ENS in-depth analysis: the leading position is unshakable but lacks a token empowerment mechanism

Editor’s note: This article was published on July 18. The data cited in the article are all previous data, which has been explained.

ENS provides decentralized domain name services and is expected to play a pivotal role in the Web3 era, but it is also constrained by the development of Ethereum itself.

Basic information of ENS project

Basic business situation

Ethereum Name Service (ENS) was launched on Ethereum in May 2017. The service provided by ENS is to map user-defined domain names with .eth suffix to user addresses. For example, when users need to transfer money, they can transfer money by simply entering vitalik.eth without entering a complex wallet address. When using wallets such as Little Fox to connect to the website, the user’s ENS domain name will also be displayed directly on the front end. Each ENS address is an ERC721 NFT, which can be traded in NFT trading markets such as Opensea.

ENS’s domain name service is priced according to the character length of the domain name.
Domain names ≥ 5 characters in length: $5 per year;

4-character domain name: $160 per year;

3-character domain name: $640 per year;

business data performance

The current total number of domain name registrations under the ENS protocol has reached 112w. At present, 500+ wallets or protocols have been integrated, and the number of users exceeds 40w.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

Among the total historical revenue of all projects, the historical revenue of ENS is about $56.7m, ranking 15th among all projects, with strong profitability. Unlike other protocols, the ENS protocol only generates revenue when users purchase or renew for the first time. For nearly 90% of players, they have a 90% probability that their annual consumption in ENS is $5.

Since ENS announced the airdrop, ENS’ revenue data has shown explosive growth, with revenue increasing by more than eight times in the past year. The revenue has exceeded $180w for 11 consecutive months.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

From the perspective of business structure, the new domain name registration fee is the main source of ENS revenue, and the new domain name registration revenue is more than 10 times the renewal revenue. Most of the current ENS revenue is incremental revenue.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

ENS registrations went through two bursts (as shown in the yellow circle in the image above):

In the first outbreak period, ENS announced the airdrop, and a large number of users temporarily participated in the “mixed” airdrop

The second outbreak period is the hype wave of ENS domain names starting in April 2022.

With the influx of users who try it, especially domain name scramblers who buy ENS domain names on a monthly basis, the average registration time of ENS has also been diluted. The current average user registration time is 1.64 years.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

ENS was founded in 2016 by Nick Johnson, a former software engineer at Google. Initially, ENS was a side project authorized by the ETH Foundation, and then the ENS team was established with the support of the ETH Foundation. There are currently 16 team members. Team member team CEO × 1, CTO × 1, “customer service” × 1, community × 1, consultant × 1, technology × 7.

ENS has not made any investments since its inception. Donations are only available from the ETH Foundation, biance_x, etc.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

Partner

There are currently 500+ projects that have integrated the ENS protocol, and almost all of the well-known projects have integrated the ENS protocol. And the integration of the ENS protocol is becoming standard.

Among them, there is a sign of an important partner that cannot be ignored is that every user who changes his twitter username to a .eth suffix. These include crypto twitter V, ordinary retail investors, VCs, project parties, and even traditional brands such as PUMA.

The net name with the .eth suffix comes with a web3 identity tag, allowing various users to “emphasize” their web3 attributes invisibly. And every user with the .eth domain name suffix is ​​a living sign of ENS.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

ENS business data

Valuation driving force

If the valuation of ENS shows explosive growth in the future, what factors will drive it?

Revenue (business): The number of ENS domain name sales continues to skyrocket

Functional side (imaginary space): ENS domain names will play an important role in the future web3

The revenue of ENS business can be divided into two parts: stock and incremental:

The stock income is the income brought by the user renewing the domain name they hold

Incremental revenue refers to the revenue from new domain purchases by users

At present, the ENS protocol has entered a period of rapid expansion, and the number of new ENS domain name registrations continues to grow.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

Judging from the revenue component data of the past year and a half, the amount of renewal revenue of old users has increased significantly and steadily, accounting for about 10% of the total revenue.

ENS domains are currently more of an identity tag. The account function that ENS actually represents has not yet been fully explored. In the web2 era, not everyone needs a domain name, but in the web3 era, a wallet address is essential to enter the web3, and ENS will have a vast market in the future. With the gradual improvement of web3 infrastructure and the prosperity of the ecosystem in the future, ENS will become an important part of DID. ENS will have a large space for imagination in the future web3 world.

competitor

As the only .eth domain name seller in ETH ecology, ENS has exclusive franchise and monopoly rights. As a domain name provider, there are no competitors on ETH, and it is difficult to have competitors in the future. At present, the brand of ENS has been deeply rooted in the hearts of the people as the default standard of the project. Due to the current brand advantages, ecological advantages, and especially the first-mover advantage of ENS, it will be difficult for any competitor to compete with it in the future.

Token Model Analysis

ENS tokens were first issued on November 9, 2021, with a total of 100 million tokens. The distribution of tokens is as follows:

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

5kw (50%) treasury [4 years unlock]

    • Released at 10% DAO

2.5kw (25%) airdrop to users (>137k accounts) [release immediately]

    • Only 1.96kw (78.5%) was claimed.

2.5kw (25%) airdrop to ENS contributors (100 individuals and groups, plus hundreds of Discord users). 【4 Years Unlock】

    • 18.96% Core Development (11 people)
    • 0.58% Lauch Advisors (2 people)
    • 1.25% Future Contributors
    • 1.29% Extemal Contributors (17 players)
    • 0.05% Translators (13 players)
    • 2.5% Select Integrations (54 people)
    • 0.25% Keyholders (10 people)
    • 0.125% Active Discord Users (> 400人)

The annual inflation rate is at most 2%, and the exact amount is determined by the DAO.

In general, ENS airdrops 50% of the total tokens to ENS users and contributors very web3, although 25% of the total tokens airdropped to ENS contributors have a 4-year unlock period, but such a huge amount The airdrop is bound to cause a lot of selling pressure on the $ENS token in the future.

Token basic information (data sampling time June 29, 2022):

Circulating Supply: 20,244,862.09 ENS (20%)
Maximum Supply: 100,000,000
Total Supply: 100,000,000
Market Cap: $176,105,477
FDV: $870,415,465
Rank: 135
Issue Date: November 9, 2021 All-
time High Price: $85.69 (November 2021) date), the all-time high price of BTC is November 10, 2021.

The $ENS token was issued on November 9, 2021, and the market was very good at that time, and BTC reached its all-time high of $6.9w on November 10, 2021. Then ENS followed the broader market all the way down. It is currently oscillating around $9.

Risks to ENS

  1. The development of ETH determines the development of ENS. Therefore, the important risk that ENS will face in the future is also the risk that ETH may fall behind in the future public chain competition. However, according to the current ecological development of capital, technology, and users, ETH has a high probability of maintaining strong competitiveness in the future.
  2. From last year to this year, ENS has flooded into a large number of hype and early adopters. When their domain names expire and the crypto market is cold, ENS’s revenue data may face the pressure of a sharp drop in the short and medium term.
  3. For ENS tokens, the ENS project party does not empower $ENS. And in the next 3.5 years, 25% of the total tokens will be unlocked, and the ENS tokens will be under a lot of selling pressure.
  4. ENS domain name NFT is still in the midst of a hype, and the price of short-term domain names may fluctuate greatly. The current high-priced domain names may be faced with a significant price drop in the future.

ENS Valuation Assessment

ENS’s own function is to improve ETH, taking advantage of the first-mover advantage to gradually establish a network effect in the domain name field on ETH when ETH is still in its infancy. And obtained official endorsement and support, and finally obtained the exclusive franchise and monopoly of the ETH ecological .eth domain name. Due to its relatively simple business, ENS has less pressure on subsequent innovation and development after completing the development of core functions in the early stage. ETH will likely continue to be the leader in the future L1 competition, and ENS can almost get a big piece of the cake from ETH’s development dividend in a lying posture.

With the further expansion of the market of crypto in the future, web3 will gradually move from concept to popularization of application. Blockchain-based web3 will inevitably stimulate the need for readable domain names. The sales of ENS will also continue to grow predictably with the development of the industry. In contrast to the predictable growth in sales revenue, the ENS domain name has no cost and is essentially a business with zero marginal effects.

At present, the user base of ENS is still relatively small, and the number of ENS users is only 46w. According to the current ENS domain name sales rules, when a large number of new users flood into web3 in the future, users will find that the domain names with 3 and 4 characters have been preempted. They can only buy “second-hand” domain names from the NFT market, or register domain names with 5 characters or more. . At present, the proportion of domain names of 5 characters and above is about 91%, and the influx of new users will cause this proportion to continue to increase in the future. In this way, when the number of ENS users reaches a certain scale, the annual revenue of ENS will be close to $5 × user base. Without changing the fee rules, there may be an invisible ceiling on ENS revenue.

According to the spirit of web3, the user’s data, assets and other digital assets are kept by the user himself. The service provided by ENS is only to convert the Ethereum address into a “pretty number” display. In essence, the user still participates in web3 through the Ethereum address, even if the user You can still participate in web3 without using ENS. So the value capture of ENS to web3 is not a “direct” relationship, but an unnecessary indirect relationship.

Summarize

ENS is a monopoly company with an exclusive .eth domain name, with a broad mass base and a deep moat.

ENS tokens do not have a strong connection to the ENS project, and ENS tokens currently only capture the sentiment value of good news from the ENS protocol.

ENS is a very important part of web3, but not necessarily an integral part.

ENS Domain Name NFT Transaction Analysis

Macro perspective

According to Opensea’s data, there are currently 183,680 ENS domain names that have placed orders on Opensea, and the proportion of pending orders is close to 13%.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

Judging from the data of ENS domain names in the NFT market, ordinary users are still the main theme of ENS. More than 70% of users hold one ENS, and about 87% of users have less than or equal to 3 ENS. In terms of holding time, users who have held it for more than 3 months accounted for about 55%.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

From the transaction data of ENS domain names, the liquidity rate of ENS is nearly 5.74%. According to the transaction data of Opensea in the past year, especially the transaction data after the issuance of ENS tokens, before the domain name hype, the number of transactions per day was only a few dozen. Dropped to the order of hundreds of transactions per day. Corresponding to such a large plate of ENS, the overall liquidity of ENS domain names is relatively low.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

Considering the particularity of ENS domain names, the proportion of domain names with transactional attributes in the overall domain name market is relatively small, and the purchase and sale are very dependent on “fate”. However, at a time when the trading volume of the NFT trading market is shrinking, the trading volume of ENS domain names shows an upward trend against the trend.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

The particularity of ENS domain name NFT

Quasi-official

As a project supported by the ETH Foundation, ENS has also been praised by Buterin. ENS is by far the most successful non-financial Ethereum application. Buterin also changed his Twitter screen name to vitalik.eth to “bring goods” to ENS. The ENS project does not receive any external investment and only receives funding from various foundations such as the ETH Foundation, thus maintaining the independence of the ENS project. The ENS project can be regarded as the “son” of ETH, and the ENS domain name NFT can be regarded as the NFT officially issued by ETH.

Long-term stable real use requirements and potential application scenarios

The difference between ENS domain name NFT and the current mainstream PFP/PASS card NFT is that ENS domain name NFT satisfies a long-term and stable real demand. Use your favorite .eth suffix domain name instead of wallet address. This basic demand is difficult to be replaced. .

ENS Domain Name Transaction Data Analysis

According to NFTGO data, the historical total transaction volume of ENS domain names is 10.954w, and the total transaction volume from November 01, 2021 (announcement of currency issuance) to July 06, 2022 is 10.509w, accounting for 95.9% of the total transaction volume. The total transaction volume from April 27, 2022 (the first day of ENS domain name hype) to July 6, 2022 was 9.247w, accounting for 84.4% of the total transaction volume. The ENS domain name transactions in the past three months account for the absolute proportion of the total transaction volume, and all subsequent data in the past three months are used as the time interval for analysis.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

Micro angle

Data Statement:
Data Collection Scope: April 25, 2022 – July 7, 2022

There are some errors in the data captured by the API used this time. The reasons include using other ERC20 tokens as the settlement currency, errors caused by API, and the transaction volume of a specific single NFT cannot be found in batch transactions. Ignore data for various error reasons. Transactions with a transaction amount less than 0.001Ξ will be ignored.

The data analysis made in the follow-up of this article is inevitably wrong, and it is not used as any investment reference

In summary: the number of valid statistical transaction samples is 94,883.

ENS domain name classification:

Using the classification method in the ENS official API, a domain name has two properties:
length: the length of the domain name characters

trait_type : Domain characteristics

    • digit: pure digital domain name
    • letter: pure English letter domain name
    • alphanumeric: Contains only numbers and characters (Chinese, English, Arabic, etc. are all characters)
    • mixed: domain name containing special characters, such as emoji, punctuation, etc.

From the perspective of price range:

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

Among all transactions, the proportion of turnover < 0.1Ξ is 66.94%, and the proportion of turnover < 1Ξ is 91.84%. There were only 623 transactions with a turnover greater than 5Ξ, accounting for only 0.66%. From the transaction data results, low-priced ENS domain names are the mainstream of transactions. The data shows that the average price of all trades is 0.344Ξ. The 25% price is 0.02Ξ, the 50% (median) price is 0.05Ξ, and the 75% is 0.18Ξ.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

The transaction price >1Ξ contributed nearly 68% of the transaction quota, accounting for nearly 8.16% of the transaction volume. In particular, transactions with a transaction price > 5Ξ contributed 30% of the transaction quota with 0.66% (623 transactions) of the transaction volume. Combined with the transaction volume, the transaction volume contributed by the TOP 0.66% of the exchanges was comparable to 91.84% of the transaction volume. The transaction volume contributed by the exchange is evenly matched.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

Divide the transaction of ENS domain name NFT into three ranges of transaction quota <1Ξ, between 1-5Ξ and >5Ξ. There is an order of magnitude difference in the number of trades in these three price ranges, but the trade size is close to 1:1:1. The turbulent transaction wave of ENS is mainly provided by transactions with a transaction price >1Ξ. These “big fish” are the promoters of the wave and the contributors to the bubble.

From the perspective of ENS domain name categories

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

Judging from the median and average transaction price of each category of domain names, the average transaction price and median transaction price of domain names with only 3 digits and 4 digits can significantly exceed the gas fee when the ETH main network is congested. In addition to these two categories of domain names, the average and median transaction prices of other types of domain names are relatively low. Combined with the low liquidity of NFT transactions, investing in these domain names may have higher liquidity risks.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

From the perspective of domain name categories, digital domain names are the largest component in terms of both the number of transactions and the turnover. For other types of domain names, the volume-price relationship between the number of transactions and the amount of transactions does not match. To put it simply, the digital domain name is very popular. Alphabet and text domain names are not very popular, and mixed domain names are not very popular.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

In the segment of digital domain names, 3-digit domain names contributed 29% of the transaction quota with 1% of the transaction volume. The 4-digit length of the digital domain name occupies a large proportion in both the number of transactions and the proportion of transaction quota.

ENS in-depth analysis: the leading position is unshakable, but the token empowerment mechanism is lacking

It can be seen from the proportion of the TOP10-100 transactions of each digital domain name to the total transaction volume that the head transaction quota of 3-digit and 5-digit domain names accounts for nearly 50%, indicating that some special domain names sold a far more than similar ones. In essence, it is still a small number of transactions that raise the overall transaction, rather than “common prosperity”.

The data shows that the number of transactions of 3-digit domain names is 522, and the number of 3-digit domain names with transaction records is 344. The number of transactions of 4-digit domain names was 12,790, and the number of 4-digit domain names with transaction records was 6,135. The number of transactions of ≥5-digit domain names was 28,118, and the number of ≥5-digit domain names with transaction records was 24,418. It can be seen from the above transaction data that the liquidity of 4-character domain names is the highest among digital domain names.

Overall, 4-character domain names are the most cost-effective investment targets in digital domain names.

Other types of domain names

For other types of domain names, there are too many domain name combinations, and the number of domain names with scarcity is less than the total. In the investment process of such domain names, the selection of investment targets is far more difficult than that of digital domain names. In addition, among these domain name transactions, TOP exchanges account for a large proportion of the total transaction volume. With such a large proportion of the top transaction quota, the average transaction price and median transaction value are still low. Compared with digital domain names, it is more difficult to invest unless you encounter a significantly better domain name.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/ens-in-depth-analysis-the-leading-position-is-unshakable-but-lacks-a-token-empowerment-mechanism/
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