Liquidity - Why 3 & 4 digits will accrue outsized value in ENS ecosystem

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, :whale2: feel more comfortable buying marquee assets (555 for 55.5 eth)
  • More :whale2:= 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