Why brands are paying thousands for crypto domain names

Last month, Nike-owned Web3 platform RTFKT bought a strange NFT: a crypto domain for the name “dotswoosh.eth.” Even more surprising was how much it paid: 19.72 ETH, or roughly $38,000 at the time of purchase. A crypto domain works like a domain for a traditional website, granting the owner rights to a specific address that can be easily queried. But as opposed to referring to an Internet Protocol (IP) address, this name refers to the unique address for a crypto wallet, which in its default form is an incomprehensible string of numbers and letters. For brands hoping to gain early control of their wallet—which is essentially the base layer of a user’s identity in Web3—these names can be valuable investments. They may also pose marketing opportunities compatible with the infrastructure of Web3, which will require brands to engage consumers without the assumption of having access to troves of their data. “You would be silly to not own it right now,” said Gregg Lester, chief digital officer at brand consultancy Troika Labs. Lester is advising his brands to go out and buy their crypto domains as one of their first steps into Web3. Brands such as Puma, Gucci and Budweiser have already purchased at least one “.eth” name. Budweiser paid around $95,000 for “beer.eth.” An “.eth” extension means the domain is applicable to the Ethereum blockchain, and is sold by an organization called Ethereum Name Service (ENS). While ENS names are the hottest suffix in Web3—as a result of Ethereum being the most popular Web3 blockchain—different name services support domains for other blockchains. The organization Tezos Domains, for example, offers “.tez” extensions for the Tezos blockchain. Mark Soares, chief marketing officer of agency Blokhaus, which works directly with the Tezos ecosystem, suggested brands consider buying their names across a variety of blockchains in order to expand the verification of their identity. Proving to users you are who you say you are, and across a variety of ecosystems, is especially important when dealing with financial transactions between wallets. But this is where things can get costly for brands. Like most NFTs, crypto domains are available to anyone with a wallet and can be bought and resold on the secondary marketplace, often for much more than the initial sale. “Axe.eth” is currently listed on OpenSea for over $120,000, and “adidas.eth” is around $18,500. Names on less popular blockchains will be far less pricey, yet the costs can still add up if another owner maintains the leverage in negotiation. Marketing opportunities The method of direct communication in Web3 will likely exist between wallets, which means the addresses of those wallets will serve brands in much the same way as emails serve them in Web2, according to Troika’s Lester. Like an email campaign, a brand can simply drop a piece of media or information—in the form of an NFT—into a consumer’s wallet, needing only knowledge of their address to complete the send. But if the brand wants the consumer to engage with that media, they must ensure their own identity is clear and verifiable. This makes the case for owning crypto domains. A consumer is much more likely to open an NFT from “puma.eth” than 0x4b26bdf…—an Ethereum address virtually indistinguishable from all other Ethereum addresses. “There's no better verified checkmark than “.eth,” said Lester, who cited the rampant use of fake usernames on Twitter as something that could be prevented in Web3 platforms via crypto domains. A similar marketing opportunity is feasible in e-commerce. If Puma wanted to sell virtual wearables, it could allocate an entire wallet for that purpose by registering a sub-domain of its larger crypto domain (“puma.eth”) with the name, “shopwearables.puma.eth.” With some extra help from third-party browser software, Puma could improve the wallet’s user experience and thus open a seamless and trustworthy destination for consumers to buy its wearables. These stores could be especially helpful for brands already accepting crypto payments. When making a payment online, consumers still have to trust that the address they’re paying is the right one. Some brands have used QR codes to limit mistakes, but displaying a wallet with their own name could improve these efforts. Tricky secondary market The process of buying crypto domains from a name services organization like ENS is typically straightforward and costs an annual fee that depends on the length of the domain name. For ENS, this will be between $5 and $640 a year, with the shorter domains (a minimum of three letters) carrying the highest costs. Brands should also be aware that the service will not reach out to owners when their domain expires, said Blockhaus’ Soares. And if you lose your domain, and someone else buys it, transactions meant for you will go to the new owner, until you make it known your address has changed. For many brands, however, their name or an alternative has already been bought, which means they will have to go the route of the secondary market and negotiate, Soares said. This can be a tricky process, which has spurred Troika Labs to start offering such a service to brands. The first step, and arguably the most difficult, said Lester, entails finding out a way to communicate with the current owner. Since most crypto wallets still remain in their default, hexadecimal form, there is no clear identity attached to them, meaning no social accounts or emails to which to send a message. One method of establishing contact includes finding other NFTs in the owner’s wallet and scouring social media for posts about that NFT. From there, a brand could feasibly trace the post to the owner of the NFT, who would also be the owner of the desired crypto domain. Metaverse glossary Key words and terms brands should know Click here The subsequent negotiation process can also be daunting. Current owners maintain the leverage and can jack up prices however they see fit, as long as it isn’t so outrageous that the prospective buyer will leave. This appears to largely be why brands have spent so much on their respective domains. Chipotle owns several ENS domains, most of which they bought directly from the service, for no more than $5 each per year. But according to transaction history on OpenSea, one of Chipotle’s domains, “chipolte.eth [sic],” came from a previous owner, and cost the brand 1 ETH, or just under $3,000 at the time of purchase, not including gas fees. A spokesperson from Chipotle confirmed it did indeed buy one domain from a previous owner. “It's similar to domain prices back in the day,” said Lester, referring to the hot market for website domains in the late ‘90s. “They can be anywhere from $1,200 to $350,000.” Brands should also know the risks of trying to undermine the owner of a domain that they believe does not have rights to their names. In April, a VP at Wyndham Hotels sent a Digital Millennium Copyright Act (DMCA) takedown notice to OpenSea to remove “wyndhamhotels.eth” from its platform. OpenSea complied, but the pseudonymous owner, BloomCapital, threatened Wyndham on Twitter that they would “burn” the NFT, meaning send it to an inaccessible smart contract where it would effectively be lost forever. Even if Wyndham one day wanted its crypto domain, it would not be able to acquire it. Wyndham if you guys wanted your name all you had to do is ask,, I paid $16 🤣You send your VP to take down my name isn’t very strategic. Now I’m considering to send it to the burn address Sincerely -penislord.eth@WyndhamHotels— Habibi.eth (DomainPlug.io) (@BloomCapital_) April 21, 2022 BloomCapital did not end up burning the NFT, it said via a direct message on Twitter. But it would have been willing to reach an agreement, had Wyndham not filed the DMCA. Though the name cannot be sold on OpenSea, BloomCapital still owns the rights, and can sell it on another platform. Wyndham Hotels did not return a request for comment.

Why brands are paying thousands for crypto domain names

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