cap / thecap.eth
What role do ENS Ecosystem projects play? Does the ENS truly require a suite of ecosystem projects to fully realize its potential? What value do they bring? Opportunity or a cost for the DAO?
This article delves into the relationship between ENS and its surrounding initiatives, exploring whether the success and usability of ENS are connected with the broader ecosystem or if it can stand robustly on its own.
As the last ENS Small Grants round is officially finished, and the proposal for Service Providers Stream has passed, we are still overwhelmed with excitement and joy for the support Namespace has received from the community. We secured the 3rd place and could not be happier with the results! These projects were a great source of inspiration and motivation behind writing this article.
Let’s dive in.
Ecosystem projects are where all the action happens! They are the lifeblood of ENS, serving as catalysts for growth and innovation. They bridge the gap between a robust protocol and the end user, making the technology accessible and functional for a diverse audience. These projects are where the abstract becomes tangible, where ideas transform into real-world solutions. ENS might have the most elegant and modular design, built from first principles, but it’s the Ecosystem projects that show us what ENS is really capable of.
There are a few main perspectives to look at when talking about the “health and longevity” of a protocol. The adoption will depend on a few main indicators that define its success. This is especially true for open-source public good protocols such as ENS. Let’s review some of them.
Ecosystem projects help to improve the usability of ENS by creating user-friendly interfaces and tools. This could include the development of easy-to-use dApps that integrate ENS, making it more accessible to non-technical users.
They often bring innovative use cases to the table, expanding the utility of ENS beyond basic name resolution. This could include subdomain services, domain trading, identity solutions, communication services, and much more! All of which can be built on top of ENS, further demonstrating its versatility.
Projects that come to mind that have managed to bridge the gap of ENS being a fully developer-centric protocol to broader adoption, recognition, and wider use by non-tech end users.
ENS Vision: single-handedly introduced the creation of a Community aspect for ENS. It helped drive the biggest revenue for ENS DAO through speculating and trading .eth domains. It introduced a social aspect to the decentralized domains by allowing token-gated and exclusive groups to emerge ensuring domain registrations and renewals.
1W3: has managed to onboard 1500+ users who now have fully permissionless censorship-resistant websites with .eth name as their domain. Considering there are ~22k total dWebs on ENS and if 1W3 has 1500 users that means that they are responsible for ~5-6% of total Decentralized Websites ever created with .eth domain.
Namestone: API and offchain community subnames. Recently, their founder Slobo.eth announced in Twitter space that they want to issue 100M names in the next 5 years. Considering Coinbase alone has 100M users on their CEX, I trust they can do it.
Namespace: (regular selfless shill) going after Digital Identity space with the mission to equip every existing and new crypto user with a Digital Identity by turning all ENS name owners into Digital Identity providers allowing anyone to claim a subname anywhere.
TKN DAO: onchain token data management system, allowing various stakeholders like wallets, web apps, smart contracts, and token communities to control and update a shared token dataset transparently and efficiently.
SIWE: Sign-In with Ethereum is an innovative authentication method that allows users to use their Ethereum accounts and ENS profiles to control their digital identities, offering a decentralized alternative to traditional intermediaries.
EAS: Ethereum Attestation Service is an open-source infrastructure enabling onchain and offchain attestations, providing a foundational layer for authenticating information and facilitating decentralized systems like reputation, governance, and social media.
ETH.LIMO: Privacy-preserving ENS gateway for resolving ENS records and associated IPFS/IPNS/Skynet content. LIMO allows users and dApp developers to effortlessly access and host static sites built with a combination of IPFS/IPNS/Arweave and ENS.
EFP: Ethereum Follow Protocol is a simple, open, and composable protocol for Ethereum, allowing users to create and manage lists of Ethereum accounts or ENS names for various purposes, enhancing on-chain identity.
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All of these, and many many more, contribute to ENS evolution as the backbone of Web3 infrastructure and are cementing ENS as the de facto Naming system of Web3.
The real-world application of Ecosystem projects provides essential feedback for ENS, helping identify areas for improvement and optimization. This ensures ENS evolves in line with user needs! Additionally, these projects address crucial challenges in scalability and security, contributing to a more resilient ENS infrastructure.
Cross-pollination with other blockchain technologies through ecosystem projects enhances ENS's interoperability and functionality. So far, this is mostly seen by projects utilizing Chainlink’s CCIP to build both offchain and L2 subnames such as Unruggable Names. Ecosystem projects often develop new infrastructure that complements ENS, including protocols, functionalities, and services, further enriching the ENS ecosystem.
ENS has a considerable number of integration partners across various sectors of the blockchain and crypto ecosystem. These partners range from wallet providers, decentralized applications, exchanges, and other platforms that utilize ENS for their naming services.
Some of the types of integration partners ENS typically has include:
Wallets and CEXes: Many wallet providers integrate ENS to allow users to send and receive crypto using ENS names instead of traditional wallet addresses. Some are even adding the ability to mint .eth name (or a subname) directly from their app. Coinbase Wallet is a prime example of being an ENS power user. They managed to issue more than 3M Subnames to their users.
Decentralized Exchanges (DEXs): These platforms may use ENS primarily for facilitating transactions and user interactions.
Blockchain Explorers: These platforms often use ENS to display more user-friendly addresses in transaction histories.
Defi projects: They integrate ENS for ease of transactions and to improve overall user accessibility and experience.
Games and Metaverses: This includes various services like governance platforms, identity verification services, and more.
Website builders: Mostly utilize ENS as a domain name to their users for building permissionless censorship-resistant websites.
Communities (DAOs, PFPs, Brands, Content creators, etc.): Increasing brand awareness through digital presence and cohesive and collective identity.
If you’re interested in seeing who are the biggest advocates and early adopters of ENS, I wrote an article called “Who will drive ENS mass adoption” that covers some of the biggest players in the space.
One might say - these are not directly tied to the strength of the ENS protocol and don’t depend on the Ecosystem projects. They just implement and use ENS. True, however, there are Ecosystem projects, and there will be more in the future, that will help wallets, games, and metaverses quickly and easily implement and issue Subnames (Digital Identities) to their users, help Decentralized website builders easily sort through available subnames for free websites and blogs, offer free or monetizable subnames to communities, brands, content creators, and so on and so on for each of these user groups that use ENS already and many more that are yet to come.
ENS is the only naming system that is capable of completely changing how we view and share wallet addresses with each other. The only Naming system that has the power to change the entire crypto culture from 0xK3pR…D12k to alice.eth. And Ecosystem projects will be the ones that, through different integrations, cool use cases, and creative tools and features, help speed up its adoption and therefore create a new industry standard where when people you to send them your wallet, you send your .eth identity.
Many great and reputable companies in Web3 have integrated ENS and are issuing Subnames. These subnames are Digital Identity assets in their earliest form. And they will become more detailed and more important in the future.
The influence of ecosystem projects extends far beyond technological innovation. These initiatives are very important in underpinning the economic sustenance of ENS, creating a strong financial foundation for the network's continued growth and success.
At the core of their contribution is the revenue generation. Ecosystem projects, particularly those offering specialized services like domain trading, lending, subdomain registrations, or unique digital identity solutions, etc. bring in revenue for the DAO by creating more demand for ENS names.
Innovative applications and use cases developed by these projects make owning an ENS name more appealing. As a result, we see a surge in new registrations and renewals, a primary source of income for ENS. For instance, the emergence of token-gated communities or unique applications for digital identities has spurred a notable increase in demand for ENS names or ensured renewals.
This is crucial in maintaining a steady income stream for the ENS ecosystem by ensuring registrations and renewals.
Moreover, ecosystem projects significantly contribute to the network effect for ENS. They play a significant role in brand enhancement. Their success stories and innovative applications bolster the ENS brand, making it more attractive to a wider user base.
Another key aspect of these ecosystem projects is their ability to engage and retain a loyal community. Engaged users contribute to the economic health of ENS through increased usage and participation in the Ecosystem. Moreover, a loyal community serves as advocates for ENS, further driving adoption and economic activity.
Up until recently, Ecosystem projects didn’t have a clearly defined sustainable funding stream for their projects. Even though their products are built on ENS or with ENS as a core piece of their product.
For the first time ever, ENS DAO will be focusing on “investing” in its ecosystem growth by providing sustainable funding to the most innovative, impactful, and committed teams and projects that utilize ENS protocol.
AvsA made a strong case for why ENS needs Ecosystem projects:
“A lot of the best ENS improvements (offchain registrars, profile avatars, DNS integrations) did not come from building features voted by a large group, but rather the result of passionate deeply knowledgeable developers who were free to experiment.”
Therefore, he started the proposal for enabling funding for Service Providers which successfully passed the voting and is being implemented as we speak.
I highly recommend everyone to read this 3-minute overview below!
Context Over the last 12 months the ENS DAO made 22M USD in Revenue (dollars in for domains) which amounts for 30M of annualized income (income just for fees in the period). If we look at the daily...
The entire discussion around creating a Service Providers Stream in greater detail can be found on the ENS discussion forum: https://discuss.ens.domains/t/temp-check-proposal-for-new-service-provider-streams/18044.
When the proposal was first introduced it caused a lot of excitement for a lot of founders! I reached out to some founders to get their opinions and perspectives on the proposal.
The feedback and discussions primarily focused on several key areas:
Impact and Value of Ecosystem Projects: There was a common understanding of the significant impact and value that ecosystem projects bring to ENS.
Indirect Marketing Through Ecosystem Projects: Many people highlighted that while ENS might not engage directly in marketing (which is good), enabling builders and protocols to undertake marketing efforts is beneficial. This strategy is seen as crucial for expanding ENS's presence and enhancing its reputation.
Need for Strong Builder Incentives: In a competitive landscape where other protocols actively seek talented developers, ENS must offer compelling reasons for builders to remain and invest their time in the ecosystem. Such incentives are not just about financial rewards but also about creating an environment where innovation, tools, development of new use cases, are actively encouraged and supported.
Shortcomings in Current Funding Models: A recurring theme in the feedback was that the current funding models lack providing long-term support for builders within the ENS ecosystem.
During our discussions, several key concerns were raised about funding within the ENS ecosystem:
Funding Allocation Concerns: There's an inherent risk in setting aside funds for ENS projects. One worry is that it might attract people more interested in financial gain rather than contributing genuinely to the ENS ecosystem.
Complicated Funding Process: The process of funding could become overly complex, inviting scrutiny from those not fully understanding the projects' needs or their value.
Challenges in Project Recognition: It was noted that projects may need to work harder to justify their value to get the necessary votes. There are no guarantees voters will recognize their impact and contribution to the ecosystem due to the project’s complexity.
High Voting Threshold for Approval: A major worry is the high vote count required for project approval – 1M+ votes. This is seen as a potentially unrealistic goal, considering even significant proposals like this one, for Service Stream Providers didn’t get 1M+ votes.
Risk of 'Death by Committee': A critical point raised was the danger of 'Death by Committee,' where projects might flounder if they are consistently subjected to intensive scrutiny and justification to a committee. This could significantly hamper innovation and progress.
In summary, the need for a well-balanced and effective funding strategy within the ENS ecosystem is clear. Such a strategy should facilitate meaningful projects while steering clear of issues like attracting opportunistic entities, overly complex funding mechanisms, and the risk of hindering project progress through excessive oversight.
"If you wanna go fast, go alone, if you wanna go far, go together.” — African proverb
ENS is not just a technology or a protocol; it is a living, breathing community of innovation and collaboration. The success and vitality of ENS are closely linked to the diverse, creative, and committed individuals and teams who constantly push the boundaries of what’s possible.
As ENS continues to evolve, it's clear that its journey is far from over. The path ahead is bright with the promise of new discoveries, innovations, and collaborations. As we look to the future, let's remember that each one of us plays a part in this unfolding story. Whether you're a developer, a user, an advocate, or simply a curious observer, your involvement and support help shape the future of ENS.
So here's to the builders, the dreamers, the doers, and even toxic haters and squatters – and to the exciting journey that lies ahead for ENS. May our collective efforts continue to inspire, innovate, and lead the way in the ever-evolving world of Web3.
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