What is the value of your Web3 domain name?

When you hear about a Web3 domain name being sold at a sky-high price, when you see a Web3 friend use a domain name as his username, when you start looking for a domain name you are interested in in the registration column, have you ever thought deeply about what these domain names are actually useful for? What are the differences and connections between different projects? What is the potential for the development of the domain name track? If you are interested in these questions, please don’t miss this article!

The structure and core ideas of this article are as follows. Readers who already know about Web3 domain names can jump directly to the chapters they are interested in:

Chapter 1, Introduction to Web3 Domain Names: User's "Web3 Nickname", Encapsulation of On-Chain Addresses

Chapter 2, Application Scenarios of Web3 Domain Names: Unifying Account Names and Identity Data in Applications, Interoperating with Web2 Web Addresses, and Using Them as Identity Management and Social Display Tools

Chapter 3, Classification of Web3 domain name track: single-chain domain name (including public chain domain name, multi-domain name registrar, social domain name), multi-chain domain name (including three different implementation paths), DNS alternative domain name

Chapter 4: Some observations and thoughts on Web3 domain names by the author, including: the user demand intensity of Web3 domain names, analysis of Web3 domain name transactions, outlook on the competitive landscape of Web3 domain names, potential suffix conflicts of Web3 domain name projects

What is a Web3 domain?

Web3 domain names generally refer to domain names with suffixes such as .eth, .bnb, nft, .wallet, etc., or abbreviations with strong Web3 characteristics, and whose application scenarios are mainly in the blockchain/Web3 field. Ethereum's ENS is the most well-known and representative project in this field.

The concept of domain name originated in the early days of the Internet. At first, everyone accessed web pages directly through IP addresses. For example, if you enter "202.108.22.5" in the browser address box, you can open the homepage of Baidu, because the string of numbers 202.108.22.5 is exactly Baidu's IP address. But obviously, this string of numbers is not readable and difficult to remember. Therefore, early Internet designers built the domain name system DNS (Domain Name System), which encapsulates digital IP addresses by using more readable domain names such as www.baidu.com as "web page addresses" for people's daily use. Now, every Internet user knows the concept of "web page address", even if most of them don't know the principles of IP addresses, DNS, etc., but this does not hinder their experience on the Internet at all.

The most intuitive value of the Web3 domain name is similar. It is the user's "Web3 nickname", which is an encapsulation of the on-chain address. For example, vitalik.eth is an encapsulation of this Ethereum address:

0xd8da6bf26964af9d7eed9e03e53415d37aa96045

Every Web3 user will hold at least one on-chain address, but I'm afraid no one will think about remembering their own address, let alone remembering others'. Domain names such as vitalik.eth, 2089.bit, and jack.bnb are obviously more readable and memorable than that long string of address characters, and can better meet people's daily needs. For example, if you need your friends to transfer money to you, you may have to find your on-chain address in your wallet or notepad and then send it to your friends; but if you hold a domain name, such as vincent.eth, you can directly tell your friends to transfer money to this domain name.

From this perspective alone, the value of domain names has a lot of room for development: after all, it can help general users shield on-chain technical details such as on-chain addresses. So when Web3 becomes popular among the general public, will it become a "proxy" for addresses in the minds of users, just like most users on the Web "only know web page addresses, not IP addresses"?

Web2 Domain Names vs. Web3 Domain Names

From a technical perspective, the technical essence of domain names is not complicated, it is just a data relationship of "mapping". Therefore, its specific implementation can have multiple paths: in Web2, the registration and management of all domain names are handled by ICANN located in California, USA, which is highly centralized and regulated by the US government; but in Web3, the most mainstream domain name implementation method is the on-chain smart contract represented by ENS, which casts each domain name into the form of Ethereum NFT, which can be freely registered and traded without permission, and the user sets the corresponding resolution address by himself.

In addition to binding to the address of the public chain, the domain name has more room for imagination, because it can also be bound to other public chain addresses, Web2 accounts, and even Web2 DNS addresses. For example, you only need to know the ENS domain name "mtyl.eth" to directly find one of my commonly used Ethereum addresses, its corresponding Opensea account, my Twitter account, and my personal homepage website on ENS. To some extent, this has already shown the prototype of a Web3 universal identity.

With just one mtyl.eth domain name, you can find the author on various Web3 related platforms.

Specific application scenarios of Web3 domain names

As an NFT product sold directly to users, what exactly can Web3 domain names be used for? Below, let me sort out in detail the application scenarios of domain names in Web3.

Domain name + DApp: unified account name, interoperability of data

The most direct application is to use the domain name directly as the account name of each Web3-related application. In Web2, every time you use a new website/new application, you often have to register a username; for convenience, many users will choose from some of the names they used before when registering a new account to reduce their memory costs and enhance the recognizability of their network identity. However, even if users want to use the same username, it is not easy to achieve consistency in usernames in different apps due to different formats and lengths of usernames on different websites, as well as problems such as being registered in advance by other users. If a person uses "Alvin" as a username in application A, if you want to find him by searching for "Alvin" in application B, it is often not possible. Even if you really search for an "Alvin", you still need to spend time to identify whether the controller behind these two accounts is the same person.

In Web3, due to wallet address login and on-chain resolution of domain names, DApp can easily support users to use a domain name as their account name. And due to the uniqueness of domain names, as domain name support for multiple chains matures, you can ensure that the same person uses the same domain name on Opensea (ETH) and Magic Eden (Solana). Even Web2 applications such as Twitter can authenticate those who use their own NFT domain names as their usernames through some plug-ins, and it is not ruled out that platform giants such as Twitter will support similar functions in the future.

Behind the unification of account names is the interoperability of identity data. Since the domain name resolution information contains information from other chains and Web2, the application party can obtain user information that cannot be obtained through the wallet address on the chain through the domain name. This not only directly imports user data, but also reduces the cost of users getting started with new applications from the information level (think about the various information filling in Web2 applications), but also allows the application party to make targeted recommendations to users; various certificates and badges issued by the application party can also be resolved and bound by the domain name, increasing its interoperability on the chain and user recognition.

Although this cross-chain and cross-Web2 interoperability of identity data does not necessarily have to be achieved through domain names, domain names are indeed a natural and excellent carrier for users, and are a strong competitor and partner for this segmented value point.

Domain name + wallet: Search addresses by domain name, unified account address management

The most common collaboration between wallets and domain names is to support searching by domain name when transferring money, eliminating the need for users to remember transfer addresses. For example, Metamask, a leading wallet product, has already implemented search support for ENS domain names.

If you want to support me by transferring money on the chain, I don’t need to show the specific wallet address here. You can directly enter "mtyl.eth" in the target address bar of "Send" to find the corresponding address for operation.

No need to display a long string address, no need for WeChat payment code, just remember a simple domain name to support the author

There is still room for deeper cooperation between wallets and domain names, but these collaborations themselves may involve strategic development issues of wallets, so they may not necessarily advance quickly.

Taking Metamask as an example, each Metamask account of the user can create different sub-accounts; and different sub-accounts have different addresses on different chains. This sub-account management is in the upper right corner of the browser plug-in, as shown in the lock below:

In fact, the sub-account name and the corresponding ecological niche can be replaced by the domain name

Metamask's account name currently allows users to set it freely, and it does not have any application scenarios (it is simply for user management convenience). But in fact, this account name can cooperate with the domain name project party and use the corresponding domain name. The public chain addresses bound to the domain name naturally become the interaction addresses of the wallet and the application.

Further derivative, after the wallet integrates the domain name and its various resolution relationships, it can also display them in the wallet. For example, display the Twitter, Reddit and other Web2 social platform relationships corresponding to a domain name account, and the credentials held by users in various DApps. These things are actually what some wallet project parties that focus on DID also want to do, which makes this cooperation a potential conflict of interest. In addition, it is not easy for domain name project parties to make these tool protocols, so there is no more practical progress at present. But in the future, this is indeed a possibility.

Domain name + Web2: interoperability of web page addresses

Some users who hear about Web3 domain names for the first time may think that Web3 domain names such as "2099.eth" are similar to "2099.com" and are both Web2 domain names (i.e. web addresses), but this is not actually the case. So, can you make the Web3 domain name you registered really become a website address that can be opened by a general browser? This is actually something that many domain name projects hope to promote, but its difficulty is not reflected in technology, but in the communication between the real world and ICANN.

In ICANN's Web2 domain name management system, "web suffixes" such as ".com", ".cn", ".xyz", and ".link" are called "top-level domains", and the application for a new top-level domain name requires special submission of materials + auction. This not only requires a high application fee, but also the opening and auction time of the domain name are entirely determined by ICANN. In addition, ICANN has a brand protection rule - if a brand (such as Apple) finds that its trademark domain name has been registered, it can appeal to obtain its own domain name. Even if this appeal is not necessarily successful, it also brings many potential troubles to the project party. In addition, ICANN will reserve top-level domains for countries (such as .cn for China), and the suffixes of a few projects conflict with the country abbreviations, such as ENS's ".eth" and ICANN's national top-level domain reserved for Ethiopia (Ethiopia).

Therefore, since the connectivity of Web2 websites is not the core value of Web3 domain names, coupled with the aforementioned reasons, no Web3 domain name project can now achieve "directly using Web3 domain names as website addresses." However, after all, there is a precedent for Web2 domain names. The concept of buying a Web3 domain name and giving away a website address, and building a personal homepage/company homepage around it is still very attractive. For example, Unstoppable Domains is very active in the aspect of Web2 connectivity. And other projects such as ENS have also formed a relatively mature "curve-saving" solution under the unremitting exploration of Web3 community members: using Web3 domain names as second-level domain names under the top-level domain.

Although "vitalik.eth" cannot be directly entered into the browser for parsing, "vitalik.eth.xyz" and "vitalik.eth.link" can be used. Readers may also try it. For example, if you enter "vitalik.eth.xyz" into the browser, you can see Vitalik's default ENS Profile; if you enter "vitalik.eth.link", you can see Vitalik's personal homepage:

Vitalik’s ENS Profile

Vitalik's personal homepage built on eth.link

There is no convention on what top-level domain to use, what the different meanings of each top-level domain suffix represent, or even whether the project party can obtain control of the corresponding headphone domain name. Take ENS as an example. Previously, .eth.link was registered by co-founder Virgil Griffith, but due to Virgil's imprisonment, the domain name was auctioned to Manifold Finance after it expired. ENS has filed a lawsuit in court, hoping to regain control of the domain name, and the case is still under trial.

This direct connection with the web address, although its specific implementation still relies on the Web2 domain name system, requires the project party to obtain control of the second-level domain name they are interested in, but it is more acceptable to the public than some other solutions (such as IPFS static resolution + Web3 browser opening). This natural interoperability with Web2 websites is also a unique feature of Web3 domain names compared to other similar identity management carriers.

Domain Name Application Ontology: Identity Management Tools & Social Display Homepage

The main body of Web3 domain name application, now mostly only bears the function of registering domain names and binding addresses on the main chain, and its presence is not high. However, as more and more applications and wallets support domain names, domain name application bodies will also carry more identity management functions. Specific examples are as follows: setting the corresponding resolution targets for each chain and each Web2 platform, setting the address, format and display information of the personal homepage, setting some privacy content/content that requires specific permissions to access, etc.

Domain name project owners can also naturally create a social display homepage to present the information registered by users and that they wish to display in a structured manner. For example, the second-level domain name suffix .eth.xyz carries the function of the ENS personal homepage. As long as you know any ENS domain name, you can add .xyz to it and enter it in the browser to see some display information of the domain name owner's corresponding address. Although the display experience is still very rudimentary at present, it is indeed valid in the long run. In addition to being operated by the domain name project owner itself, the personal homepage can also be operated in cooperation with projects such as link3 that wish to do similar things.

If we use our imagination further, domain name projects can also do social networking themselves, or social networking projects can use issuing domain names as one of the core operations. The SNS domain name issued by Linkkey is one of the more practical projects of this type.

If readers are interested in the decentralized identity track, they can refer to the author’s previous long research article on DID:

Chapter Summary

The above is the author's integration of the more practical application scenarios of Web3 domain names. Different domain name projects have different focuses in development.

In Chapter 3, this article will classify and sort out the main projects in the Web3 domain name track so that readers can understand the differences and connections between these projects, as well as the specific data and implementation details of the domain name projects.

Domain Name Project Classification

There are many domain name projects at present, perhaps nearly forty or fifty, but if divided from the perspective of technical implementation and application scenarios, it is actually not too complicated - you can regard ENS as the "pioneer" and "big brother" in the domain name field, and most domain name projects are copies of ENS on different public chains. Even if they are not direct copies, their specific implementation on the chain is highly referenced from ENS.

The author divides the current domain name projects into the following three categories: single-link domain names, multi-link domain names, and DNS alternative domain names. Among them, single-link domain names can be further refined. As shown in the following figure:

Single-link domain name

Public chain domain name: represented by ENS

These projects are very recognizable: they all have the abbreviation of the public chain as the suffix, such as .eth, .sol, .avax, and all have the official background of the public chain or the official explicit support. Their implementation logic and application scenarios are also highly similar, except that they are on different public chains. Therefore, to study this type of project, you only need to focus on ENS.

ENS is the leading project in the field of Web3 domain names. It was founded by Nick Johnson, a former software engineer at Google, in 2016. Initially, ENS was a sideline project authorized by the ETH Foundation, and the ENS team was later established with the support of the ETH Foundation. ENS has never received any external financing, and has only received donations from institutions such as the Ethereum Foundation.

ENS launched the beta version in May 2017 and the official version in May 2019. ENS's trading volume ranks among the top ten in Opensea all year round, and there have been two peak trading periods in November 2021 and April-May 2022. As of early November 2022, ENS has 2.62 million domain names registered, 573,000 registered users, and 508 ecological cooperation projects, which are far ahead of many other similar projects. ENS airdropped + issued coins in November 2021, and in early November 2022, its fully diluted market value was approximately US$1.5 billion.

ENS currently has no plans to directly expand to other public chains. The project's recent actions are mainly reflected in the connectivity of Web2 web pages, such as the second-level domain name web pages and their corresponding applications mentioned above. In addition, ENS is also promoting the new login method Sign-in with Ethereum (EIP-4361) with Spruce ID, hoping to achieve the interconnection of identity data through it, which is very worthy of attention and expectation.

For more details on Sign-In With Ethereum, see: login.xyz

Although ENS is well-known, it is not perfect. After ENS was launched, it exposed the "ZWJ character problem":

The ZWJ problem refers to the fact that ENS supports the padding character ZWJ during registration - for example, "%E2%80%8D", which allows domain names that are actually different to appear in the same appearance. For example, "vitalik%E2%80%8D.eth" and "vitalik%E2%80%8D%E2%80%8D.eth" are both displayed as "vitalik.eth" on the web page, which means that if users transfer funds by copying and pasting the domain name, they are at risk of being deceived by "fake domain names".

At present, ENS cannot solve this problem technically, and can only rely on the conscious application layer to patch it. For example, Opensea and Metamask will add a yellow exclamation mark to domain names with ZWJ characters. However, if ENS enters a large-scale promotion period, it can be expected that related fraudulent applications will inevitably appear. This has planted potential trouble factors for the large-scale promotion of ENS.

Opensea's "Yellow Triangle" ENS domain name

Web3 domain name registrar: represented by Unstoppable Domains

Such projects often sell multiple Web3 domain names with suffixes at the same time, and these domain name suffixes are often highly related to Web3. The representative of them is Unstoppable Domains.

Unstoppable Domains completed a $65 million financing in July this year, with a valuation of $1 billion, close to the level of ENS. It also supports the registration of 9 domain names: .crypto/.nft/.x/.wallet/.bitcoin/.dao/.888/.zil/.blockchain. It is worth mentioning that, unlike most domain name projects that require annual renewal, Unstoppable is a permanent registration mechanism, so the fees for some rare domain names will be more expensive.

The registration process of Unstoppable Domains is not completely on-chain like projects such as ENS, but a centralized registration management + on-chain NFT mint model: users can use Google login + credit card payment when registering, and then go to Polygon to mint NFT (except for .zil domain names, which are mined on Zilliqa).

Unstoppable Domains accepts credit card payments when registering

After registration and payment, go to the chain to mint

In terms of project development, Unstoppable Domains will also focus on the concept of "Web3 name", but its actual product design and publicity focus more on the experience of Web2 users, as well as the interoperability of its domain name and Web2 website. In terms of Web3 connectivity, in addition to the account name cooperation mentioned earlier, Unstoppable Domains also launched "Login with Unstoppable", which is a button parallel to wallet login methods such as "Metamsk" after you click "Connect Wallet". Users can use this method to log in in cooperative projects such as yearn.finance. However, this login cannot bypass the wallet at present, but requires an additional process of filling in the domain name, and the current user experience is not good.

Unstoppable Domains may not be particularly well-known in the Chinese community, but its popularity and marketing efforts overseas are very strong. Currently, the total number of domain names registered by Unstoppable Domains has exceeded 2.7 million, and more than 500 applications have integrated Unstoppable Domains.

The main problem with Unstoppable Domains and similar projects is that the domain extensions they sell are not backed by an authority, so the ownership of popular domains is often controversial. This domain extension conflict problem is also a problem faced by this track, which I will discuss in the next chapter.

Social domain name applications: represented by Linkkey

This type of project may not have any particular innovation in domain name technology, but it focuses more on combining domain names with social applications.

Linkkey's SNS is one of the representatives. It hopes to use domain names as a carrier to do "value social networking" in the Web3 field. According to the theory that "a person can only maintain deep social links with 150 people at most at the same time", each SNS user can issue NFTs that symbolize their social value, and the user's social value is determined by the market price. Linkkey's token model design is also innovative. Its domain name registration function and some product functions have been launched. The complete product will be launched and available at the end of this year and the beginning of next year. Interested friends can go to its official website to experience and understand it in depth.

Multi-chain domain name

NNS, .bit, and Space ID are the three main projects in this category. In the promotion and development of their projects, they all emphasize the nature of "Web3 identity business card" and "Web3 identity management", and have written clear multi-chain support plans.

However, when it comes to the specific implementation of "multi-chain support", the three domain names have their own unique solutions. Below, I will focus on briefly introducing their multi-chain implementation solutions.

.bit

The .bit project has launched a domain name system with .bit as the suffix. The project believes that the development of public chain suffix domain names such as .eth, .bnb, and .sol may encounter some upper limit problems (especially new public chain domain names), because the core projects on other mainstream L1 public chains may find it difficult to accept cooperation with domain names with another public chain suffix. .bit is a domain name suffix without a public chain label, and may have a more natural advantage when cooperating with multiple public chains.

.bit is implemented based on the Nervous CKB public chain. This public chain cannot be regarded as a mainstream public chain in the public's perception, but it has a unique nature - it is specially built to achieve unified management of assets on different public chains.

How Nervous Assets implements multi-chain asset management involves some technical issues related to cryptographic principles. There is a relatively intuitive metaphor in its official documentation, which is briefly described as follows:

If we compare the ETH public chain and the BTC public chain to the United States and the United Kingdom, respectively, and compare the ETH address and the BTC address to the ID cards of the United States and the United Kingdom, respectively, the current situation is that residents must have a US ID card (BTC address) to hold and manage assets in the United States (BTC), and the same is true in the United Kingdom (ETH). The two countries do not recognize each other's national ID cards (addresses).

The Nervous public chain can be regarded as a neutral and open third country. It supports citizens of other countries to hold assets through ID cards of other countries. For example, when a BTC user sends assets issued on Nervos CKB in a BTC wallet, it can be regarded as a US resident holding a US ID card selling his or her house in a neutral country, and this process has been officially recognized by the neutral country (verified by the Nervos CKB node).

NNS

NNS is a domain name system with the suffix .nft launched by the Metascan.pro (Twitterscan's parent company) project. It currently mainly implements core functions such as registration and resolution on the Ethereum main chain.

The Metascan project will launch NNS contracts on other public chains (such as BSC) in the next few weeks so that users can register and manage domain names with lower GAS fees. The NNS domain name system on different public chains is unified. The specific implementation of this "unification" may involve the deployment of some information cross-chain nodes, and may also involve some forms of centralized management.

In theory, domain name cross-chain is not complicated, as long as the domain name resolution information on all chains can be unified through cross-chain nodes. But in fact, when multiple public chains are involved at the same time, keeping the domain name registry information synchronized and consistent in real time still faces many challenges under the current Web3 infrastructure. This is why most domain name projects currently only support one public chain. How NNS implements this cross-chain, its stability, and degree of decentralization are worthy of attention.

Space ID

Space ID launched the .bnb domain name on BSC. Currently, the nature of this domain name smart contract is highly similar to ENS, and it only supports the connection and resolution of projects on BSC. There is nothing special about it. However, Space ID plans to launch a set of "Namespaces" to support domain name projects of all public chains, and even allow Web2 platform companies to issue their own domain name spaces. Instead of hoping that their domain name suffix can become a common name in the Web3 field like .bit.

This namespace can be roughly understood as follows: if a person holds Solo.bnb on BSC, then in the Space ID namespace, he will hold bnb:solo in the future; if he holds Solo.eth, then he will hold eth:solo in the namespace; even Apple and Google account names can be converted into similar formats such as apple:solo and google:solo.

This vision is worthy of attention and anticipation, but the part of Space ID that has been launched is still somewhat different from this vision and may require a longer iteration.

In summary, although most Web3 domain names use identity management as a core narrative, once it involves the interoperability of multi-chain smart contract domain names, it will face more complex technical details in cross-chain and multi-chain. Currently, .bit's multi-chain solution is the fastest in implementation.

DNS domain name alternatives: Handshake, Namecoin

The centralized management of Web2 ICANN domain names has caused dissatisfaction among many believers in decentralization. Therefore, some people are exploring the realization of decentralized website domain name resolution. The main vision of these two projects is to serve as a supplement and replacement for the Web2 DNS system.

Since their concepts and development directions are very different from those of most Web3 domain names, and they have not attracted much market attention recently, this article will not focus on them. Interested readers can do in-depth research on their own.

Thinking about key issues of Web3 domain names

User demand analysis of Web3 domain names: Currently not a rigid demand; transactions are mainly concentrated on short numeric domain names

Although the author has previously introduced in detail the current application scenarios and uses of domain names, it must be admitted that domain names are not a rigid demand for current Web3 users.

Even if a user does not purchase any Web3 domain name, it will not affect his normal Web3 application experience at all; even if he loses the Web3 domain name he purchased, unless he has used this domain name on a large scale for his social account (like the author uses mtyl.eth), his perception is limited. Readers may wish to think about the use of domain names by themselves and those around them: what percentage of people have never purchased, what percentage of people buy just for trial or investment, and what percentage of people really use their domain names on a large scale.

The author has done a statistical analysis of the renewal/retention of ENS users through on-chain data and found an interesting conclusion: 52% of the domain names active on or before August 20, 21, expired on August 20, 22. This means that in this year, these 52% of domain names have expired (perhaps they were registered many years ago), and the original users have not renewed them, and no new users have registered the same domain names in time. Taking other 21-year time periods for observation, the failure rate is basically between 45-55%.

Considering that the minimum registration period for ENS is one year, this figure can only show the situation of old ENS users who registered before November last year, but it can also explain a lot of problems. Compared with many fleeting "hot" application projects in the Web3 field, this retention situation can be said to be quite good, and it can also indirectly reflect the nature of domain names as Web3 infrastructure and long-term growth with the development of the Web3 ecosystem; but from the absolute number point of view, this ratio is still not high, indicating that Web3 domain names are still not a rigid demand of users.

The author believes that the long-term development of domain name projects mainly depends on the development of the Web3 application ecosystem, especially the development of Web3 social projects. Because it is difficult to bring fundamental large-scale increments to the entire field by simply promoting the domain name project itself in applications and wallets; only the vigorous development of application projects can highlight the importance of the account name system and identity management system associated with the domain name, and highlight the value of the domain name itself. However, before that, the domain name project must be well prepared, so as not to find that its core functions such as identity management, cross-chain solutions, and Web2 URL connectivity are still not mature enough when the real application wave comes. In addition, it is also a possible development path for the domain name project to start social applications or login systems similar to wallets.

Analysis of Web3 domain name transactions: Currently focusing on short numeric domain names

ENS is the domain name project with the most active transactions and fully public data, so its transaction situation is highly representative.

In the ENS domain name transactions in the nearly three months from April 25 to July 7, 2022, transactions of pure digital domain names contributed 44% of the transaction volume and 65% of the transaction amount; in the digital domain name segment, 97% of the transactions were short digital domain names of 3-5 digits, and 3-digit domain names contributed 29% of the transaction amount with 1% of the transaction volume.

From the development of various new domain name projects, short numeric domain names are also the shortest numeric domain names in many domain name categories, such as 982.eth, 2089.eth, 12346.eth, etc. What is the value of these domain names that deserves such concentrated attention and transactions? The author believes that there are two main reasons:

Short numeric domain names have strong potential brand value due to their readability and memorability. For example, when it comes to numbers such as 58, 360, 4399, and 12306, readers who have used related products will first think of the corresponding company names. In the Web2 field, using short numbers as the brand name of a company/business/product is a proven business logic, and it may still be true in Web3. Short numeric domain names naturally have a certain scarcity and cannot be increased (unlike English abbreviations). For example, there are a maximum of 1,000 three-digit domain names and a maximum of 10,000 four-digit domain names. In addition, the emergence of NFT digital numbers such as BAYC and corresponding concepts such as 10k Club has also verified the value of this scarcity. Now the floor price of a four-digit ENS digital domain name is close to 2ETH, and it is not ruled out that it will be on par with or even exceed BAYC in the future.

In the Web2 field, there are many cases where short domain names have been sold at sky-high prices. When Web3 goes to the public in the future, will the short domain names of the top domain name projects also be sold at sky-high prices? This is indeed very imaginative. However, it is precisely because of this that whenever a new domain name project appears, there will always be users with a certain speculative mentality who will rush to register a large number of three-digit and four-digit domain names, and the project parties are also aware of this. Some project parties will clearly increase the registration fee for short domain names when registering, while some project parties will reserve short domain names and market them as a special commodity.

It is worth noting that the emergence of this speculation phenomenon has, to some extent, made issuing domain names a "no-cost business" for project parties: they only need to fork the ENS contract, create an official website, write documents and paint a rosy picture, and then expect speculative users to register various "high-value" domain names and charge a high registration fee (for example, if we refer to ENS, a three-digit domain name costs $640/year, and a four-digit domain name costs $160/year). As for whether the project can deliver on its promises, that is another matter.

Therefore, when users choose a domain name project, they should also conduct more detailed investigations and pay more attention to the actual progress of its application scenarios, including: the number and quality of application projects that support the domain name, the progress and possibility of realizing the vision described by the project party (such as social display, multi-chain interoperability, Web2 web page support, etc.).

Outlook on the competition landscape of domain name projects: the Matthew effect is obvious

Judging from the price of domain names, I think the competition among domain name projects with different suffixes is a matter of great Matthew effect. When it comes to choosing a domain name suffix, the top domain names will become the first choice for wealthy people and KOLs, and this choice will further expand the value of the top domain name suffixes. Therefore, in the end, there may be only 1-2 top domain names at most. Because domain names have stronger social attributes, their status will be similar to or even exceed that of the .com suffix in many Web2 DNS top-level domains.

At present, the .eth suffix of ENS is most likely to develop into a leader, but ENS's ZWJ defects and lack of multi-chain support may give later competitors an opportunity to catch up. Considering that even ENS has less than 3 million registered users, which is not high compared to the Web3 user base and Internet user base, there is still some room for competition in this area.

One thing worth discussing is that the unrestrained position of the top domain name in price will cause other domain names to completely lose their living space? In Web2, in addition to .com, there are many other common top-level domain names such as .net and .org, but the Web2 domain name is mainly to B, and the value priority of the business and brand is higher. If the domain name itself has extremely high symbolic meaning and brand value, then compared with an excellent and readable prefix, the suffix may be lower. For example, if your company is Silver Stars, are you willing to register a silverstars123.com or a silverstars.xyz as your website homepage address?

However, in the Web3 field, the application scenarios of domain names are currently mainly to C. Suppose your English name is Charles, and you and your friends are used to seeing Charles as your account name, but charles.eth has been registered on ENS. If each domain name has similar application scenarios and experiences, would you rather register a name such as charles2874.eth, or register a name such as charles.gate? This is a difficult question, which may depend on the future development of the head domain name and the specific positioning of the user's mind. However, if the assumption that "each domain name has similar application scenarios and experiences" does not hold true, and the application support of head domain names far exceeds that of the waist and tail projects, then users will obviously further gather towards the head domain name.

From a long-term perspective, Web3 domain names may also become the urgent need of every B-side project party like Web2 web address. At that time, the logic of the domain name demand side may change. But this not only requires the maturity and promotion of the domain name project itself, but also requires the "registering a Web3 domain name - building a project homepage through a website address connected to Web3 domain name" to become a convention and consensus. Judging from the current focus of the development of various domain name projects, this may still be a far-reaching matter.

Suffix conflict problem of domain name projects: the necessity of decentralization and the damage of user experience

The issuance and registration of Web3 domain names does not require permission from a centralized organization, which is intuitively a good thing. But it also brings potential controversy and conflict: how should two projects open the registration of the same domain name suffix to users? After all, it is almost no threshold to make a smart contract that imitates ENS and issue an NFT with a domain name suffix to the public.

This is a very thought-provoking question in the domain name field, because the reason why domain names can be used as "Web3 common names" is their uniqueness on the public chain and even within the entire Web3 system. If this uniqueness is destroyed, the value of the entire domain name will be damaged. Just imagine, if there are two .eth projects that are open to register at the same time and have their own cooperative applications, which project's .eth domain name are you going to register? If a friend gives you a domain name instead of the address as the transfer target, do you have to ask more questions? Is the domain name project you are using now supported by the wallet that is the same as your friend's registered? Obviously, this will bring great confusion to the identity system on the chain.

Intuitively, the issuance of domain name suffixes generally follows a principle of "first come, then come". Domain name projects that conduct corresponding business first can obtain control of the corresponding domain name project first. Later projects are more like imitation disks and should not be accepted by mainstream communities. For example, if the author now uses copy ENS contracts and issues exactly the same .eth domain names on Ethereum, without using fraudulent means such as phishing websites, it is difficult to imagine what kind of users will pay to register the .eth domain name issued by the author after knowing the details of the two projects.

However, things are often not that simple, because the two projects may not be on the same public chain, and the "first/after" judgment of conducting business may not be clear, the business focus of the project may also be different, and the users attracted differently when starting up are different. Therefore, in the early stage, the consequences of this conflict are not obvious, and the two projects can be developed at the same time. So for the application project parties, how should the relevant cooperation support issues be solved?

A controversy worth paying attention to in the domain name field recently is that the .nft domain name issued by NNS was removed from the shelves by Opensea (other exchanges have not been removed from the shelves), because Opensea received a complaint from Unstoppable Domains, which preceded the former to sell .nft domain names in the market and had registered the ".nft" trademark in Hong Kong. But in fact, the .nft domain name NFT issued by NNS and Unstoppable Domains are not on the same public chain, and the business focus of the two is not the relationship between imitation disks and imitation disks; from the perspective of trademark infringement, NNS also registered the ".nft" trademarks in Japan, South Korea and other countries earlier, so the rationality of Opensea's removal of NNS is actually up to date.

This is not the first time Unstoppable Domains has had a conflict with other domain name projects over the suffix issue. On suffixes such as .coin and .wallet, Unstoppable Domains have conflicts with other projects. In the end, either one party will voluntarily give in, or rely on lawsuits and rulings from the US courts. This is ridiculous and ultimately relies on the US government system to resolve it. Isn’t it back to the old path of centralization similar to Web2 ICANN?

But if we do not solve this centralized solution and let the project parties with the same domain name suffix develop freely on the chain, how can we solve the potential conflict problems in the future? Like the ZWJ problem of ENS, will the application party use the application to make additional marks to different project parties with the same suffix? Or should we build an organization similar to DAO, and hope that each domain name project party can coordinate and build a decentralized "Web3 ICANN"? Whether it is users at home and abroad who are concerned about the domain name field, these issues are the focus of concerns and discussion.