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The Ethereum Name Service provides a distributed, open and extensible naming system for not just ethereum, but other types of cryptocurrencies and NFTs. It is based on the Ethereum blockchain, which is also the blockchain behind the cryptocurrency ethereum and popular NFTs like CryptoPunks.
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What Is the Ethereum Name Service?
Essentially, the Ethereum Name Service, or ENS, is a protocol that turns long, hard-to-remember and virtually indecipherable Ethereum wallet addresses into an easy-to-read name of just a few letters. When you invest in your own ENS, you make it easier to complete blockchain-based transactions, especially receiving ethereum or NFTs, without worrying that someone will make a mistake when they type your Ethereum wallet address into their computer or mobile device.
According to the ENS Documentation, the ENS maps “human-readable names, like ‘alice.eth’ to machine-readable identifiers such as Ethereum addresses, other cryptocurrency addresses, content hashes, and metadata.”
When you have your own ENS, it’s like having your own domain name or social media handle for Web3, so that people can easily complete crypto transactions and be assured they are trading with the right person.
Comparing the Ethereum Name Service to the Domain Name Service
Since cryptocurrency, crypto wallets and crypto trading can get complicated, here’s a comparison to a concept more familiar to most people: domain names or website addresses.
In the early days of the internet, website addresses were based on their internet protocol (IP) address. Websites did not have simple, easy-to-read domain names that people could remember. Instead, if you wanted to visit a specific website, you’d have to enter an entire string of numbers and letters and hope that you got it correct.
Enter Domain Name Services, which was created by U.S. computer scientist Paul Mockapetris and based on the research of scientist Elizabeth Feinler. The Domain Name Service, or DNS, linked complicated IP addresses to easy-to-remember, easy-to-spell and often company-branded domain names made from everyday words.
The ENS does the same thing for crypto wallet addresses, decentralized websites and browsers in the metaverse and dApps (decentralized apps). It’s even more important for crypto traders and investors, because blockchain transactions are irreversible. If you type one of the 42 characters in the Ethereum wallet address incorrectly, you won’t just go to the wrong website or receive a 404 – Page Not Found error. Type a crypto wallet address wrong and you could send substantial amounts of money to the wrong person.
Why Do You Need Ethereum Name Service?
If you’re trading in cryptocurrency, you don’t need an ENS. You can conduct transactions through a crypto exchange or even buy, sell and store bitcoin or ethereum through a service like Robinhood, PayPal or Venmo.
But if you are conducting person-to-person transactions of cryptocurrency and you want to reduce the risk of an error, it’s a good idea to invest in an ENS.
Additionally, an ENS can become a branding tool in Web3. The same as people scooped up domain names in the early years of the internet that reflected businesses they might want to start or even their own name, you might want to purchase an ENS to keep all your Web3 activities under one virtual roof, so to speak.
Currently, according to Forkast.new, ENS is the only service of its type that offers human-readable nicknames that function across all crypto wallets, dApps and decentralized websites. That makes an ENS domain a good investment for anyone interested in anything more than the most basic crypto trading; anyone interested in gaming or working in the metaverse; or anyone who collects, buys, sells or creates NFTs.
How Does the Ethereum Name Service Work?
When you buy and, subsequently, register an ENS, you become the registrant of that domain. Again, this is similar to the process of buying a website domain name. The ENS has its own registry that records, monitors and tracks the identity who registered the domain to confirm ownership. The registrar is not a person, but a smart contract that allocates all subdomain names to the proper registrant.
Is Ethereum Name Service Safe?
Crypto experts explain that, because ENS domains exist on the Ethereum blockchain, they are virtually invulnerable to deletion or hacking. Unlike website domains, which are stored on a central server and extremely vulnerable to hackers, ENS domains are more secure.
Also, using ENS domains creates more transparency amongst cryptocurrency transactions, since names will become highly recognizable.
Is Ethereum Name Service a Good Investment?
Just as many people made money buying and selling internet domain names, some investors are purchasing what they perceive might become popular or coveted ENS domains for potential re-sale.
Just as you may have purchased “yourname.com” as a domain, you may consider grabbing an ENS that resembles your name while ENS domains are still in their early stages. The ENS “exchange.eth” was auctioned for the ETH equivalent of $609,000 and “weather.eth” sold for $27,000.
As Web3 and decentralized websites grow, demand for ENS domain names could rise. You can find many ENS domains for sale on secondary ENS domain exchanges like ENSListing.com, which was the first service of its type.
However, investing in ENS domains, even seemingly popular ones, be a highly speculative investment, just as buying domain names was risky back when people were purchasing highly coveted .com addresses.
If you don’t have money to risk on such a wager, you may want to invest in your own ENS and let it sit, without trying to guess what may be popular or paying a high price at auction for brand names.
How To Buy an ENS
Buying an ENS is much easier than understanding how the Ethereum Name System works, fortunately.
To buy an ENS, you’ll need a hot wallet, or a crypto wallet connected to the internet. Then, visit app.ens.domains, the website where you can purchase and register ENS domains. Type in the name you want to register to confirm its availability. This is exactly like the process of purchasing a website domain name. Finally, follow the instructions to pay for the ENS using ETH tokens in your crypto wallet and register the domain.
Should You Buy ENS Tokens?
It’s worth noting that you can also invest in ENS tokens through many crypto exchanges.
The ENS is operated by a decentralized autonomous organization, rather than an individual or group of individuals. The DAO is represented by a foundation in the Cayman Islands called the ENS Foundation. The Foundation ensures that the ENS DAO complies with tax requirements, enables it to enter into contracts with other companies and offers limited liability for participants in the DAO regarding its actions.
The ENS DAO airdropped 25% of the ENS token supply in November 2021, giving the token a market capitalization greater than $1 billion just one day after its launch. Not only can you invest in ENS domains for use or re-sale, but you can invest in ENS tokens just like other cryptocurrencies.
Today, ENS is selling for about $12, with a market cap of only $242,522,546. The token is down from its one-year high of $83.54, according to CoinMarketCap.
Although Forkast.news wrote that the ENS “is becoming a fundamental component of the future crypto space,” it’s important to remember that any cryptocurrency investments are highly speculative and risky.
Final Take
Ultimately, the Ethereum Name Service could help crypto, blockchain technology and Web3 become more accessible to beginners. It might be worth picking up an ENS domain that resonates with you, whether that’s your first and last name, a nickname or something related to your personal brand.
As with any investment, understand that crypto, ENS tokens and even ENS domain prices are highly volatile. Consider more stable investments if you are looking to build a retirement nest egg or create a secure financial future. But if you are interested in high-risk investment with tremendous potential reward, the Ethereum Name Service could be worth exploring in greater depth.
