Rekt Report: Ethereum Name Service "ENS"​: Airdrop & Naming Standards Use Cases

By Rekt | Rekt Report | 12 Nov 2021


This week saw one of the largest airdrops in crypto with the $500 million+ value airdrop of the ENS token for holders of an Ethereum Name Service name, which would be, like, Rob.eth. This name could be used in cryptocurrency wallets, like Metamask, and rather than having to paste in a long string of characters for the actual "0x" Ethereum wallet address when you're sending someone a token, you can just type in Rob.eth, simplifying the process and making you less vulnerable to copy-paste hack malware.

The project was founded in 2017 by Nick Johnson, who spent time at the Ethereum Foundation and Google. The push to position private companies into a DAO--decentralized autonomous organization--has proven historically to be sound reasoning. Hayden Adams of Uniswap really started the wave of airdrops, which is where they give tokens away to early users of their platforms for free, on Sept 17th, 2020. Hayden's realization that the community was at least as important as the technology underlying a crypto platform was revolutionary, both in the value distributed to users as well as igniting an open-source code movement in blockchain, which has lead to greater transparency of potentially exploitative code. Without this verified code available to the world projects like DeFiSafety wouldn't be able to do the necessary code audits to prevent against an avalanche of scams.

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Nick is on the bottom right of the above interview photo. Over 100,000 Ethereum wallets received tokens that ranged in value from the high four-figures to low seven-figures. While a great many will sell their airdrop to meet their short-term expense obligations, a great many "HODL" and wait for the price to go up. For these "diamond hands" investors, their cost basis is 0 so whatever they sell it for will amount to a return-on-investment of infinity.

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I remember one of my companies was airdropped quite a bit of UNI and the question was what should be done? I was told years ago by individuals at the private equity group I worked at, far wiser than I, that one should sell half when an investment doubles in value and if you're on the fence on selling at all then just sell half to escape that analysis paralysis.

The lead-up to the actual airdrop was exciting and Nick and his team held several Twitter Spaces for nearly 1000 listeners to discuss the vision for the DAO, the goals Nick has for the project, and how to claim the ENS tokens. I did two videos on the project for my Altcoin Author channel.

For many, the process of claiming an airdrop is opaque and the space is rife with scammers attempting to orchestrate phishing attacks intent on stealing these airdrop permissions from users.

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The scaling of a name service on the blockchain is interesting because it's largely only as good as the meaningful connections and utility that comes of it. ENS's key partnerships with Etherscan, Coinbase, and other platforms that have substantial eyeballs on them daily not only reinforce the ENS brand but promote its utility. Once it reaches critical mass in size and people actually demand it on wallet platforms, then it's reached a point beyond which .eth extensions are unlikely to be encroached on by others. Coinbase, or others tech titans, could throw ice on this parade down the road by rolling out similar extensions, but are unlikely to given the platform's traction. Competitors exist in abundance but have no where near the community that ENS enjoys.

This stratospheric growth in spite of the yearly $5 cost, coupled with an outrageous $240 Ethereum gas cost to mint a name, speaks to a larger desire to use the alphabet at all possible over strings of 0x numbers.

This speaks to a broader push that also affects tech at large: ease of use. The No Code movement to make application development virtually code free has been transformative to help users begin to design the applications they desire without having to get their fingernails dirty with actual code. Venture capital has been flowing to many No Code platforms because they appreciate the swift scaling speed possible if you don't have to have a deep technical competency to even use their platform. If it's accessible to anyone then your platform is wide open for users and larger adoption is likely to follow.

When I on-board people to crypto from even the traditional computer science world, I am routinely taken aback with the difficulty involved getting up and running with the web 3.0 experience. While it is something that we do on a daily basis as blockchain developers in logging into our Metamask and keeping our private key on Ledger separate, the importance of this is lost in the great majority of people entering the space without the technical foundation or an many times the interest necessary to retain this understanding.

This has also been especially true in the NFT space, where creative types and those who saw Beeple on the Tonight Show want to get going as quickly as possible to highlight their art and earn crypto of any variety. As someone who has diligently spent time to learn code, my initial reaction is to want to force people into all of the web 3.0 tools that I use, but I ultimately came to the realization that if this forcing turns users off to the experience or makes them feel off put then that's a net negative to the ecosystem.

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There reaches a point at which we have to recognize that we shouldn't hold our nose up at easy-to-use solutions for blockchain projects. For the longest time, it was gospel that you would have to log into a website with your web 3.0 wallet to even begin the browsing experience, but this can be fraught with security challenges, especially with the avalanche of phishing advertisements on Google ads. If you search a great majority of the decentralized finance platforms on Google, the Google ad will be for a phishing site intent on stealing your crypto through your unwittingly approving a transaction that gives them carte blanche on a blanket approval to move all of your crypto. Very few people, much like the Apple terms and service agreement, will read a Metamask or any crypto wallet transaction prompt. Rather, most will just trust the site to be giving them a prompt that is safe and respects their privacy. This foundational trust has led to a great many exploits.

I do fair amount of trading every day for European clients and am always looking for the best platform that offers the most liquid and sophisticated financial instruments for coverage on promising cryptocurrency projects. The learning curve on these trading platforms themselves is relatively high if you're trying to you do a quantitative trade or schedule a series of trades that are conditional.

The technical sophistication aside, many lack of the financial sophistication to be able to understand the instruments involved. Many people I know will just ape into 5000 Doge and hold them on Robinhood. This is fine for some, but there are more sophisticated strategies to employ that will provide that same level of coverage and will allow you to mitigate your risk much more aggressively in the short and long-term.

The work of a project I follow, NFTsDAO, to introduce European options settled simply through sending the requisite amount for a coverage level to their NFTsDAO.eth Ethereum Name Service address struck me as important because it simplifies the process of getting option coverage on a top crypto.

For many, if you can't explain what's happening in one sentence than you will have lost them. This platform offers "European" options--that can't be exercised prior to expiration-- that settles automatically at the expiration date and that the NFTsDAO will read the wallet address that sends them a particular amount of Ethereum and will automatically match coverage to that wallet address and settle at the end the month by sending them their USD-denominated profits.

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On the exchange front, there is tremendous competition, but less so in the world of options, so having this easy-to-use option, pun intended, that allows more to on-board into crypto trading, without AML/KYC vulnerabilities, is tantalizing. Over the years, I've given my identity to great many sites that were well-regarded and went on to be hacked with a dangerous amount of my information compromised. Let's also remember that many exchanges will require a Social Security number in order to do the requisite tax reporting and that information also was routinely stolen and sold on the darknet.

People rightfully have an aversion for KYC because platforms have historically proven their ability to safeguard users data. Even when there are tremendous cybersecurity violations, there's a negligible or no meaningful punishment for companies that are sloppy with their security practices e.g. Facebook. If you're an executive at an exchange and you know that that the consequence will be virtually zero, besides some bad press, then it's only natural that when revenue comes in it'll would be diverted away from privacy safeguards practices, which can be expensive if done well, and into more profitable ventures when that consequence balance is skewed.

Financial instruments, linked to NFTs, is a use case that could have substantial legs in the years to come if it's focused on mass adoption, ease of use, and key platforms do a meaningful push to educate users on financial instruments. 

A great many enthusiasts tell me that NFT ecosystem has grown stale and scammy. There must be the continual focus on blocking companies to innovate with use cases at all costs and NFT's can provide many of the same capabilities as traditional ERC 20s for governance and a host of other possibilities. NFTsDAO does its actual DAO governance with an NFT as well.

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NFTs are visual by design and afford the ability to communicate a particular function within the image itself. The promising scope of being able to have an instructive image on a cryptocurrency has not yet been fully defined, but it has the potential to solve many of the problems we see with ERC-20 for those who aren't tech literate. 

The most recent edition of the NFTsDAO newsletter suggested that newsletter recipients will have the opportunity to be airdropped option coverage so I would suggest signing up their newsletter if you missed the ENS airdrop. They also provide customer service, which a great many blockchain companies will disregard entirely, direct to a community telegram with the hopes that someone not from the core team will generously help you, or the "support will be simply a redirect to the websites FAQ section.

I'm doing some exciting teaching and EdTech work in the time between now and Christmas. Always happy to share a virtual coffee: https://calendly.com/altcoin

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Rekt
Rekt

Hard-hitting crypto reporter on the blockchain beat.


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