Analysis: Are ENS Domains the "Most Perfect NFT Collection" in a Bear Market?

Author: Liu Quankai, Wu Says Blockchain

Once invincible, OpenSea recorded its lowest monthly trading volume in August in the past year, with blue-chip liquidity from BAYC, CryptoPunks, Azuki, and others suffering significant setbacks after a large-scale liquidation crisis, leading to daily transaction counts dwindling to single digits. However, amidst this winter, domain names, one of the most valuable assets in Web history, have stood out. The OG asset in the NFT industry, ENS domain names, quickly climbed to the top of trading platforms. On September 5, Nick Tomaino, founding partner of venture capital firm 1confirmation, changed his Twitter handle to "1492.eth" and stated that ENS is the perfect NFT collection.

ENS domain names are the most held assets in the NFT space, without exception. According to official data, there are currently 541,000 users who have registered a total of 2.17 million ENS domain names. Anyone can register a domain name of their choice or purchase one from the secondary market, and a good name's story and the brand it represents can quickly capture the minds of other users after widespread dissemination. Over time, when someone mentions this name, the narrative and brand value behind it unfold.

However, forming value from a domain name is often challenging, as most characters have no real-world significance. Therefore, for most users, ENS domain names are merely a substitute for a long, cumbersome address. Yet, some astute investors have discovered that certain ENS domain names with special meanings and limited quantities under specific conditions can also possess speculative value. Some users choose ENS domain names based on existing, widely recognized entities, registering or purchasing domain names of well-known companies in reality, such as: telsa.eth, hoping that the company will buy the domain after entering Web3 or that another investor with similar intentions will offer a higher price. However, such domain names were often registered years ago and are firmly held, and it is unlikely that anyone will easily trade them before reaching a high psychological price.

Create Meaning Where There Is None

The character set available for registering ENS domain names is extensive, including numbers, letters, emojis, special symbols, and their combinations. Different character sets and combinations create unique domain name collections, while variations in length artificially construct differentiation and scarcity within the same character set. This differentiation and scarcity give rise to speculative opportunities.

According to ENS.Vision data, ENS domain names can be categorized into the following major types (based on trading volume, only counting those with total trading volume exceeding 1000 ETH):

10k Club: 4-digit domain names 0000-9999

Leading all categories in trading volume, with a total trading volume exceeding 17,000 ETH and a floor price exceeding 2 ETH, this is the hottest category of ENS domain names recently.

1. 999 Club: 3-digit domain names 000-999
2. The most expensive category of ENS domain names, with a floor price exceeding 30 ETH.
3. 3 Letters: 3-letter domain names
4. 100k Club: 5-digit domain names 00000-99999
5. Pre-Punk Club: Domain names minted before Crypto Punks, total of 78,813
6. Arabic 999 Club: 3-digit Arabic numeral domain names 000-999
7. English Nouns: English nouns, total of 3,103
8. 4 Letter Dictionary: 4-letter English domain names, total of 4,001
9. English Verbs: English verbs, total of 6,127
10. 5 Letter Dictionary: 5-letter English domain names, total of 5,760
11. 3 Digit Palindromes: 3-digit palindrome domain names (read the same forwards and backwards), total of 100, floor price 40 ETH
12. Surnames: Surnames, total of 4,427

Among the total trading volume of over 55,000 ETH for ENS domain names on OpenSea, the 999 Club and 10k Club categories account for nearly half of the trading volume, with the 10k Club's trading volume in the last 24 hours exceeding 350 ETH, surpassing other blue-chip collections like BAYC and CryptoPunks.

Low Paper Hand Rate, Potential to Become Blue-Chip

As of the afternoon of September 5, the real-time number of open orders for the 999 Club (total of 999) was 114, with an open order rate of 11.4%. Among these, only 4 orders deviated from the floor price (floor price 30.5 ETH) by less than 10%, 9 orders deviated by less than 20%, and 27 orders deviated by less than 50%. If we consider orders deviating from the floor price by less than 50% as paper hands, the paper hand rate is approximately 2.7%.

Looking at the 10k Club (total of 10,000), the real-time number of open orders was 1,481, with an open order rate of 14.81%. Among these, 32 orders deviated from the floor price (floor price 2.1 ETH) by less than 10%, 91 orders deviated by less than 20%, and 261 orders deviated by less than 50%, with over 80% of orders deviating from the floor price by more than 50%. Under the same conditions, the paper hand rate for the 10k Club is approximately 2.61%.

Under the same conditions (with orders deviating from the floor price by less than 50% defined as paper hands), the paper hand rate for BAYC is approximately 2.09%, for CryptoPunks about 2%, for Azuki about 0.9%, for CloneX about 1.1%, and for Doodles about 0.95%. It can be seen that among the top NFT blue chips listed by BendDAO as collateral, the paper hand rates mostly remain around 2% or lower. Although the 999 Club and 10k Club are slightly higher, they likely possess the potential to become blue chips in the minds of holders.

ENS Domain Name Narrative

PFP as avatars, ENS as names. ENS becomes a personal label, facilitating memory, transfers, and receiving airdrops. A recent prime example is Nick Tomaino, founding partner of 1confirmation, who announced the purchase of 1492.eth and changed his Twitter name. 1492 represents the year Columbus discovered the New World.

1. Incorporating ENS domain names into the "Ape Universe." Previously, when Otherside land was released, discussions about land value were heated, with some arguing from a resource perspective, others believing the central island was the most valuable, and another voice suggesting combining BAYC numbers, Otherside land numbers, and ENS numeric domain names to achieve personal identity data sovereignty: "PFP + LAND + ENS," meaning a certain ape with a specific name lives in a particular location in the Ape Universe. In the future, when the Ape Universe becomes a unified realm, status can be gauged from the digital perspective, with the quantity/scarcity of NFTs transforming into digital uniqueness. In the future, when mentioning a certain number, such as 3399, it will be known that this person owns 3399.eth, BAYC #3399, and Otherside #3399.
2. Of course, it could also be other Metaverses or blue chips, such as CryptoPunks. Top NFT collector Punk 6529 uses 6529 as their social card for Twitter, Website, etc. When mentioning 6529, currently, there is only Punk 6529.
3. Numeric domain names aspire to replicate the success of Web2 in Web3. The mobile communications giant Vodafone once owned 360.com, which was later acquired by Qihoo 360 for $17 million, making it the most expensive domain sale in history. In recent auction records for 4-digit .com domains on Juming.com, prices range from tens of thousands to hundreds of thousands of RMB.

However, there are also criticisms regarding numeric domain names, with many believing they are merely a form of artificially speculative hype. Among the Top 50 holders of the 10k Club, the total number of holdings reaches 2,113, meaning approximately 1.2% (50/4118) of holders possess 21.13% (2113/10000) of the domains; in the Top 50 holders of the 999 Club, the total number of holdings reaches 465, meaning approximately 10.3% (50/485) of holders possess 46.5% (465/999) of the domains, with one individual, 0xe8…1bb0, holding 127 three-digit domain names.

Additionally, numeric domain names are relatively inferior in content expression compared to English domain names or other composite domain names. The meaning of character sets is assigned by people, and consensus is formed through subsequent dissemination. Numbers are simple and easy to remember, but their capacity for content is relatively limited and vague. The cultural expression ability of a string of numbers from 0-9 (10 digits) is far inferior to that of letters from a-z (26 letters). Moreover, from the perspective of transliteration/oral expression, discussing numbers in a Chinese context may sound smoother, as a number is one syllable, but when switching to English, a number is one word.

Referring to a person or calling someone by a number is also somewhat strange, as in real culture, not using a name but calling someone by their number often occurs with prison inmates.