Buying ENS Domain names for investment
Many people are buying ENS domain names as an investment. At last count there are 645,000 registered names with 296,600 wallets meaning most wallets/owners have at least 3 on average. According to dune analytics, there are over 5,000 wallets with at least 11 ENS domains. These owners are likely to be investors rather than just casual users as casual users won’t have more than 10 ENS names.
This article is written for the investors as I see many listings for the ENS domains at an unrealistic price. During the listing process on Opensea, you also have to put in a price which means one has to know how much to list it for.
Checking Market Prices for Sold ENS Domain Names
The first thing about markets and asset is that prices are market driven. In this case, it is useful to check recent transacted prices and bid prices.
- Trading Volume ( How much in $ was transacted)
- NFT’s Sold (the number of sold NFTs)
- 10th percentile price last 7 days
- Median price last 7 days
- 90th percentile price last 7 days
To remove outlier transactions and to get a better sense, seeing Sold listings on Opensea will also give you better pricing in general: https://opensea.io/collection/ens?tab=activity. To filter out the noise, remove the Sold ENS that are less than 0.5 ETH.
What are the going prices for ENS Domain names?
At the time of writing,
- Ten percent of the ENS: Ethereum Name Service sales were for $28 or less
- Half of the sales were for less than $57 and
- The highest ten percent were sold for $1301 or higher.
We can then conclude that for now, the median price ($57) should be the average price for below average names and the 90th percentile price ($1307) should be the market price of somewhat valuable ENS Domain names.
Investing in Domain Names
Domaining (“Domaining is the business of making money with internet domain names”) is not a new thing. It has been around since early internet days and .com investing is a well established industry with a lot of advice on how to value domain names.
From .com investing, here are some criteria to see if you domain name is valuable.
- Domain length:
Short one word domains are the golden tickets
- Keyword strength:
industry relevance and search volume.
Would you remember the domain if you heard it in a radio ad or saw it on a billboard?
(top-level domain) Most websites marketed today use .com as their TLD, and because of its usage and long history, it carries the most value compared to other TLDs
- Existing Traffic or Links:
Domains online have links from other pages that give existing traffic. If there are links to the domain and you can revive the domain, the traffic is sometimes as valuable as the domain itself.
Above are the criteria for internet domains. For ENS valuation and my own criteria, here is what I have and the first few are quite similar.
3 and 4 characters ENS domains already cost more to register and renew yearly so they already have a base cost there.
- Search Volume:
Even though ENS domains are not currently searched indexed and attract no organic traffic, high search volume means a valuable name as it would be a word that many are familiar with
- Radio Test:
same as Internet domains and even more so, I would say for ENS names should be easy for you to tell others about your name. Monetary transactions are one key reason for ENS domain names so not having the other person mis-hear or mis-type your ENS name is an important factor. This is even more important as there is no Google autocorrect or search to find the right ENS address.
However I think there are some ENS specific criteria that can be added
- Person’s Name:
ENS names are likely to be adopted most by people first and commercial brands second. Actual names or surname/last names will be the name of choice for people buying ENS names for their own wallet.
- Number of Words:
The more words, the longer in length and also less valuable. Having a second word can be interchanged if required to get a domain so owning NFTGold doesn't mean much if the buyers are willing to go with NFTShiny which is not minted yet.
(plural, ing, ed, tense): Special.eth is much more valuable than “specially” or “specialize” or “speciality”. The latter are English word modifiers of the base word and even though they are single word, the base work is still much more valuable.
Single word with mis-spellings like mircosoft instead of microsoft is not going to be valuable. In fact auto-correct on touch keyboards are likely to change it to the correct spelling and you can miss transactions due to keyboard auto-correct.
Crypto or Money Relevance
The primary use case for ENS right now is not so much a website but an easy to have a wallet and identity. It is unlikely one will put much content on the .eth for Google to index it. I think ENS will be for personal wallets first and the first wave will definitely be for those already in crypto or finance related work. So I would add a high weighting to words related to crypto & money because that’s what buyers will want first.
Why brands are not so likely to have .eth in long run
I do not think that companies or brands will use .eth in the long run. Although there is a currently a trend of .eth branding on Twitter like puma adopting puma.eth, I think this is likely to be a short term PR move.
In the long term, companies that want to take crypto will enable their .com names to also take crypto transactions by mapping cars.com to ENS. In this way, they bypass the need for cars.eth and present the .com for consistency sake.
Brands would also prefer to have people continue to link to their .com site as that affects SEO and it is search indexable. SEO and search/Browser traffic is still much more important than having a nice web3 name.
I do see that there could be some branding purpose in having a branded ENS but I won't assign a high weight to it.
Our valuation criteria for ENS in deciding weight
So in all here are the valuation criteria and weight when we value a ENS name.
- 8 - Crypto Related
- 6 - Money Related
- 5 - Search Volume
- 5 - Name
- 4 - Length
- 4 - Radio Test
- 4 - Brand
- 3 - Words
- 3 - Modifiers
- 3 - Spelling
- 5 - Assessor Subjective
To see how you can assess your own ENS name, you can visit this sheet and make a copy and fil in your own name and assessment criteria.
Why ENS domain will have to be long term investment
At the start of the article, we talked about the amount of ENS registered and ENS Trading volume. It is obvious that most names are transacted as the price of gas. I believe we are still very early in ENS names and here are some signs that I look forward to which will mean ENS trading volume will go up.
Signs that ENS adoption is rising
- Unique wallets holding less than 10 ENS - the more unique wallets with only 1-5 names per wallet will actually mean usage: https://dune.xyz/queries/475009
- Dapps integration - Number of Dapps allowing ENS names as identity provider
- ICANN recognition of .eth so .eth can be supported by non web3 DNS and browsers
- L2 minting so price of gas is less of a concern
- .eth Leaderboard: https://ethleaderboard.xyz
- Sales Volume on OpenSea: https://opensea.io/collection/ens?tab=activity