Ethereum Name Service (ENS) —How Does It Work?

Ethereum Name Service (ENS) —How Does It Work? It is critical to determine the barriers that make users uneasy to hasten the broad adoption of cryptocurrencies. Cryptographic addresses, which can be long and unpredictable and are challenging to learn and remember, are one such obstacle. Computers, not humans, are the official target audience for these. With the growth and widespread use of Bitcoin, developers have mainly concentrated on solving this usability challenge. Ethereum Name Service (ENS) is one blockchain project that tries to fix the issue of long addresses and make using the network more accessible. But how exactly does ENS work, and what is it anyway? Read on to find out more.

What is ENS? 

To summarize, ENS is a decentralized, open-source, legal name system built on Ethereum smart contracts. One way to think of it is as a system for creating nicknames on Ethereum. The primary objective of ENS is to map distinctive or easily readable names, like “Josiah. eth,” to identifiers that computers can understand, such as Ethereum, web3 wallets, and crypto addresses. These IDs often consist of arbitrary and extended characters. This is why ENS uses Bitcoin addresses to link to Ethereum domains or names.

 Additionally, ENS employs the strategy of reverse resolution. This approach streamlines associating Ethereum addresses with metadata, such as website descriptions or official names. The Domain Name System (DNS) and the Entity Name System (ENS) are similar in that they both aim to give users an excellent experience. It simplifies web URLs, for example.

How Does ENS Work?

Some parallels between ENS and DNS have already been mentioned. For two separate areas, they essentially perform the same function. Domains are a system of dot-parted tiers of vocabulary that they both use, so they’re nearly identical in operation. These days, smart contracts called registrars control and own top-level domains. Eth in ENS. When it comes to allocating subdomains, these registrars lay out the rules.

One can establish an ENS domain by adhering to the registrar’s policies. The ability to import already-owned domains is an extra perk of ENS. With ENS’ hierarchical architecture, you have complete control over the formation of your subdomains, regardless of the level of your domain ownership. Suppose Josiah owns the domain name Josiah. Eth, for instance, can make a subdomain like Pay Josiah. Eth for his use or to make money. Regarding their subdomains, domain owners have a lot of freedom.

The Ethereum Network and its affiliated tenets, such as the JavaScript library, form the foundation of ENS. Thus, it can detect the blockchain you use without manual intervention. Registers and resolvers are the two main mechanisms the ENS architecture relies on. To better grasp how ENS works, let’s talk about each of them individually.

Registry

A protocol for managing domains and subdomains is part of the registry. In addition, the registry keeps track of:

• Information regarding the domain owner
• Information regarding the domain settler
• Data regarding the Expected Lifetime (ETL) of every domain name

Remember that a protocol or other third party can possess an ENS domain. Therefore, a protocol that manages domains is usually referred to as a registrar. Subdomains can be assigned to individuals who meet the contract’s requirements by these methods. As a result, those who hold the domains can:

• Transfer ownership of the domain after establishing the domain resolver and time to live (TTL).
• Change the permissions for subdomains.

The primary function of the registry is to direct the suitable domain resolver to the correct terms, so it is not very complicated. The second part of the ENS design is now at hand.

Resolvers

Resolvers are parts of an ENS that convert human-readable names into cryptographic hashes. Therefore, a resolver can be any protocol that runs the correct parameters. Similar to crypto addresses, all identifier types specify rules that resolvers follow to retrieve data for a particular purpose. Therefore, new identifier types can be easily defined at any point in the EPI process. There are only two simple procedures to resolve an ENS name. The first step is to contact the registrar and determine which resolver is responsible for a specific name.

Who Founded ENS?

The Ethereum whitepaper from 2014 is where the idea for ENS first emerged. Three years later, Nick Johnson claims EIP-137 as the first acknowledged effort to create what would eventually become a web3 naming system. Nick suggested an Ethereum-based smart contract that would allow associating unique names with cryptocurrency addresses and other identifiers. If implemented, his plan will resolve multiple resources to a single domain, an improvement above current blockchain naming systems that rely on sub-domains.

The Ethereum Foundation’s Nick and Alex Van de Sande co-founded ENS in May 2017. The charity, however, awarded Nick $1 million in 2018 so that he could launch an entity to fundraise for ENS. He established the Singaporean charity True Names Limited (TNL) with the money from the award. The operations of the ENS are currently overseen and supported by TNL.

ENS Domain Renewal

According to ENS, you must renew your domain yearly to prevent others from claiming it. On top of that, you can pay the renewal amount in Ether (ETH) whenever you want before your domain expires. The shortest possible time for an ENS renewal is 28 days, while the longest possible time is not specified. Additionally, the firm provides a three-month grace period following the expiration date. During this time, you can renew your name to maintain ownership.

What is ENS Used For? 

Like allocating a domain name to your online business and social media accounts, you can assign it to your cryptocurrency wallet for ease of use, mainly if you regularly transact through crypto. This is undoubtedly a time-saving trick compared to the copy-and-paste method. Furthermore, it minimizes the risks of sending crypto to the wrong addresses, often associated with using long and unmemorable addresses. Better still, you can assign several addresses to your ENS domain, implying that you only need a single human-readable domain to receive any digital currency or NFT. As such, these multi-address domains function contextually, meaning you can map your web3 wallet and Ethereum wallet to the same domain.

Therefore, when you use your ENS domain on an internet browser, the browser directs you to your website. When you use it to send or receive crypto, your exchange or dApp will automatically detect your crypto address. This way, ENS unifies different web services into one source.     You can also assign ENS domains to decentralized websites, such as those hosted by the InterPlanetary File Systems (IPFS), though this requires higher technical knowledge. Likewise, ENS spreads out DNS capacities by allowing you to register your DNS names.

Let’s assume you own a website registered with the DNS domain that hosts your resume and academic certificates. You can connect your DNS-registered website with your ENS domain if you want to maintain one ENS domain name for your website, crypto address, LinkedIn account, Github, etc. Therefore, your ENS domain is a pseudonym for all your online accounts.

The Advantages of ENS

As you can see below, ENS provides numerous benefits to crypto users:

Reduction of Errors

As highlighted, ENS facilitates plotting human-readable names to computer-readable identifiers on Ethereum. Using short and memorable names instead of long addresses mitigates the risk of copy-pasting crypto addresses.

Immutability

Transactions conducted using ENS are permanent since they are based on smart contracts that operate on the Ethereum blockchain. The immutability of all ENS records is similar to blockchain technology. Is there a way that immutability helps you? Well, censorship cannot affect irreversible transactions. To further ensure that no one else may access your domain’s content without your permission, ENS has teamed up with the IPFS.

Simple-to-Use Lookup Technique

You can easily find the records of your domain registrations using Etherscan, the built-in block explorer of Ethereum. Crypto users can access Ethereum transactions through the explorer, including their wallet balance, amount, and transactions. Domain owners can enable reverse resolution in the ENS dApp settings to show their ENS domains instead of their addresses.

Monetizing ENS Domains

Marketplaces like OpenSea or Rarible allow you to purchase or sell domain names representing NFTs. You can still use it to get a loan on sites like NFTfi that accept collateral. Marketplaces like OpenSea or Rarible allow you to purchase or sell domain names representing NFTs. You can still use it to get a loan on sites like NFTfi that accept collateral.

The Growing Popularity of ENS 

Due to the growing popularity and discounted Ethereum gas fees, ENS has been experiencing its best months regarding new registrations, domain renewals, and revenue lately. ENS lead developer Nick strongly believes the primary reason for ENS’ rising popularity is that the company is at a point where crypto users are creating mutual communities devoid of mandatory centralized systems. As a result, the company has reached an inflection point where most wallets and influencers support ENS domains.

Nick said discounted gas fees are impacting the ENS onboarding and renewal rates. Gasprice.io estimates that Ethereum transactions cost approximately $0.44 at press time. Previously, gas prices hit $100 during Ethereum network congestion, discouraging potential crypto users from using the network for non-emergency activities. You can register a character domain at the current gas prices for less than $5. Exorbitant Ethereum gas fees make the ENS registration cost more; thus, gas prices significantly affect the affordability of ENS domains.

Since April 2022, when the ENS 10K Club came into the limelight, the demand for ENS domains has constantly risen. ENS users with domains having less than five characters established the club. Also, account registrations and renewals have almost doubled in the last three months. As a consequence of the high number of users, the ENS website has experienced several crashes in the recent past. ENS names with less than five characters are the most popular because of their rarity (there are only 10,000 in existence). After their release, they sold out within six hours, and some have been resold for as high as 90 ETH on NFT marketplaces.

ENS DAO

A DAO is an abbreviation for a Decentralized Autonomous Organization. It’s composed of an open-source code governed by the members and characteristically without any management model like the traditional hierarchical structure of board directors since the rules are coded into the protocol. If a member wants to introduce or amend some regulations, he sends a proposal to the DAO for the rest of the team to vote. This way, DAOs can incessantly grow as the members (people who own the project at heart) can recommend and vote on appropriate changes.

Generally, the ENS DAO has a delegate system as its foundation, which allows members to choose their representatives. As such, individual members can suggest proposals or amendments, and others will vote on them. Though ENS is decentralized and its DAO operates without human supervision, some functions, like multi-sig contracts that govern the treasury and the registrar contract, require human intervention.

When the ENS DAO was established, ENS domain owners received 25% of the ENS governance tokens ($ENS) based on different factors. The airdrop was done on November 8, 2021, for ENS domain holders. Furthermore, the company allocated another 25% of tokens to the primary ENS team (contributors) and 50% to the ENS DAO treasury. The first task of the ENS token holders was voting on the core principles, which contain rules to educate the community on how to govern ENS. Moreover, the ENS constitution recognizes decentralization and integration as the primary goal of the DAO.

ENS Foundation

The ENS Foundation is a Cayman Islands Foundation that represents the ENS DAO physically. So, what’s the purpose of having a real-world foundation? Well, this legal entity:

• Offers limited liability to DAO members for the DAO actions. Remember, if an organization lacks a legal entity, its members may be individually accountable for the actions it does

• Complies with taxation laws. Again, if an organization doesn’t have a legal entity, its members may be individually accountable for its revenue, even though they don’t access the company funds directly.

• Signs contracts with other physical companies, such as storing assets

There are no shareholders and no dividends for members of the ENS Foundation because it is a charity. Nick Johnson, Brantly Millegan, and Kevin Gasper—core members of ENS—serve as foundation directors and keep an eye on its day-to-day operations. The ENS Foundation is overseen by a supervisor who ensures the three directors follow the laws of the Cayman Islands. A corporation based in the Cayman Islands, DS Limited, has been assigned this post. In the Ar articles of Incorporation of the foundation, ENS DAO is granted extensive ability to:

• Hire or discharge a director, member, or supervisor

• Restrict the admission of new members in the future

• Command the directors to dissolve the foundation and state the charity or other organization that should inherit its assets.

While not written directly in the Articles, the ENS DAO may require the directors to be accountable for the foundation, such as signing contracts and partnering with like-minded companies.

Conclusion

From a more conventional perspective, its usability is the primary issue preventing widespread use of web3. For example, inexperienced crypto users may find lengthy, complicated addresses intimidating and troublesome. Computers are the intended end users of these addresses.

By translating simple, human-readable names like Josiah. Eth into sophisticated, computer-readable identifiers like 0x816…e684e, ENS provides a blockchain solution to this problem. You and your clients on web3 apps have the opportunity for seamless interaction with ENS domains, much like with conventional IP addresses that became easier to use with the advent of DNS. So, to ensure your company is prepared to take advantage of the possibilities of a blockchain-centric future, getting a DNS domain is smart.