The Ethereum Name Service (ENS) is a naming service that allows giving wallet addresses easily readable names. The Domain Name System makes it possible to assign a domain and it also resolves addresses by pointing requests to the correct IP. This way website addresses are easily readable by humans and can be visited using a browser. The Ethereum Name Service is working in a very similar way. It makes wallet addresses readable by humans, which allows making them easily memorable and identifiable for everyday transactions between people.
How does ENS work and how does it improve interactions on the blockchain? In this article, we are going to dig a little bit deeper into what the Ethereum Name Service really is.
What is the Ethereum Name Service?
As the name already suggests the ENS is based on the Ethereum blockchain. The project was started in May 2017 by Alex Van de Sande and Nick Johnson from the Ethereum Foundation. An address on Ethereum looks like this:
This is of course very easy to read for a machine. But a human being cannot possibly remember such a long and for the most part random string of characters. But what if you and your friends started the “Bean Store” and would like to receive payments in Ether and make your wallet address more accessible for your customers?
This is where the Ethereum Name service steps in. Very similar to a domain it would allow you to assign a human-readable address to your Ethereum wallet address. One example would be beanstore.eth and it would allow your customers to remember the address and to send payments to you.
But this is just one of the most common examples. The ENS isn’t limited to wallet addresses but can also be used for metadata, transaction IDs, hashes, avatars and more. It is also capable to store the addresses of over 100 blockchains. In effect, users of the ENS are not limited to using the service with Ethereum wallet addresses.
How does the ENS work?
Each ENS domain name is represented by a token. This way each name or domain on the ENS becomes not only unique but also transferable. Owners of each token can also manage all the information that is attached to it and the domain.
A smart contract acts as the registrar and allows to create top-level domains as well as subdomains on the ENS. For example, owning beanstore.eth also allows to create a subdomain like employees.beanstore.eth and any other possible name when interacting with the .eth registrar.
How to get your own ENS domain?
The first step to getting your very own .eth domain is to check if the desired name is available. In order to rent the domain, you have to set for how many years you would like to rent the domain. The costs associated with renting a domain have to be paid in form of a yearly renewal fee which is influenced by the length of the name:
- 5 or more characters .eth names: $5 in ETH per year.
- 4 character .eth names: $160 in ETH per year.
- 3 character .eth names $640 in ETH per year.
The fees are calculated in US-Dollars but have to be paid with Ether as well as the transaction fees on the Ethereum blockchain. The most popular names were auctioned when the ENS started but it is possible to acquire or rent them on the secondary market. Since it is a business strategy to register domains that might be promising in the future many owners are more than willing to trade.
The ENS token
In early November 2021, the team announced the launch of the ENS token which serves primarily as a governance token. An amount of 25 % of the total supply of the token is issued as an airdrop and anybody who held at least one .eth domain during a snapshot on October 31st is eligible to claim a share of ENS tokens. Users can claim their ENS with a few simple steps and have to claim them until May 4th 2022. Unclaimed tokens will be burned afterwards.
The airdrop cause quite a stir in the international crypto media since the lowest tier was worth around 17.000 US-Dollars after the event. But the airdrop wasn’t meant to reward early adopters with free money. Instead, Ethereum Name Service was shifting to a decentralized autonomous organization (DAO) in order to lay the governance of the project into the hands of its users.
Another 25 % of the total supply was allocated to the developers of the project and the other half of the token supply is part of a treasury that will be controlled by the DAO. Typically, the treasury is meant to finance the future development and marketing efforts of a project.