What Are ENS Domains?

Contributor, Benzinga

Perhaps the largest barrier to crypto investing and usage is its complexity. It may seem daunting to use crypto when the technology is complex and difficult to understand. 

Ethereum Name Service (ENS) is a revolutionary project looking to completely change the way crypto is transacted. By simplifying the transactions process, ENS hopes to make the process easier and more accessible to all blockchain participants.

Overview of Ethereum Name Service

To send or receive cryptocurrency, you need a wallet. These wallets use a string of 64 letters and numbers in order to identify the wallet. Obviously, this presents problems for everyday usage. 

If you want to send someone crypto, you would have to obtain their 64-character wallet address and send it to them. This is tedious and has high potential for mistakes. If you were to miss just 1 character, the funds would go to the wrong address and be lost forever. It is also time consuming to manually enter 64 characters.

Ethereum Name Service (ENS) has unveiled a unique way to combat this issue. It is using domains to replace these wallet addresses. A good comparison is that of a nickname. Someone could have a very long name, so they are often referred to as a nickname for simplicity. This is how ENS works. It takes the long wallet address and consolidates it to a domain like alice.eth or benzinga.eth.

Instead of having to find and enter someone’s wallet address, users can now send crypto directly to a users’ domain, so long as it’s connected to their cryptocurrency wallet.

ENS uses smart contracts to accomplish this. Smart contracts are essentially a way for a blockchain to automate tasks. In this instance, they are automating the process of converting a domain to a wallet address. 

Domains are stored with their associated wallet address once a user connects a domain to their wallet. When crypto is sent to a domain, the smart contract automatically sends it to the wallet address associated with that domain. 

The native ENS token is an ERC-20, meaning it uses the Ethereum blockchain to process all transactions. This token was released in November 2021 through an airdrop. 

ENS Token Airdrop

In cryptocurrency, an airdrop is when a project gives free tokens to its users. In this case, tokens were given to those who had a .ETH address on October 31, 2021. Airdrops are mainly used to market projects and increase the use before the token launch. 

The amount of tokens given were determined using a formula. This formula took into account the age of the .ETH address and the registration term when determining how many tokens to give out. In total, more than $500 million was given out to users.

These tokens are to be used as governance tokens. They can be used to vote on issues in the ENS decentralized autonomous organization (DAO). The amount of token owned coincides without the amount of votes. This is a main reason why users were given tokens, as those who are already using the platform can form the basis of the project moving forward. 

Are Ethereum Domains Useful?

As of right now, Ethereum domains are not as useful as they could be. There are currently services such as QR codes that can make sending crypto fairly simple. However, the project could be especially effective at gaining new crypto users.

By simplifying the transaction process, new crypto users may be incentivized to join. ENS makes the process seem much less daunting and may allow new users to quickly understand crypto.

However, ENS is still useful for existing crypto users. One feature that is particularly interesting with ENS domains is that they can store NFTs. Users’ ENS domains can appear alongside their favorite NFT. 

Ethereum domains can also serve as a sign-in with Ethereum. This means that your ENS name could be used as a universal username across many platforms. Discord and Twitter are both social media sites working on adding Ethereum wallets, and Axie Infinity and Decentraland are crypto video games hoping to do the same. This would allow ENS to enter the mainstream and make the tokens, as well as the domains, more valuable. 

While ENS may be more useful in terms of new user attraction, it is still very useful for anyone looking to process transactions quickly on the blockchain. 

Where To Buy ENS Tokens

At the time of writing, ENS is only a few days old. Because of this, it’s only listed on Binance. However, we can reasonably assume that the project will be listed on major exchanges, such as Coinbase, in the coming future. 

If you are looking to buy ENS tokens right now, the best place to look is Uniswap. To swap for ENS, you will first need to buy ETH on a centralized exchange, such as eToro, Gemini, Webull or Voyager and send it to a wallet. From there you can connect your wallet to Uniswap and execute the trade.

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.ETH Domains vs. Other Domains

There are hundreds of other projects that have already unveiled the use of domain names. Some of the more notable projects include Cardano (ADA) and Solana (SOL). ENS is certainly not the first domain service provider in the crypto sphere, but it is 1 of the first to offer a token. Nametoken was arguably the 1st project to release a domain service in April 2011. 

.ETH domains also differ from .com and other websites in that it is simply shorthand for a wallet address. Domains such as .com store the IP address and other information for the website. Websites can also be viewed, but if you were to enter a .ETH domain into a browser, you will get an error message. 

How To Store ENS Tokens Safely

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If you own ENS tokens and wish to find the safest place to store them, Ledger is most likely your best option. Ledger is a hardware wallet, meaning that the physical device must be present in order to send crypto. 

Ledger currently offers Nano S and Nano X models. The Nano S offers mostly essential functions, while the Nano X is more designed for advanced users. If you want to learn more about Ledger and other wallets, make sure to check out our guide on the best cryptocurrency wallets.

ENS Domains vs. Competitors

While crypto domains are not an entirely new feature, ENS is taking the protocol to the next level. Because Ethereum processes so many transactions, the service is able to be used by a lot more people. 

However, Ethereum currently has extremely high fees, oftentimes exceeding $150 per transaction. This may be a constraint for Ethereum as it is not the most cost-effective way to transact crypto. If ETH2.0 can lower these fees, ENS may become a household name. 

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