Anand Sinha
+1 authors
5min read
Published on: Sep 16, 2024
#Crypto 360
#Blockchain
#Web3
The Ethereum Name Service (ENS) is a domain service on the Ethereum network that allows you create a simple and human-readable domain to access a wallet in the cryptocurrency ecosystem.
We recently reported about the integration of the Ethereum Name Service (ENS) with two leading payment services, PayPal and Venmo. The decision is set to impact over 270 million users in the United States. An increasingly popular service, the ENS is slowly gaining currency among Web 3.0 enthusiasts. Let's learn about the concept in detail in this blog.
To understand the Ethereum Name Service (ENS), we first need to draw an analogy and go back to the history of the internet. During the early days of the internet, there was no easy way to access a website. You couldn’t simply type in www.google.com to access Google’s website. Instead, you needed to enter the IP address to access Google’s website.
An IP address is a long string of numbers and symbols. One IP address is different yet strikingly similar from another IP address. This made it difficult to remember the IP addresses of different websites. Unless you were a nerd, navigating the internet in early years was more of a nightmare. Then arrived a system of domains in the form of human-readable and pronounceable letters which you could type in to easily access different websites.
Implemented in 1985, the Domain Name System (DNS) simplified the process of accessing different websites on the internet. Thanks to the DNS, you don’t need to type in 207.46.170.123 anymore to access Microsoft. You can simply enter www.microsoft.com to access the website.
The blockchain technology underlying the cryptocurrency sector is still in its initial stage as well. Each address in the crypto ecosystem is a distinct string of letters and numbers. For example, the address of its founder Vitalik Buterin’s Ethereum (ETH) wallet is 0xd8dA6BF26964aF9D7eEd9e03E53415D37aA96045.
Source: Getty Images
Given how sensitive this is, it seems obvious that even a minor typing error could lead to an unintended transfer of funds and such errors are common – and there is where the ENS comes in.
Recommended Read: Ethereum Explained
The way the introduction of domains made the access of different websites on the internet simpler, ENS aims to make the process of locating crypto wallet addresses simpler.
Let's take a practical example: if you want to transfer crypto assets to Buterin, you could simply transfer it to vitalik.eth* instead of 0xd8dA6BF26964aF9D7eEd9e03E53415D37aA96045. The domain is merely an example of the ENS service. Otherwise, it’s Vitalik’s virtual address.
Let's understand how this works.
As a blockchain product, the ENS is built on two smart contracts of the Ethereum network, namely the ENS Registry and the ENS Resolver.
Image: How the ENS works, by ENS
Here is how even you can get a blockchain domain with the ENS:
The ENS is a project of a Singapore-based organisation, ENS Labs Limited (formerly True Names Limited) that started operating in May 2017. The ENS token is the governance token of the Ethereum Name Service protocol. It is an ERC-20 utility token.
Related: What Are ERC-20 Tokens?
The ENS project airdropped ENS tokens in late 2021 to its users. It also established a decentralised autonomous organisation (DAO) for the management of its operations. The owners of the ENS tokens use their virtual assets to raise their voices on decisions such as a service price, protocol updates, and fund management within the treasury. ENS tokens can be exchanged for other cryptocurrencies on the crypto exchange. You can even redeem these tokens for US Dollar.
We earlier mentioned the integration of the ENS with PayPal and Venmo in the U.S. The announcement led to an immediate surge of 5% in the price of the ENS token as it was exchanging hands at $17.67 on the day. The ENS coin is trading $17.36 at press time.
Image: ENS/USD, by CoinGecko
ENS has a total market capitalisation of over $570 million. Out of its maximum supply of 100 million tokens, there is more than 33 million tokens.
Read More: Understanding Decentralised Applications (dApps)
The ENS is a prominent player in the Ethereum ecosystem that is gaining popularity due to the kind of service it offers. Ethereum's native token, ETH, is the second largest cryptocurrency with a total market cap of $280 billion. Bitcoin (BTC), with a market cap of $1.15 trillion remains the king coin within the crypto ecosystem.
However, there is one area in which Ethereum has managed to beat Bitcoin. Ethereum boasts of the largest number of decentralised applications (dApps) on its network. In fact, it hosts over 4,000 dApps and over 53 million smart contracts.
Despite the many good solutions being offered by several dApps operating on the Ethereum network, none of them has thought of replicating the DNS model in the crypto ecosystem yet.
It is only the Ethereum Name Service that thought of offering these services to the burgeoning crypto market. Naturally, it found a quick success and is still expanding.
Currently, the ENS has over 2.04 million domain names, 750 integrations, and 885,913 owners. It counts Coinbase, Base, GoDaddy, Etherscan, Metamask, and Arbitrum among its partners.
Image: Choosing a domain, by ENS
In May, the ENS labs proposed that the protocol expands to layer-2 (L2). Titles the "ENSv2," the project aims to re-envision its “architecture from the ground up.”
The move is expected to bring about the following benefits:
We will be keeping a close watch on any updates on the transition phase of the ENS.
How can I use the ENS service?
It is very easy to use the ENS service - follow these simple steps:
1. Use an Ethereum wallet, integrable with the ENS, to visit manager.ens.domains.
2. Look for a simple and easy-to-remember domain that is available.
3. Register the domain and confirm it with two transactions from your wallet.
4. As the domain gets registered with your wallet, you can even create subdomains for different kinds of web3 resources you hold.
This article is for informational purposes only and not intended as investment or financial advice. It contains opinions and speculations that are subject to change without notice.
The author and publisher disclaim any liability for decisions made based on the content of this article. Readers are advised to conduct their own research and consult a financial advisor before making investment decisions.
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