Ethereum Name Service (ENS) has recently made headlines across various crypto outlets, celebrating the launch of the native ENS token. Also, the token launch included a free ENS token airdrop to early users of the ENS services. For many users, this was a five-figure airdrop from the ENS platform. The primary service from ENS is to offer users a human-readable Ethereum domain name instead of a long-character wallet address. ENS aims to lower the technical barriers by removing strings of random digits with familiar, recognizable ENS domain names. But, how does the Ethereum Name Service (ENS) work under the hood? What is the responsibility of the ENS token?
In this article, we are going to dive deep into Ethereum Name Service's (ENS) application. We’ll explore how the ENS domain names work under the hood, plus discuss the ENS token utility and tokenomic distributions. Also, we’ll go through step-by-step to see if you’re eligible for the ENS token airdrop and, if so, how to claim your free ENS tokens!
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What is Ethereum Name Service (ENS)?
Ethereum Name Service (ENS) is primarily a decentralized iteration of the legacy Domain Name Service but with more powerful functionalities. As an open-source and distributed “extensible naming system”, the application runs on top of the largest smart contract-enabled blockchain in the industry, Ethereum. Ethereum domain names are a more aesthetically-favorable and memorable style of wallet address. ENS offers a familiar dot-separated decentralized domain name that is human-readable.
For example, let’s say Alice’s MetaMask wallet address begins “0x8e9gf….”. As such, she decides to purchase a recognizable ENS domain name, “alice.eth” instead of communicating a 40-character string of digits. The core function of the Ethereum Name Service is to map easy-to-read Ethereum domain names with “machine-readable identifiers”. This includes Ethereum and other cryptocurrency addresses, alongside metadata, content hashes, and more.
Owners have full control over their Ethereum Name Service (ENS) domain names. Available on Ethereum mainnet and several testnet networks, ENS uses a hierarchical system for domain names. Using the example with Alice, she has full autonomy and ownership of “alice.eth” - cryptographically verifiable of the blockchain. Also, Alice has control over all subdomains of her wallet address, e.g., pay.alice.eth or iam.alice.eth. Alice can choose to create and configure subdomains to her preference. Additionally, the application supports the importing of traditional internet Domain Name Service (DNS) names for use on ENS.
As per the ethos of decentralization, the Ethereum Name Service (ENS) has formed a decentralized autonomous organization (DAO). That said, The ENS Foundation is an established organization operating from the Cayman Islands, legally representing the ENS DAO. The ENS DAO serves to ensure the growth and sustainability of the project. Moreover, the newly-released native ENS token is responsible for helping govern the ENS DAO. We’ll discuss this later in the article.
How Do Ethereum Domain Names Work?
The Ethereum Name Service (ENS) boasts true decentralization with two key components under the hood of operations. The first is the ENS registry - a single smart contract containing a list that consists of all domain names that are either owned by a user or registrar smart contract. A registrar contract is a “smart contract that owns a domain and issues subdomains of that domain to users that follow some set of rules defined in the contract”. The ENS registry also stores caching times and the resolver for the domain. Resolvers are the other key component, seamlessly interoperating with the ENS registry. Resolvers carry out the computational calculations to mathematically translate human-readable names into complex long-character addresses.
Ethereum Name Service (ENS) domain names were the first type of non-fungible token (NFT) introduced in May 2017. In fact, this was before the hype around the NFTs we have today. It wasn’t until eight months later that the ERC-721 NFT token standard came about. At this stage, ENS migrated its domain names and services to operate with the ERC-721 standard. Using a universally-compatible token standard as a template allows ENS domain names to function just like any other NFT. Owners can buy, sell, and trade Ethereum domain names or store them in their Web3 wallet.
To purchase an Ethereum domain name, users will need to be familiar with the number one Web3 wallet, MetaMask. Also, the Ethereum Name Service (ENS) does support some other popular Web3 wallets too. Although the price of the domain names are set, the additional cost of gas fluctuates greatly. This is worth bearing in mind when investing in an Ethereum domain name. First, users will purchase their chosen name. Then, users will need to select and “set” their address as the primary ENS name in the profile settings.
The ENS Token
On November 8th, 2021, the Ethereum Name Service (ENS) announced the launch of its native currency, the ENS token. As an ERC-20 token, the ENS token operates with the same characteristics as every other cryptocurrency on Ethereum. The ENS token is completely separate from the ERC-721 Ethereum domain names. Instead, holders of the ENS token can partake in governance proposals and be of influence to the growth and direction of the application. In turn, the primary use case of the ENS token is for use in voting. Plus, the ENS token even has its own human-readable contract address: token.ensdao.eth (or in long-form: 0xC18360217D8F7Ab5e7c516566761Ea12Ce7F9D72).
Several popular centralized exchanges (CEXs) began offering trading following the launch of the native ENS token. This includes leading exchange Binance, KuCoin, and OKEx. Moreover, within a few days of trading, the ENS token became available to trade on popular decentralized exchanges (DEXs). Users can trade ENS tokens on Uniswap, SushiSwap, ByBit, and more.
The ENS token launched at a starting value of $39.31, according to CoinGecko, shortly after then bottoming out at $17.63. However, within just over 24 hours, the ENS token reached an all-time high of $83.40. At the time of writing, the ENS token price sits around $54.
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Ethereum Name Service (ENS) DAO Overview
The Ethereum Name Service (ENS) decentralized autonomous organization (DAO) has enabled ENS to grow from a centralized team to an application with distributed governance. ENS stresses the decentralization of the core components, assuring users the ENS DAO can’t take away someone’s .ETH address. However, to maintain stability and ensure user and community-centric growth, certain adjustable parameters rely on human discretion.
The first ENS DAO proposals present the key holders the ability to control funds from the community treasury to redirect toward project rewards and funding for developers. Moreover, the proposal includes the request to govern different protocol parameters, including the price oracle and .ETH domain name pricing. Each proposal must receive a majority vote with at least 100,000 participants. We’ll discuss this further with the ENS Constitution following the ENS token distribution allocations.
During the claiming process of free airdropped ENS tokens, holders must first vote on the aforementioned proposals from the project’s root key holders. Users can claim their free ENS tokens between November 8th, 2021, and May 4th, 2022. If there are any unclaimed tokens past this date, they will automatically be sent to the ENS DAO.
ENS Token Distribution
The ENS token has a hard cap of 100 million tokens. Second-level .ETH domain holders receive an airdrop distribution equalling 25% of this number. A further 25% goes to ENS contributors, while the remaining 50% (50 million) will stay with the ENS DAO. The .ETH domain users receive a distribution relative to the total registration time of their domain, including future registrations up to eight years.
Furthermore, the retroactive airdrop distribution goes to individual accounts, not just individual users. Accordingly, users with multiple active .ETH accounts will receive a higher distribution. Also, the airdrop offers a 2x multiplier to users who have set their Primary ENS name, as this shows that they are active.
Additionally, to reward the active and enthusiastic Ethereum Name Service (ENS) community, ENS reserved an allocation from the contributors funds to reward over 450 passionate and devoted Discord members. Further, the remaining contributors' funds are subject to a four-year vesting period.
Of the 50 million ENS tokens allocated to the ENS DAO, 10% (5 million) became available from launch. The remaining amount is set to be released periodically over the next four years. The ENS DAO plans on strategically allocating tokens to the growth and development of the Ethereum Name Service (ENS). Moreover, the ENS DAO will focus on initiatives with a community focus.
How to Claim ENS Token Airdrop
For users who have purchased an Ethereum Name Service (ENS) domain name prior to the snapshot on 31st October 2021, you are eligible for the ENS token airdrop. This also applies to users who have purchased ENS domain names but are yet to set their Primary ENS name with their wallets.
Firstly, eligible participants must go to https://claim.ens.domains/. Then, a prompt will appear for users to connect their wallets - the same wallet as in use for their ENS account. After, the Ethereum Name Service will calculate the rewards amount for the ENS token airdrop. Rewards vary depending on the amount of ENS domain names one owns, if the addresses are active, how long the ENS domain names have been owned and how long left of ownership. To continue with the free ENS token airdrop claim, users must first consider and read the ENS Constitution.
The ENS Constitution is a proposal for a set of rules and community guidelines. In order to claim ENS tokens, community members must first vote on four initial proposals that outline the basis of ENS governance. Articles require approval from 67% of the votes in the first week following the token launch in order to pass. Also, changes can be implemented to the ENS Constitution with a 67% approval threshold and a quorum of 5% of all tokens. Voting requires an off-chain signature for the transaction. Therefore it does not cost any gas to participate. Next, users must choose one of 100 network validators to delegate their votes to.
Following this, users will arrive at the final confirmation page, where users can confirm they would like to claim the ENS token airdrop rewards! It’s worth noting that this is an on-chain transaction, meaning gas is required. This will vary greatly depending upon network activity.
Exploring Ethereum Name Service (ENS) and ENS Token Summary
Ethereum Name Service (ENS) is pioneering the next generation of decentralized finance (DeFi) wallet addresses, making sending crypto easier than ever! Furthermore, the ENS domain names act as an umbrella for multiple crypto addresses across different chains. This includes Ethereum (ETH), Bitcoin (BTC), Litecoin (LTC), and Dogecoin (DOGE) addresses. As such, using the Ethereum-based ENS service, Bob could send 1 BTC to “alice.eth” with zero friction!
Moreover, in recent developments, the project has become truly decentralized with the introduction of the Ethereum Name Service (ENS) decentralized autonomous organization (DAO). Also, this entails the introduction of its native token, ENS, to form the infrastructure for the ENS DAO. Plus, during the early November 2021 launch, ENS announced a huge airdrop for early users of the ENS services. The ENS token airdrop was one of the largest in the crypto industry history, airdropping many token allocations worth a five-figure sum! As a result, the ENS token airdrop has hit many crypto media headlines, boosting the branding and publicity of the project.
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