Domain Names Are Fueling the Latest NFT Craze on Ethereum—Here’s Why

In the past week, Ethereum domain name sales on OpenSea are up nearly 2,300%, as users rush to buy highly coveted, and scarce, three and four-digit names.

The Ethereum Name Service (ENS) is a domain name provider for the Ethereum blockchain. The ENS is controlled by a DAO, or decentralized autonomous organization, which uses governance tokens to make collective decisions. It has close ties to the Ethereum Foundation and has been around since 2017.

But this week, Ethereum users have taken to speculating on the future value of three and four-digit ENS domain names. ENS names are domains that end in “.eth.” Each one is an NFT that is minted and sold just like your average NFT, which is a unique blockchain-based token that signifies ownership. 

ENS names are touted by their proponents as the future for decentralized, uncensorable websites and a potential universal login for all things Web3. Today, ENS names are most commonly used as a simple, readable alternative to a traditional Ethereum wallet address, which consists of 42 hexadecimal characters.

A number of celebrities and public figures currently use their ENS names as their Twitter usernames, like Jimmy Fallon (fallon.eth), Paris Hilton (parishilton.eth), Trey Songz (treysongz.eth), Coinbase CEO Brian Armstrong (barmstrong.eth), and Ethereum founder Vitalik Buterin (vitalik.eth).

Notably, Buterin tweeted two years ago about three and four-letter ENS names.

“They’re a fixed-supply asset and you can do things with them!” he said.

Similar to the web domain craze of the early internet, ENS names with fewer characters are easier to read, spell, and search.

Since the minimum number of digits for an ENS name is three, three and four-digit names have seen a massive and sudden uptick in sales. ENS’s Head of Community alisha.eth noted that on Tuesday, the ENS saw a whopping 446 Ethereum, or about $1.3 million, in secondary sales on OpenSea.

“As an observer, I feel like I blinked and I missed it,” she said of the recent surge in an ENS-hosted Twitter Space yesterday.

According to data from Lead ENS Developer nick.eth, the ENS went from taking in about $700,000 from April 14 until April 21, to $3 million from April 22 until April 27.

In the past week, the ENS saw a 119% increase in domain name registrations, and the total number of active .eth names is up 7%. 

But this domain name craze isn’t quite like that of the 1990s. Today, many users are hyped up over numeric ENS names, like 123.eth. Many three-digit ENS names are selling for over 6 ETH each, which is about $17,000, such as 792.eth, 645.eth, and 981.eth.

Some are buying their ENS names for the amount in the name itself, such as 887.eth going for 8.87 ETH, which is nearly $26,000. 555.eth sold for 55.5 ETH yesterday, which is an eye-watering $160,000.

As to why some are paying hundreds of thousands of dollars for a name that might to others evoke thoughts of being a prison inmate or living in an Orwellian dystopia, the NFT community has a few ideas.

“If your Punk [profile picture] is [number] 4000, then you’re going to want 4000.eth,” said tommygun.eth in a Twitter Space hosted by ENS Consultant 2594.eth on Thursday, referring to how CryptoPunks (aka Punks) are numbered as part of a collection of 10,000. 

In fact, the vast majority of NFT PFP collections are numbered, especially among the highest-grossing collections, such as Bored Apes, Azuki, Clone X, and Moonbirds.

Tommygun.eth also shared that he owns a number of three and four-digit ENS names, even though only one main ENS name can be registered to an Ethereum wallet at any given time.

“The idea is to sell some, and lease most of them,” said 1289.eth, who is envisioning a four to five year future timeline for his ENS domain names.

Others prophesied an upcoming “ENS summer,” where, similar to the “DeFi summer” of 2020—when decentralized finance exploded in popularity—the ENS might see similar interest.

Some NFT collectors are already speculating on the potential value of ENS subdomains, like “quit.pcc.eth,” which can be created by the parent domain name holder. In this case, quite.pcc.eth is a subdomain of pcc.eth, which is owned by the Purrnelopes Country Club NFT collection.

And because there is a fixed supply of 10,000 four-digit ENS names, some users have already created entire communities around being in the “10k Club.”

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