The Internet uses the Domain Name Service (DNS) to associate data with simple, easy-to-remember domain names. For instance, users can navigate to the “www.bitstamp.net” domain name instead of using the complex string of numbers that constitute Bitstamp’s IP addresses. Your phone’s contacts app provides a similar service: you can type in a friend’s name to make a call instead of remembering every single friend’s phone number.
Using smart contracts, the Ethereum Name Service (ENS) brings similar functionality to the Ethereum blockchain. Users may obtain a .eth domain name that associates with their Ethereum addresses, making it easier to navigate to their own wallets, input their addresses into decentralized applications (dapps) or exchanges, and provide a simpler way for other users to transact with them.
ENS names exist as non-fungible tokens (NFTs) on the Ethereum blockchain, leading to some crypto users collecting .eth names that they believe to be valuable. This drove upwards of 20,000 weekly sales in mid-2021. Since its launch in 2017, more than 2.5 million names have been registered using ENS.
In order to govern the system, ENS uses a decentralized autonomous organization (DAO) comprised of holders of its ENS token. Token holders can vote on proposals that guide how ENS operates, setting how names are registered and how the community treasury directs its funds.
How was the Ethereum Name Service developed?
ENS was not the first blockchain-based naming service, despite its now-widespread popularity and recognizability as the leader on Ethereum. Namecoin, launched in 2011 as a fork of Bitcoin, provided the framework for blockchain transactions among addresses that touted “.bit” domain names, but it never garnered broad appeal.
However, Namecoin was inspiration for the later development of a similar project on Ethereum. In fact, when Vitalik Buterin first introduced Ethereum, he noted that a possible use case for this new technology was a naming service—like Namecoin. It didn’t take long for an ex-Google software engineer named Nick Johnson to publish an Ethereum Improvement Proposal (EIP) that detailed the “Ethereum Domain Name Service.” Johnson later received funding from the Ethereum Foundation to build the service.
This funding led to the creation of an organization now called ENS Labs, a non-profit based in Singapore, that directs the development of ENS. Over the years, updates to the protocol have included support of addresses beyond .eth (like .xyz and Tor’s .onion) and the compliance of ENS names with the ERC-721 non-fungible token (NFT) standard.
How does the Ethereum Name Service work?
The ENS approaches blockchain addresses almost like the Internet’s DNS approaches IP addresses. However, the mechanics of this relationship are slightly different, as the ENS operates using smart contracts on the Ethereum blockchain.
ENS stores all names in its registry smart contract, which also contains information about every name’s owner and resolver. Resolvers are separate contracts that translate ENS names into the 42-hexadecimal addresses (i.e., 0x88brN04…), thus allowing owners to connect their .eth (or other) names with Ethereum addresses. Owners of a name—such as individual users or smart contracts—can control domain resolvers and transfer ownership of domains (and subdomains) across the network.
Obtaining an ENS name
In order to become the owner of an ENS name, a cryptocurrency user can navigate to the ENS.domains website and use the app to register the name using a smart contract called a “registrar.” The user pays a fee according to the length of time they wish to register the name (e.g., 1 year, 2 years, etc.), how long the name is (shorter is more expensive), and how much gas is necessary to process the transaction.
Behind the scenes, ENS generates and keeps track of the names through a process called Namehash. This process standardizes names, making them compatible across the protocol, and then hashes (converts) the names using cryptography to make them into an alphanumeric string.
Using ENS names
Owners can use ENS names in place of their wallet address or a smart contract address, allowing others to make transactions with them more easily. ENS names are also functionally NFTs, as transferring one to another owner gives them the right to the name. In the broader NFT marketplace, this has made ENS names one of the more popular digital assets—especially for perceived high-value names related to finance, the metaverse, and specific projects.
How is the ENS token used?
In November 2021, holders of ENS-issued names were offered an airdrop of a new ERC-20 token dubbed “ENS.” Within 1 month of release, the total market cap of all ENS tokens peaked at $1.5 billion.
The ENS token is used to conduct governance of the ENS protocol through a process of proposals and community votes. This type of governing body is called a decentralized autonomous organization (DAO). Through voting, ENS holders can set the fees for new domains or other specifications of the protocol, but perhaps most significantly they can also direct the funds in the DAO’s treasury.
Token supply and distribution
There is a maximum supply of 100 million ENS. The airdrop released 25% of the supply to holders of ENS names, and another 25% were allocated to over 100 of the project’s contributors. The DAO community treasury received the other 50% of all ENS. Only 10% of these tokens were available for immediate use, and the remaining ENS were scheduled to unlock over the course of 4 years (ending in 2025).
- The Ethereum Name Service is a protocol that allows for the creation and management of human-readable names associated with addresses on the Ethereum blockchain.
- The ENS was conceived early in the development of Ethereum, taking inspiration from the Bitcoin-based project Namecoin.
- ENS names are transferable and compatible with the ERC-721 non-fungible token (NFT) standard, making them attractive to NFT traders; meanwhile, the ENS token is used to govern the protocol through its decentralized autonomous organization (DAO).