The hype around Bitcoin domain names BNS, is it an opportunity or a risk?

Author: Grapefruit, ChainCatcher

On May 28, a screenshot of the sale of the 001.btc domain for 0.3 BTC (approximately $8,100) circulated in various crypto communities. According to the seller of the domain, he inscribed it in February for about $10, resulting in a profit of over 800 times. This transaction has completely ignited the enthusiasm of Bitcoin domain players.

In fact, the 001.btc domain is a text inscription (Text) inscribed by users based on the Bitcoin Ordinals protocol. Although it appears to be a domain with a .btc suffix, it does not have the so-called domain functionality, as it does not support Bitcoin address resolution, and users only hold a text-based NFT.

With the completion of the 001.btc transaction, text-based domains based on the Ordinals protocol have begun to attract the attention of users and related service providers, aiming to truly provide domain functionalities.

Domains have become another new hotspot in the Bitcoin ecosystem, following BRC20 and NFTs. Domain players are racing against time to inscribe new domains, fearing they might miss this wealth train. Some applications on the Bitcoin chain have also begun to support Bitcoin domain services. On May 30, the Bitcoin inscription trading and wallet service platform Ordinals Wallet announced support for .btc, .sats, and other domain resolutions, allowing users to send and receive Bitcoin and inscriptions using domains; on May 31, the Bitcoin wallet Unisat launched a domain trading market, supporting the trading of .sats and .unisat suffix domains.

The Ordinals protocol allows anyone to inscribe inscriptions, meaning users can inscribe text similar to any .xxx character suffix domain. Currently, the consensus domains that have formed in the Bitcoin text domain market include a series of suffix character domains such as .btc, .sat, .sats, and .ord.

Additionally, some domain service providers have started offering domain services, but the ecosystem is very chaotic. There are three types of .btc domains, including text-based .btc domains, BTC.US's .btc domain based on the Stacks chain, and the Jason format .btc domain launched by the decentralized domain service provider BTCDomain based on Ordinals. Although they all appear as .btc, they are backed by three different domain providers and operational systems.

Currently, based on the domain payment mechanism, products in the Bitcoin domain (BNS) market can be roughly categorized into two types: one type is the rental payment domain led by domain service providers, which requires an annual service fee, represented by products like BTC Domain and BTC.US; the other type is Ordinals text-based domains (.sats, .sat, etc.), which only require payment of the on-chain gas fee at the time of inscription, and are valid for a lifetime.

So, what are the differences between these domains? What are their functions? How should we choose? This article will attempt to provide some answers.

About Bitcoin BNS

BNS (Bitcoin Name Service) is a general term for Bitcoin domain services, referring to domain services established on the Bitcoin blockchain network. The function of BNS is similar to the Ethereum Name Service (ENS), allowing Bitcoin addresses to be converted into characters that are easier for humans to remember and recognize, forming Bitcoin domains ending in ".btc, .sats, .sat," etc.

BNS acts as a converter for Bitcoin chain addresses, allowing Bitcoin addresses that start with "bc1p" to be converted into easily recognizable domain characters, similar to Twitter or Weibo usernames. Once users bind their Bitcoin addresses to a domain, they can use the domain to send and receive BTC and other on-chain assets without needing to copy or input complex Bitcoin addresses. At the same time, BNS domains also serve as a universal identity credential for users in the Bitcoin chain world. In the future, users may log into Web3 applications using their BNS as a username, managing the corresponding wallet addresses and data.

Additionally, some social accounts, email, and other internet accounts can also support users binding BNS domains, and NFTs held can be recorded on the domain or set as the domain avatar. For example, the decentralized social application Damus supports users using .sats domains as usernames.

What are BNS domains? How to choose?

Today, in the Bitcoin ecosystem, based on different payment methods, users can obtain domains mainly in two ways: one is paid rental domains provided by domain service providers, represented by projects like BTC.US and BTCDomain; the other is text-based domains (Text) generated based on the Ordinals protocol.

Since text-based domains (Text) are owned for life by the inscribing wallet address once inscribed, with no subsequent fees and no project issuers, anyone can inscribe their desired domain according to their preferences. Therefore, text-based domains are currently the most sought after and welcomed by users in the Bitcoin domain market.

However, before the popularity of text-based domains, developers had already deployed Bitcoin domain-related products, such as BTC.US and BTCDomain. Among them, the .btc suffix domains are the most numerous, with BTC.US and BTCDomain providing .btc suffix domain services, along with text-based .btc domains generated spontaneously by users through Ordinals. This means that there are currently three types of .btc domains in the Bitcoin ecosystem. This is mainly because .btc, being a symbol of BTC, is easier for users to recognize and spread, making it the preferred suffix character for domain service providers.

So, what are the differences between these three types of .btc domains? How should users choose?

1. Ordinals Text Domains: Only pay Gas fees, equal issuance

Text domains mainly refer to character content similar to domains issued based on the Bitcoin Ordinals protocol. Users only need to pay the on-chain gas fee to inscribe, and once inscribed, they are valid for life with no subsequent fees. The main representatives include ".btc, .sat, .sats, .ord, .unisat," etc.

The Ordinals protocol makes each satoshi (sats) unique by inscribing inscriptions on the smallest unit of Bitcoin, generating Ordinals NFTs. The essence of using the Ordinals protocol to issue domains is inscribing domain strings (text inscriptions) on satoshis, which is why domains are referred to as text-based.

Since domains are text inscriptions, they comply with the rules of inscriptions: any user can inscribe any suffix domain and it operates on a first-come, first-served basis. The former means that anyone can deploy any character suffix .XXX domain, such as .uniswap, .bank, .pepe, etc.; the latter rule means that for the same domain, the one registered first is valid, while the rest are invalid. In other words, it does not restrict users from registering the same character domain, but once that domain inscription is registered, later registrations of the same domain are invalid and not recognized by the market. For example, if someone registered 001.btc for the first time in February, others can also register 001.btc, but the later 001.btc is an invalid inscription.

The process of inscribing a domain inscription is similar to deploying a BRC20 token, except that the inscriptions on BRC20 tokens are uniform Jason data, while domain inscriptions are unique strings. Therefore, each inscribed domain is also an Ordinals NFT asset.

Additionally, in the current Bitcoin text domain market, domain case sensitivity does not matter; there is no distinction between upper and lower case during inscription and recognition. This means that if someone has minted SUSHI.btc, there is no need to mint SUshi.BTC/sushi.btc, etc., because that domain has already been taken, and later ones are invalid.

Although Ordinals supports inscribing inscriptions with any suffix character, it does not mean that any suffix domain character will necessarily have value. If it does not have domain functionality (such as not supporting binding to Bitcoin wallet addresses) or lacks consensus, it can only be a text inscription NFT.

In other words, whether text inscriptions like .btc, .sat, .sats, .stas, .ibx, .gm can become so-called domains depends on whether there is consensus on them and whether wallets or related service providers offer domain-related functional services, such as supporting address resolution, which can be used to receive assets or log into decentralized applications. Only with support for domain-related functionalities can these text-like domains potentially have domain value.

Taking the .btc, .sat, .stas, .sats, .ibx, .gm domains as examples, currently, the Unisat wallet supports resolving .sats, allowing users to receive and send Bitcoin assets using .sats domains; also, the decentralized social application Damus supports setting usernames as .sats, allowing users to use .sats as their identity representation. At this point, .sats has already acquired domain functionality, while other pure text domains with .xxx suffixes lack wallet applications to support address resolution or other domain functionalities, remaining merely text NFTs.

How to obtain a text domain?

If the domain has already been registered, users can purchase it on the Bitcoin NFT trading market or through over-the-counter peer-to-peer transactions, with the price depending on the seller's listing price; if the domain has not yet been registered, users can inscribe it directly on platforms that support Bitcoin inscriptions or use code, only needing to pay the on-chain gas fee (currently about $3 per transaction), with no further costs.

Taking the Unisat platform as an example, to inscribe a new domain:

Step 1: Before registration, check for duplicates to confirm if the domain has already been registered.

Use the platform's search function (Search), input the desired domain, and see if it already exists. If it does, any further registrations will be invalid. It is important to note that during the duplicate check, some reasons may lead to inaccurate data, so users need to check across multiple platforms for cross-validation.

Step 2: Once confirmed that the domain has not been registered, use the platform's inscription function (Inscribe) to register the inscription. Since Unisat supports .sats and .unisat, users only need to click on the relevant domain suffix and input the desired characters, allowing for batch minting of multiple domains.

If the relevant suffix domains are not available on Unisat, users can input the desired character suffix domain in the Text (text-based) dialog box, allowing for batch minting of different suffix domains.

What are some well-known text domains?

Bitcoin Name Service (.btc)---is a domain with a .btc suffix spontaneously organized by community users, having minted satoshi.btc and donated it to the Bitcoin Foundation. As of May 31, according to Unisat searches, there are 100,000 registered .btc domains.

sat.names (.sat)---sat is an abbreviation for satoshis, with 307,000 registered domains.

sats.names (.sats)---sats is a shorthand for satoshis, with 298,000 registered domains.

.unisat------is launched by the Unisat wallet, where users with .unisat can enjoy platform fee discounts.

.ord---is a tribute to the first token of BRC20, which is ORDI.

Text domain-related tools------

• Check duplicates and inscribe new domains

iDclub------can be used for domain duplicate checks and batch registrations, charging a certain service fee.

Unisat------supports domain duplicate checks and registrations. On May 31, it launched a trading market for .sats and .unisat domains, and can also resolve these domains to Bitcoin wallet addresses, allowing users to receive Bitcoin assets and inscriptions using .sats and .unisat domains.

Best in Slot------aggregates various assets of the Ordinals protocol, including NFTs, domains, inscriptions, etc., allowing users to check duplicates and view the holding address information of each inscription.

• Secondary domain trading market

Ordinals Wallet------provides services similar to Unisat, combining wallet and Ordinals asset trading functions. On May 30, it announced support for .sats, .btc, .unisat, .xbt, and other domains, and supports resolving domains to Bitcoin wallet addresses, allowing users to bind these domains with Ordinals Wallet Bitcoin addresses to receive and transfer assets.

Ordswap------is also a platform that integrates wallet and Ordinals asset trading functions, supporting the trading of text-based domains.

[Magic Eden](https://www.rootdata.com/zh/Projects/detail/Magic Eden?k=MjU3MQ==)------has added a Bitcoin NFT market, supporting the trading of .btc and other domains.

2. BTC.US: .btc domains issued based on the Stacks network

BTC.US is a domain service system built on smart contracts on Stacks, with a ".btc" suffix. Stacks is a smart contract chain for Bitcoin, providing smart contract functionality support for Bitcoin, helping to deploy DeFi, NFTs, and various decentralized applications.

Currently, to obtain a domain on BTC.US, users need to connect wallets like Hiro or Xverse on its official website to apply for registration, paying with the native Stacks token STX. Each registration requires a one-time payment of 2 STX tokens (approximately $1.3) for a 5-year annual fee, which will be automatically deducted upon expiration.

BTC.US provided domains

The .btc domains provided by BTC.US support users binding Stacks chain addresses and Lightning Network addresses, allowing users to receive and send Stacks ecosystem assets and Lightning Network assets through their .btc.

Thus, the .btc domains from BTC.US are generated based on the Stacks chain, with data stored in Stacks, serving more as an identity credential in the Stacks network and its ecosystem.

3. BTCDomain: Paid .btc domains provided based on Ordinals

BTC Domain provides .btc domain services issued based on the Bitcoin Ordinals protocol. It functions more like a comprehensive domain service platform, offering not only domain registration but also domain resolution and other related services. It aims to provide a user-friendly domain service platform for the Bitcoin community, operating similarly to ENS on Ethereum.

If users want to obtain a domain on BTC Domain, they first need to have an Ordinals-type wallet address. During the registration process, in addition to paying the Bitcoin on-chain gas fee, they also need to pay an additional annual service fee, with a maximum option to pay for 5 years.

When registering a domain on BTC Domain, the fees vary depending on the length of the domain. The annual service fee for a 4-character domain is 0.01 BTC (approximately $280); for a 5-character domain, it is 0.004 BTC (approximately $112); for 6 characters or more, the annual service fee is 0.001 BTC (approximately $28). Currently, there is a 50% discount on the annual service fee.

BTC Domain fee structure

The .btc domains provided by BTC Domain and the text-based .btc domains are both based on Ordinals, but their operational systems are completely different. According to official statements, the .btc provided by BTC Domain has been designed with deduplication and anti-counterfeiting signatures in its initial design, ensuring uniqueness through registration.

Compared to BTC.US's .btc, the .btc domains provided by BTC Domain are fully stored on the Bitcoin chain, making them native Bitcoin domains that can be bound to Bitcoin wallet addresses, allowing users to receive and send Bitcoin and inscription assets through their .btc domains.

Moreover, the .btc domains provided by BTC Domain can resolve not only to Bitcoin wallet addresses but also to web content. This is a convenient solution for businesses, charities, and individuals looking to create recognizable identities for their Bitcoin transactions. Currently, the .btc provided by BTC Domain supports resolution to Tokenview, TP Wallet, Foxwallet, and others.

However, some users have expressed that due to the existence of the BTCDomain official team, it is not as decentralized as text-based domains, and the costs associated with the rental model are too high. In response, the official team stated that the presence of the BTCDomain team allows for more resources to be invested in the development of .btc, supporting domain development and management, which in turn creates more application scenarios for its .btc domains.

The chaotic growth of the Bitcoin domain market makes unification difficult

Although Bitcoin domains have made it easier for users to manage on-chain addresses, the domain service system is still in its early development stage and has not yet been perfected. Since anyone can inscribe text domains with any .xxx suffix, there are currently multiple suffix characters in the Bitcoin domain market, including (.btc, .sat, .sats, .ord, .xbt, etc.), and more may emerge in the future, such as .uniswap, .xen, etc. In a short period, it will be challenging to unify domain suffix characters, domain resolution methods, and registration format requirements within the Bitcoin ecosystem.

Taking the .btc domain as an example, although the suffix btc characters are easy for users to recognize and spread, there are three different service providers and operational systems behind it. BTC.US's .btc, while using the btc suffix, is more oriented towards domain functionality within the Stacks ecosystem; BTC Domain's .btc, although it is a native Bitcoin domain supporting multiple wallet resolutions, has been criticized by users for its fees, domain registration restrictions, and centralization issues; while text-based .btc, due to the absence of subsequent fees and a relatively fair issuance method, is favored by users, but its application scenarios and resolutions still pose challenges, as currently only the Ordinals Wallet supports .btc text domain resolution. Despite the differences in product design and operational models among these three .btc domains, it is easy for most users to confuse them.

Moreover, even if they all belong to text domains (such as .sats, .ord, .unisat, etc.), the registration rules are also not uniform. For example, some domains support spaces or special characters and emojis, while others do not.

Differences in text domain formats, image source from .btcdao

In terms of domain usage scenarios, especially address resolution, there are various factions. For instance, some wallets only support resolving certain text domains, and the domain resolution rules and types of domains between wallets are not unified.

For example, Ordinals Wallet supports resolving .sats, .btc, .unisat, .xbt, and other domain resolution services; Unisat supports .sats and .unisat domain resolution, and its launched domain market currently supports trading .sats, .unisat, and other suffix domains; while wallets like TP Wallet support resolving BTC Domain's .btc. This means that users can only use the same wallet to transfer and receive assets using domains. For instance, Xiao Ming's .btc domain in Ordinals Wallet does not support transferring BTC to TP Wallet's .btc domain address.

Additionally, the speculative nature of text domains often outweighs their real applications. Although text domains are valid for life once registered and have no extra fees, their current application scenarios are singular, and most suffix characters lack wallet support for address resolution, failing to possess domain functionalities. The trading of these domain characters is more about betting on future expectations, with prices rising once wallet support for resolution is established.

Furthermore, while it seems that everyone is equal when inscribing text domains, the reality is not so. Some users have already inscribed batches of 3D (3-character) and 4D (4-character) premium domains before promoting certain suffix domains, then hype up the domain prices to profit from them. Therefore, users need to understand the risks when investing in text domains.

In addition to the chaos within the Bitcoin domain market itself, the development of a decentralized domain ecosystem is also controversial. Many question whether domains are a good business in the Web3 world. Taking the leading decentralized domain ENS as an example, according to Dune data, the registration volume in May was only 15,702, the lowest level since June last year, while in September 2022, the monthly registration number peaked at 400,000. Since September last year, the monthly registration numbers for ENS have been on a downward trend. The .bnb domain project Space ID on the Binance chain has seen a significant decrease in attention after the airdrop hype; the Bonfida (.sol) domain project on Solana had only 716 registrations in the last 7 days.

Will Bitcoin domains also follow suit and become a fleeting phenomenon? Although it currently appears to be in an early stage of chaotic growth, with community organizations actively exploring the market for .btc, .sats, .sat, etc., attracting more wallets to support domain resolution to expand more application scenarios, it is even possible that dedicated text domain resolution services will emerge in the future. As for which suffix character will ultimately become the king of Bitcoin ecosystem domains, it will require time and community consensus to determine.