ENS business growth difficulties usher in opportunities: Launch V2 upgrade and move to L2, accelerating the expansion of domain name services

Vitalik Buterin, co-founder of Ethereum, has repeatedly supported ENS in a high-profile manner. On May 21, he also said that “ENS is the most successful non-financial application in the Ethereum ecosystem. I don’t know why more people don’t care about it.” A week later, ENS Labs had new news and announced a proposal to upgrade ENS v2 , plans to migrate services from the Ethereum main network to the Layer 2 network, in order to democratize domain name services. Judging from a series of actions such as service upgrades and migrations and integration of .box domain names, ENS, which is experiencing growth difficulties, is trying to further open up the road to mainstreaming domain names.

ENS will be migrated to the Layer2 network, mainly focusing on the development of Optimism

ENS v2 aims to enhance scalability and reduce Gas by transferring core functions from the Ethereum main network to the Layer2 chain fees and improve user experience. That is, if the proposal is accepted, users will benefit from reduced transaction fees and increased efficiency.

At the same time, the ENS v2 upgrade can also improve multi-chain interoperability. Through the combination of CCIP-Read gateways and compatible parsers, the practicality and influence of ENS can be expanded in different blockchain ecosystems. In addition, ENS v2 also proposes a new "layered registration system" to manage .eth domain names more efficiently, including the ability to manage subdomain names and configure resolvers. This also means that each .eth name will have its own personal registry, giving users more control over ownership of their names.

Currently, ENS Labs has not selected a specific stack or Layer 2 network for migration, but this network will become the new platform for users to interact with ENS once the migration is complete. However, according to previous ENS executive director Khori Whittaker, ENS is focusing on researching ways to build its protocol on the Ethereum Layer 2 network, and may even consider launching its own internal Layer 2. They are currently making progress in the research and development of Layer 2 applications, and are expected to see some substantial results in this area this year, mainly focusing on the pursuit of Optimism development.

ENS V1和V2对比，图片来自TechFlow

Regarding the reason for the ENS v2 upgrade, ENS Labs explained that due to the limitations of the Ethereum main network, ENS is quite limited in new use cases, application integration, etc., and is not in-depth. To achieve decentralization, ENS began to reconstruct the entire structure on the original basis. The release of Ethereum Improvement Proposal (EIP) 4844 is an important factor in promoting the ENS upgrade, which significantly reduces the cost of the Layer 2 network through blob transactions.

The growth of users and income has slowed down, and cooperation has been established to expand the domain name business

Every time Vitalik “calls for orders”, the price of ENS currency rises. But in fact, ENS is now facing difficulties in user and revenue growth.

According to Dune data, since its establishment, the number of ENS domain names created has exceeded 2.072 million, the total number of independent participating addresses has reached 886,000, and the number of main domain name registrations has reached nearly 847,000. Among them, about 175,000 ENS domain names have been created since 2024, accounting for 41.7% in the past year; more than 154,000 new addresses have been added, accounting for 45.4% in the past year. However, according to the Ethereum browser, the number of independent addresses in Ethereum has exceeded 270 million, and the number of ENS domain names is less than 1% of the former.

However, the growth momentum of ENS users is slowing down. Dune data shows that the proportion of daily new users of ENS has dropped from a high of 687 in April 2023 to 0.5 today.

At the same time, ENS's revenue has also shown weakness in growth. DeFiLlama data shows that ENS's revenue in 2023 will exceed US$9.85 million, which is far from the US$50 million in 2022. As of May 29, ENS’s year-to-date revenue was approximately US$3.431 million, an increase of 33.7% from the beginning of the year. According to Token Terminal data, as of May 29, the number of monthly active users of ENS dropped by 30.7%, and the number of daily active users dropped by more than 88.9%.

#In order to improve its own predicament, in addition to service upgrades, ENS has also expanded its domain name services through multiple cooperations. For example, in February this year, ENS announced a cooperation with domain name registrar GoDaddy, aiming to help Web3 community users link ".eth" domain names with traditional Web2 domain names (.com, .xyz, etc.) for free; in April, ENS announced Reached cooperation with Intercap to introduce the .box domain name into the ENS management application. This is also the first time that an ICANN-approved top-level domain name (TLD) is integrated into the dynamic platform. Users can now register the .box domain name through the ENS management application and use it for e.g. Web2 services such as email and website hosting. It is reported that the uniqueness of .box domain names is that they run on the chain, integrating the existing functions of DNS and the decentralization concept of ENS, which means that .box domain names can not only serve as network addresses and email hosts, but also as A personal cross-platform Web3 identity.

Now, with the launch of ENS V2, perhaps the "most successful non-financial application" in Vitalik's eyes will attract more people's attention.

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