The rise of Web3 functionality has been a boon for decentralized domain name services over the past two years, with millions of blockchain-based domai
The rise of Web3 functionality has been a boon for decentralized domain name services over the past two years, with millions of blockchain-based domains registered to date. Challenging market conditions may have hampered exponential growth, but industry leaders believe that utility-driven adoption will continue in the future.
Web3 is fundamentally changing how businesses, brands and retailers serve customers, who are taking full control of their data, wallets and online identity courtesy of blockchain ecosystems like Ethereum.
Decentralized domain names are proving to be valuable tools for users and businesses to integrate with Web3 functionality. From providing human-readable names that replace numerical wallet addresses to serving as a decentralized profile across the Web3 ecosystem, decentralized domains offer an alternative to conventional domain services.
Ethereum Name Service (ENS) and Unstoppable Domains are the two most prominent platforms serving the space, having a combined 6 million-plus domain registrations since their respective inceptions. Both services saw significant increases in newly minted domains through 2021 and into 2022.
Cointelegraph reached out to a handful of decentralized domain name platforms to gauge the current state of the industry, who is leading registrations and what the future holds for the space.
2022 in review
2022 proved to be a massive year for both ENS and Unstoppable Domains, with both firms highlighting some key metrics from the year in correspondence with Cointelegraph.
ENS is a distributed, open, extensible naming system that runs on the Ethereum blockchain. It maps human-readable names like “alice.eth” to machine-readable data like cryptocurrency addresses and URLs.
ENS emulates the conventional Domain Name Service (DNS) by using dot-separated hierarchical names, commonly known as domains, with the owner of a domain controlling both it and any subdomains. An ENS domain is effectively a nonfungible token (NFT) that serves as an Ethereum wallet address, cryptographic hash or website URL.
ENS developer Makoto Inoue said that the platform’s official registered domain total was 2.8 million as of January 2023, excluding any reregistered names after expiry. When including subdomains and DNS names, that number rises to 3.9 million — excluding off-chain names like Coinbase’s in-house cb.id domain solution for wallets and decentralized identities.
Nora Chan, vice president of communications at Unstoppable Domains, unpacked the premise of the blockchain-based domain name service. Unstoppable Domains offers Web3 domains on Polygon with no gas fees, providing an affordable way for users to establish a secure and portable identity for Web3.
The domains can be bridged to Ethereum and used for various purposes, such as sending and receiving cryptocurrency, logging in to hundreds of apps and metaverses, building decentralized websites, and constructing a Web3 identity.
The platform has registered and minted 3.1 million domains to date, with 1.2 million registered in 2022 alone.
Measuring growth in a bear market
Both Inoue and Chan reflected on the bearish market conditions of 2022 and offered varying views of its effect on decentralized domain registrations. Depressed market conditions were actually a boon to ENS registrations, as Inoue explained:
“During the bull market, high gas fees actually hindered the growth of ENS because a .eth registration was costing somewhere between $50–$100 when a one-year annual registration is only $5/year.”
But as gas fees have slowly reduced, it is becoming more affordable to register ENS names. Inoue also noted that the growth of 2022 ENS registrations was influenced by the discovery of “categories.”
This included the minting of ENS domains based on a list of names with common traits like the “10K Club,” which are four-digit domain names, from 0000.eth to 9999.eth; and genesis-era ENS domains, which are a select group of ENS names minted before June 2017 — preceding the advent of the popular CryptoPunks NFT collection.
Meanwhile, Chan conceded that the rate of registrations with Unstoppable Domains slowed in 2022. Nevertheless, the 1.2 million domains registered in 2022 still account for more than a third of its total domain list.
Third-party integration
Companies, brands and users are becoming increasingly familiar with Web3 functionality. Using a decentralized domain, users can carry their complete digital ID with them, pay for items on an e-commerce site, and collect NFT versions or extras linked to specific real-world products.
As more of these services plug into Web3, the likes of ENS and Unstoppable Domains provide the infrastructure for both businesses and users to enter this new paradigm.
For ENS, the rise of Coinbase’s high-profile cb.id subdomain integration was the biggest third-party service integration story, according to Inoue.
The Cross-Chain Interoperability Protocol (CCIP) is a universal standard for developers…
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