Source: AdobeStock/Casimiro
Just as the Internet advanced with the evolution of the Domain Name System (DNS) – which converts domain names into IP addresses – the crypto sector is undergoing a similar transition with the implementation of on-chain domain names.
What are on-chain domains?
Sandy Carter, COO and Head of Business Development at Unstoppable Domains – a decentralized domain service provider – told Cryptonews that on-chain domains are blockchain-based domain names that provide a decentralized alternative to traditional DNSs.
While DNS has served the enterprise identity market well, it falls short in addressing the broader consumer identity landscape, which includes payment processing, social media profiles, email addresses, and phone numbers – areas where on-chain domains provide the most value . Carter said.
To put this into perspective, on-chain domain registrar 3DNS founder and CEO Paul Gauvreau told Cryptonews that on-chain domain names allow crypto users to type in a name – like bob.eth, for example – instead of complex wallet- addresses when conducting cryptocurrency transactions. .
On-chain domains can also be called “digital identities.” Algorand on-chain domain builder TxnLab Inc. Co-founder and CFO John Mizzoni told Cryptonews that users can add metadata such as an X account, Discord account or Telegram account to decentralized domains.
By adding metadata to this, you can verify that a crypto wallet address belongs to a specific individual.
“If a user has a domain that is integrated into a large part of the crypto space, their profile travels with them no matter what application they use,” says Mizzoni. “This is fundamentally a much better model for users because they can take their data or identity across platforms.”
The progress of domains in the chain
Although on-chain domains are a relatively new concept, the industry has seen impressive growth since these offerings began to rise in popularity about three years ago.
Carter said Unstoppable Domains has registered about 4 million decentralized domains to date, integrating crypto wallets with browsers such as Brave and Opera. She added that Unstoppable recently partnered with fifteen registrars – including two ICANN-accredited registrars, Entoro and GMO Internet Group – allowing them to offer Unstoppable’s domains to their customer base.
While Carter believes these partnerships have helped expand the global reach of on-chain domains, the recent partnership between GoDaddy and Ethereum Name Service (ENS) – a naming system based on the Ethereum blockchain – further demonstrates mainstream interest in decentralized domains.
We’re happy to announce our partnership with @GoDaddy
Millions of customers can now use their DNS domains in the ENS ecosystem!
Let’s take a look at what this means
pic.twitter.com/PyrZi4e5cV
— ens.eth (@ensdomains) February 5, 2024
Improved Web2 domain utility
GoDaddy President of Domains Paul Nickstold Cryptonews says the goal behind the partnership with ENS is to increase usability for GoDaddy domain owners, ultimately positioning the company’s domains as the destination for a user’s digital identity.
“We have recently been exploring blockchain technology in response to our customers’ interest in integrating crypto wallets with their domains,” said Nicks. “ENS shares a vision with GoDaddy, bridging the gap between scalable and secure DNS infrastructure and emerging trends in the blockchain space.”
Nicks added that GoDaddy’s partnership with ENS focuses on providing enhanced functionality for customers with existing crypto wallets.
For example, Nicks explained that the partnership with ENS will allow users to link their GoDaddy domain name to ENS and their crypto wallet address, allowing them to receive crypto payments using their domain name as the wallet address.
Users can still receive crypto payments via their regular crypto wallet address, but this partnership provides additional convenience and exposure for non-crypto-native users.
Source: GoDaddy
The story has changed
Don Ruiz, General Manager at Trust Machines – a team of builders focused on growing the Bitcoin ecosystem – told Cryptonews that on-chain domains were initially positioned as a solution to the friction caused by public keys, serving as a asset for sending and receiving cryptocurrency. between users.
Still, recent developments such as the partnership between GoDaddy and ENS have led Ruiz to believe that the narrative around on-chain domains is rapidly changing.
“There is an evolution happening now where many could argue that on-chain domains could potentially replace traditional Web2 domains,” he said.
However, Ruiz noted that such a scenario has yet to materialize for a number of reasons.
“The use case for on-chain domains remains more aligned with the ethos of digital identity,” he explained. “Given this, I believe Web3 digital identities will help bridge the gap for Web2 domains in the coming years by acting as a complementary service to extend a domain’s usability.”
Ruiz may be right, as Nicks pointed out that the broader impact of on-chain domains for mainstream adoption depends entirely on digital preferences.
In the meantime, Nicks believes the partnership between GoDaddy and ENS will particularly resonate with customers already active in the crypto space.
Echoing this, Mizzoni noted that on-chain domains are currently beneficial for crypto wallet users.
“So until crypto is used in more applications, you won’t see a huge need for a decentralized naming service,” he said. “The real mainstream adoption of these services will happen when crypto accounts become more widely used.”
For example, Mizzoni pointed out that decentralized social network Farcaster benefits from on-chain domains because every account on the network is linked to a crypto wallet.
“You can use a Farcaster ID as your username, or you can use your ENS (.eth) domain already linked to your ETH account,” he explained. “This allows users to simply link their wallet address and already have their profile available no matter which client they use to interact with Farcaster.”
Challenges to consider
However, implementing domains in the chain can be challenging, resulting in slow mainstream adoption.
According to Ruiz, the disadvantages of on-chain domains are mainly centered around story and scale.
“Coming from the Web2 world, there are newcomers to the space and projects aimed at adding usability to digital identities, but the technology and processes remain confusing and clunky,” he said.
Given this, Ruiz believes that education, along with simplifying the user experience, is necessary for Web2 domain providers to begin implementing on-chain domain capabilities.
He added that as more players in the Web3 domain space collaborate with The Internet Corporation for Assigned Names and Numbers (ICANN), on-chain domains will likely become closely tied to Web2.
“I predict this will be the path for all on-chain domain servicers looking to create a technology bridge for users to Web3,” he said.
But as on-chain development takes place, Ruiz pointed out that the next question to consider will be where users want to establish their digital identity, as a number of blockchain ecosystems have started implementing on-chain domains.
While ENS and Unstoppable Domains may be leading players in the industry, users can register .BTC domains, for example, along with many others.
“Stacks join .BTC domains via BNS, the Bitcoin Name System on Stacks, and are registered via a smart contract and secured by Bitcoin,” Ruiz explains.
Mizzoni added that NFDomains is a Web3 company that offers domain options for Algorand users with the .algo suffix.
Brian Newar, communications lead for HNS – a registry of on-chain domains on the Hedera Public Network – told Cryptonews that HNS offers Hedera users the ability to claim their identity within the Hedera ecosystem.
While it is notable that on-chain domains are becoming increasingly popular within the Web3 ecosystem, Nicks shared that GoDaddy’s current priority is to provide value only through ENS.
“We do not currently plan to partner with other organizations, but we are always willing to consider options that meet the needs of our customers,” he said.
Given this, .ETH domains are perhaps the most widely used option for establishing digital identity today, and also serve as a bridge between Web2 domain names and crypto wallets.
