaluating ENS revenue is the type of registrations and renewals. The cost of registering and renewing an ENS name of 3-4 characters is significantly higher than registering an ENS name of 5+ characters. As of September 2022, the average cost of registering an ENS domain name can be broken down into three tiers: $332 (3 characters), $92 (4 characters), and $7 (5+ characters). Likewise, as of September 2022, the average cost to renew an ENS domain name is: $191 (3 characters), $66 (4 characters), and $6 (5+ characters).
In 2Q22, people were scrambling to mint 3 and 4 character names and short words. As the number of these types of ENS names decreases, so does the opportunity to create expensive names. The share of registration revenue for 3- and 4-character names declined significantly in 3Q22 relative to 5+ character names due to the availability of these expensive names to register.
governance
qualitative analysis
governance
ENS is operated by a DAO governed by holders of the native ERC-20 token, ENS. Token holders can submit proposals and vote on them.
An early proposal to transfer treasury fund ownership from multisig.ens.eth to wallet.ensdao.eths DAO contract resulted in ENS token holders being transferred governance rights over the protocol treasury.
There are three working groups in ENS DAO: Meta Governance, Ecosystem, and Public Goods. Draft Q3/Q4 Budget Overview The budget for each group is described below:
Meta Governance: $632,000, with $200,000 allocated to support ENS DAO tools, governance partnerships, and gas reimbursement.
Ecosystem: $2,254,300, with the largest grant being $1.5 million to support bug bounties, hackathons, gitcoin grants, and more.
Public Goods: $430,650, of which $173,000 was allocated to the ENS DAO Small Grants Program.
treasury
ENS funding has increased by 20% since the May low in 2Q22, reflecting the increase in ENS price over the same period. In total, the treasury holds $185 million in unlocked funds and another $1.07 billion in locked ENS tokens.
EP 2.2.4: ENS Endowment Fund: In September, The DAO submitted a request for proposals to find a fund manager to manage the treasury. Fund managers will use idle ETH and USDC treasury funds for deployment, with the goal of returning at least $4 million to the DAO per year.
key event
ENS founder Nick Johnsons recent ENS town hall and Devcon presentations gave us a glimpse into the current state and key events.
Coinbase and ENS: Coinbase announced a partnership with ENS to create the cb.id username. Users can connect their existing .eth addresses or new cb.ids to build their Web3 profiles. Usernames are available through the Coinbase Wallet extension.
Summarize
Summarize
In terms of user experience, ENS has taken an important step for the entire Web3 field. ENS provides a user-friendly solution for mapping blockchain addresses to easily reproducible domain names. Anyone can register and own an ENS domain name for many years. The number of ENS domain name registrations hit an all-time high in 3Q22. At the same time, the number of renewals increased by 3 times sequentially. It remains to be seen whether registrations and renewals will continue to grow, given that many ENS names will be renewed in the coming months.
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