The emergence of Web3 functionality has been a boon for decentralized domain name services over the past couple of years, with millions of blockchain-based domains registered to date. Tough market conditions may have hindered exponential growth, but industry leaders believe utility-based adoption will continue into the future.
Web3 is fundamentally changing the way companies, brands and retailers serve customers, who are in full control of their data, wallets and identity online through blockchain ecosystems like Ethereum.
Decentralized domain names are valuable tools for users and businesses to integrate with Web3 functionality. From providing human-readable names that replace digital wallet addresses to serving as a decentralized profile across the Web3 ecosystem, decentralized domains offer an alternative to traditional domain services.
The Ethereum Name Service (ENS) and Unstoppable Domains are the two most prominent platforms serving the space, with over six million domain registrations since their respective inception. Both services saw significant increases in newly minted domains during 2021 and 2022.
Cointelegraph has come up with a few decentralized domain name platforms to gauge the current state of the industry, who is driving registrations and what the future holds.
2022 is under review
2022 is proving to be a huge year for both ENS and the Unstoppable domain, as both companies highlighted some key metrics from the year in correspondence with Cointelegraph.
ENS is a distributed, open and extensible naming system that runs on the Ethereum blockchain. It maps human-readable names such as “alice.eth” to machine-readable data such as cryptocurrency addresses and URLs.
ENS mimics traditional Domain Name Service (DNS) using dot-separated hierarchical names, known as domains, with the domain owner controlling it and any subdomains. An ENS domain is actually a non-fungible token (NFT) that acts as an Ethereum wallet address, cryptographic hash, or website URL.
ENS developer Makoto Inoue said the platform’s total official registered domain was 2.8 million as of January 2023, excluding any names registered after expiration. When subdomains and DNS names are included, that number rises to 3.9 million — excluding off-chain names like Coinbase’s cb.id domain solution for decentralized wallets and identities.
Nora Chan, Vice President of Communications at Unstoppable Domains, breaks down the premise of a blockchain-based domain name service. Unstoppable Domains offers Web3 domains on Polygon with no gas fee, providing an affordable way for users to create a secure and portable Web3 identity.
Domains can be linked to Ethereum and used for various purposes, such as sending and receiving cryptocurrencies, logging into hundreds of apps and metaverses, building decentralized websites and creating a Web3 identity.
The platform has registered 3.1 million domains to date, with 1.2 million registered in 2022 alone.
Measure growth in a bear market
Inoue and Chan reflect on the 2022 bear market conditions and offer different perspectives on their impact on decentralized domain registrations. Subdued market conditions have actually been a boon for ENS Records, as Inoue explains:
“During the bull market, high gas fees actually hindered the growth of ENS because registering a .eth used to cost $50-$100 when an annual one-year registration was only $5 a year.”
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But with gas fees slowly dropping, ENS name registration has become more affordable. Inoue also noted that the discovery of “categories influenced the growth of ENS enrollments for 2022.”
This included minting ENS domains based on a list of names with common attributes such as “10K Club”, which are four-digit domain names from 0000.eth to 9999.eth; and ENS Domains from the Age of Formation, a selection of ENS names minted prior to June 2017 — before the rise of the popular CryptoPunks NFT pool.
Meanwhile, Chan acknowledged that the rate of registrations with Unstoppable Domains may have slowed in 2022. However, the 1.2 million domains registered in 2022 still represented more than a third of the total domain list.
Third party integration
Companies, brands and users are increasingly aware of the functionality of Web3. With the decentralized domain, users can carry their entire digital identity with them, pay for items on an e-commerce site, and collect NFT versions or add-ons associated with specific products in the real world.
As more of these services are plugged into Web3, ENS and Unstoppable Domains provide the infrastructure for companies and users to enter this new paradigm.
For ENS, the emergence of Coinbase’s high-level cb.id subdomain integration was the biggest third-party service integration story, according to Inoue.
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