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Posted on Sep 02, 2022Read on Mirror.xyz

How to construct an ENS domain marketplace?

Author: @0x长安 | @RealResearchDAO

With the development of the cryptocurrency market, the number of users of the ETH ecosystem is gradually increasing, and the number of users of the ENS domain name, which is the identity system of the ETH ecosystem, is also gradually increasing.

The accompanying problem is that there are too many NFTs for ENS domain names, and people cannot easily find their favorite domain names in the current NFT trading platform.

So I designed an NFT marketplace dedicated to the large number of NFT transactions involved with ENS domain names.

1. Necessity

There are too many ENS domain names, and the current NFT trading platforms cannot meet the needs of users.

The average number of NFT collections is 10K, so users can use filters on NFT trading platforms such as OpenSea to filter the types of NFT they like. For example, for BAYC, users can choose their favorite NFT types according to the background, clothing, eyes, hats, and mouths, etc.

However, these types of filters are not applicable to ENS domain names. Currently, the filtering tools on OpenSea are only: character set, length, registration time, expiry date, etc. It is very difficult for users to filter out ENS domain names that meet their requirements. There are many popular ENS domain names in the market, including domain names for books, buildings, and names. There are various divisions. The filtering tools we are used to are obviously not suitable for such a large number of NFTs.

For NFTs such as domain names, the most important thing is exposure. If the customers cannot find your products in the market, naturally they will buy them. The current ENS domain name merchants use a special method to set the price of one of their own domain names to 0.0000000000001 and make you unable to purchase successfully so that when an OpenSea user sorts prices from low to high, cheap products always appear first, and you can click on the sellers’ profiles to see what ENS domains they are selling.

It can be seen that the current NFT trading platforms have been unable to provide users with good services, and cannot even meet the normal purchase activities of users. Therefore, a trading platform dedicated to ENS domain names is indeed necessary.

2. ENS domain names are positively correlated with the development of Ethereum

Vitalik had given high expectations of the ENS domain names. He once said: “ENS is by far the most successful non-financial Ethereum application. ENS, as the underlying facility of Ethereum, its development will be highly related to the Ethereum ecosystem.”

ENS domain names are different from the current NFTs. It is a domain name on the Ethereum blockchain. As an important part of the identity system of Ethereum, ENS domain names will play an indelible role in building the grand blueprint of a decentralized society in the future. It is indeed an indispensable part of the Ethereum ecosystem.

Therefore, it is destined to not have similar problems with other PFPs. The survival rate of PFP-type NFTs is very low. A PFP NFT collection needs to become a blue-chip project, which requires the joint efforts of many parties. It needs high community cohesion, an exquisite style of art, a development route that is embraced by everyone, etc. But being a blue-chip NFT doesn't mean the project won't die. Some time ago, the founder of Azuki admitted to having been involved in rugged NFT projects, which caused a crisis of community trust, leading to Azuki's floor price falling immediately.

Looking at the entire history of PFP-type NFTs, there are very few projects that can become blue chips. Many projects that are very popular in the bull market have fallen by more than 90% so far, and they have fallen into a liquidity crisis and have no further attention.

The ENS domain names depending on the needs and curiosity of users. Usually, beginner users who enter the blockchain need to register and purchase an NFT of their own. With the prosperity of Ethereum, ENS domain names can be purchased by a steady stream of beginner users. As a platform that specializes in trading ENS domain names, it will be able to generate business income because of the product's popularity.

3. ENS domain names are in demand, and Ethereum users will register/purchase

According to data from Dune Analytics, an average of 1,000 new users choose to register the .eth domain name per day, which also indicates a problem - the gas fee of Ethereum has dropped to a low point. The GWEI between 5 and 10 is enough to show that there are very few users on the blockchain. While the number of new users of .eth remains above 1,000 for a long time, indicating that the value of ENS has been accepted by the public. Everyone recognizes this Ethereum identity system.

And it is a very common thing to have an ENS domain name at present. When Mail3 mailboxes perform testnet tasks, users need to have an ENS domain name, a Twitter airdrop, and a nation airdrop, and they all need to leave their ENS domain names under the tweets. The current demand for domain names is a process of gradual discovery, and this also meets the needs of many project developers.

When conducting testnet tasks, project developers prefer that their users are all real humans, rather than multiple wallet addresses created by one person, or a large number of robots. Therefore, having an ENS domain name can alleviate this problem to a large extent, because registering ENS requires a certain cost, which can prevent users from creating addresses on a large scale to do tasks.

4. The service fee is high

According to the data of NFTGO.io, the transaction volume of ENS in the past three months is a total of 34 million US dollars, with an average daily transaction volume of 377,000 US dollars.

According to the current transaction fee of the NFT trading platform, X2Y2 currently only has a 0.5% transaction fee, Opensea's transaction fee is 2.5%, and ENS Vision charges a 1.5% transaction fee.

Calculated according to the 0.5% transaction fee, the average daily transaction fee income is 1880 USD.

Calculated based on the 1.5% transaction fee, the average daily transaction fee income is 5650 USD.

Higher fees are not competitive in the current market, and OpenSea’s high transaction fees are often complained about by users. Higher fees are not considered for the time being.

It can be seen that even in the depression of the NFT market, the transaction volume of NFT has returned to the level of 2021, and the transaction fee of ENS is still within an acceptable range. And this is the current situation where transactions are very inconvenient. Once the infrastructure is built, the transaction volume of ENS can also be improved by a large level.

5. Competing Products (ENS.Vision, rare.id)

At present, there are two trading platforms for ENS domain names in the market, namely ENS.Vision and rare.id. Compared with traditional NFT trading platforms like OpenSea, I think these two platforms are more like information hubs that provide ENS market information.

The disadvantage of these two products is that they are too centralized. All NFT collections on the platform are applied by users and approved by the official. After the collection is approved, the collection can be launched on the platform. But there will be two problems.

5.1. The type of NFT in the collection is determined by the applicant

The obvious example would be emoji domain names. Emojis can compose multiple characters, including 3, 4, and 5 letters. However, because the number of characters that make up the emojis is inconsistent, even if the displaying shape is an emoji, it will not be listed by the platform in the same collection.

In ENS. Vision’s collection of single emoji domain names, as soon as the new users notice that there are only 1356 on sale, they’ll mistakenly believe that there are only 1356 domain names for a single emoji. However, this is actually wrong. The number is only listed by the platform by a single emoji domain name consisting of five characters. And the platform did not make comments, nor did it enable a collection of single emoji domain names consisting of three characters.

5.2. The type of collection to be launched is decided by the official

There, we can propose the second problem, which is that the types of collections that are launched are determined by the official. If the platform is regarded as the largest ENS domain name trading platform, the listed collections are authoritative and recognized collections. And the whales can just utilize this loophole to create trends, registering a set of domain names that they believe are more reasonable in advance and using their connections with the official team to list their domain names on the platform. When retail investors flood in, they will then sell all the domain names they have.

I think these two problems are the more serious problems of the current ENS domain name trading platforms, and projects that are too centralized will not be sought after. This type of platform is to list the products, classifies them, and lets customers choose. But I think that for the type of ENS domain name, there are a large number of NFTs, and customers should actively choose and filter, rather than passively being offered and sold to.

In addition, the limited collection of domain names cannot cover all types of ENS domain names, and many domain names have not been launched on the platform. Ultimately, the problem of domain name exposure has not been resolved.

Therefore, at present, these two ENS domain name platforms are more like an ENS domain name information hub, a platform for users to absorb information, rather than a real ENS domain name trading platform.

There is indeed a need for a real trading platform that provides convenience for ENS domain names.

6. How to construct an ENS domain marketplace?

Marking the domain name characteristics of each ENS requires composability in DeFi. For example, if a user wants to buy 0xname, then select a domain name of 0x type, and the platform will filter out all qualified 0x domain names. For example, when I want to buy a 0x domain in English, I need to click on two filters, 0x, English.

And when I want to buy some numeric domain names, I can also filter according to this type. For example, when I select the filter: 01, 05, and 08, the trading platform will direct me to 010508, 050108, 050801, 080105, and 080501, which are completely composed of free selections by users. As long as the domain name meets the requirements, it will appear on the screen.

The domain name of emojis also deserves a better solution. Users can filter the character length of the emoji by themselves so that each emoji domain name can be treated fairly.

Of course, the current practice of the ENS trading platform can also be used for reference. When customers buy products, they probably have no idea and do not know how to choose the items they like. The platform can list the same domain name as a set, and let customers know which domain collections are more popular.

Putting out the popular series of products and letting customers observe, can let customers understand what the current market is focusing on. Even if customers are not satisfied, they can find the coexistence according to the popular domain names, and then use the platform to search out the domain name they want by themselves.

The platform can not only list ENS domain names, if other public chain domain names are also popular, the platform can also support them. And if the number of other NFTs is also very big, the current NFT trading platform is not suitable for this NFT collection. Therefore, the future development goal of the platform is to make a platform dedicated to a large number of NFT transactions.

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