Liquidity is the core factor on why 3 & 4 digits will likely accrue outsized value in ENS ecosystem
- Liquidity begets liquidity
- ENS volume last 2 wks > all volume before
- 3 & 4 digits initial liquidity was from NFT degens, now being joined by freshly funded wallet
Low Transaction Fees - ENS has no royalty fees on transactions
- OS charges their standard 2.5%
- Resulting in ENS having the lowest possible fees on OS
- Larva Labs charges 0% on punks, Yuga charges 2.5%, Art Blocks 5%, Azuki 5%, NFT Worlds 8.5%
Buyer Aggressiveness
- Example: 4d costs are listed for 1.5 ETH
- If the fee is 2.5%, the buyer will need to sell for 1.54 ETH to be break-even
- If the fee is 7.5%, it’s 1.62 ETH
- Intuitively buyers can be more aggressive if fees are lower
Tighter Spreads
- At any moment a digit holder may need to sell
- Given buyers are aggressive, the seller can price around the floor and get filled quickly
- Due to tighter spreads, investors are more interested in buying bc they know they can exit without much slippage
Comparison to Words P1
- Until 2 weeks ago, there was little interest in ENS digits
- Keywords, Google, Apple, Trade, Loan … had sold occasionally for 30-50 ETH
- Short words would sell here and there for 2-5 eth
- There had never been persistent liquidity across words
Comparison to Words P2
- There are limited buyers for each word/name
- The avg English speaker knows ~30k words, there are Spanish, Chinese, Arabic, and Niche words
- Number of words is high and # of buyers per word is low
- Resulting in limited liquidity
Carry Cost: Digits (d) vs Letters (L)
- 3 character ENS cost ~0.23 ETH / yr
- 1k 3d = 230 ETH/yr - 17.6k 3L = 4,040 ETH/yr
- 4 character ENS cost ~0.058 ETH / yr - 10k 4d = 580 ETH/yr
- 457k 4L =26,500 ETH /yr - Aggregate digits much less carry
- Carry removes liquidity
Defined Hierarchy - 3d worth 10x 4d
- Lower #s > Higher # - Patterns 7788, 121 premium
- Special #s like 888, 5555, 1000, 1234 trade for giant premium
- With strong floor liquidity,
feel more comfortable buying marquee assets (555 for 55.5 eth) - More = more liquidity
Incremental Liquidity P1
- Many NFT degens are fading digits … in favor of pfps, land
- Looking at ENS’s value against other NFTs is misplaced
- Most NFT ecosystems have 5k-20k unique wallets, ENS has 371k
- Many 10+ ETH digit buys came from wallets with no non-ENS NFTs
Incremental Liquidity P2
- OpenSea has ~400k monthly active unique wallets
- MetaMask has ~30m monthly active users
- Unlike pfps, ENS appeal to crypto-only users
- As a short wallet address adds utility
- ENS much larger TAM than traditional NFT projects
By 008