Reimagining Ethereum Name Service (ENS) Valuation: Beyond Just Domain Names

The Ethereum Name Service (ENS) is creating an identity layer for individuals, companies, and internet transactions—a market with immense potential.

Understanding Blockchain-Based Domains

Blockchain inherently excels at recording digital-native assets, and domain names are among the most significant. These domains map human-readable names (e.g., Messari.io) to IP addresses (like 13.57.64.34). Since Bitcoin's inception, numerous projects have attempted to bridge internet domains to blockchain, making ENS a standout innovation.

Key Features of ENS

ENS is a domain registration protocol that links readable names (e.g., alice.eth) to Ethereum addresses. Its primary use cases include:

• Web3 Identity/Usernames
  ENS domains serve as decentralized identities, enabling single sign-on (SSO) across platforms without centralized intermediaries like Google.
• Native Payments
  ENS domains function as crypto wallets, supporting ETH, BTC, DOGE, and more. Payments can be sent directly to websites via DNS integration, bypassing traditional payment processors.
• Enhanced Domain Ownership
  Unlike traditional registrars (e.g., GoDaddy), ENS domains are self-custodied and irreversible unless the owner stops payments.
• Decentralized Web Hosting
  ENS integrates with IPFS, Arweave, and Sia Skynet, allowing websites to be stored on decentralized networks.

ENS Adoption Metrics

• 447,623 ENS domains created (72% are .eth domains).
• DNS integration enables companies (e.g., Google) to use Google.com as a Web3 wallet and decentralized site.

👉 Explore how ENS transforms digital identity

ENS DAO: Governance and Tokenomics

To decentralize the protocol, ENS launched its governance token and operates via a DAO.

Token Distribution (2021–2022)

• 25% to .eth holders (137K+ addresses).
• 25% to contributors (100+ teams, 450+ Discord users).
• 50% to DAO treasury.

Key Governance Rules:

• Proposals require 100K+ token support and 1% quorum.
• Token holders delegate voting power to community representatives.

ENS Constitution Highlights

• Respects domain ownership rights.
• Avoids rent-seeking and supports DNS integration without sacrificing decentralization.

Financial Sustainability of ENS

ENS generates revenue through:

1. Domain Registrations: One-time fees (scaled by name length).

   • 5+ characters: $5/year.
   • 4 characters: $160/year.
   • 3 characters: $640/year.
2. Renewals: Recurring fees to retain ownership.

👉 Discover ENS revenue insights

Revenue Snapshot (2021–2023)

• $20M+ total revenue (90% from registrations).
• 13K ETH accumulated (~$2,000 ETH held in treasury).

Valuation Metrics:

• Fully diluted market cap: $5.5B (2023).
• P/S ratio: 334x (based on $16M annual revenue).

Future Outlook

ENS stands out by prioritizing integration with existing DNS systems, avoiding conflicts with ICANN. Its growth isn’t limited to Ethereum—it supports cross-chain naming protocols.

Potential Growth Drivers

1. Mass adoption by individuals and enterprises.
2. Expansion to other blockchains and use cases.
3. Revenue surge from increased domain transactions.

FAQ Section

Q: How does ENS differ from traditional DNS?
A: ENS adds blockchain functionality (e.g., payments, anti-censorship) while integrating seamlessly with DNS.

Q: Can ENS domains expire?
A: Yes, unless renewed. Fees act as an anti-squatting mechanism.

Q: What’s the value of holding ENS tokens?
A: Governance rights and potential treasury allocations from protocol revenue.