Over the past week (1st week of Aug/21) I spent time learning about the non-fungible token (NFT) space. If you are not aware, NFTs are unique digital collectables that are stored on the Ethereum blockchain (in most cases) that can be bought and sold digitally. This article isn’t an overview of NFTs but a look at things I noticed over the past week and the connections I see with domain names and the NFT market.
Building of brands
Artists and brands are creating NFTs at breakneck pace and selling a lot of them (OpenSea Co-founder Devin Finzer reported that OpenSea did $95M in transaction volume in 2 days at the end of July 2021 vs $21M transaction volume for all of 2020), and while doing this, most are creating brand new brands with NFT drops. With any brand launch on the web, this will involve the branding process and the use of a domain name to house and communicate the brand to the world.
At the time of writing, there are 17.5 million items listed on popular peer-to-peer NFT marketplace OpenSea.io and thousands of different “brands”.
The vast majority of the NFT brands pay little attention to the quality of domain used.
It is most common for NFT brands to present the brands website on its “collection” page on OpenSea to further drive traffic to it and most rely on social media to get noticed.
Overall, most domain names that I have seen associated with the respective brands are on starter domains, mainly .io if I had to guess the highest used. There is a wide mix of .art, .xyz, .co and .com’s. I did see some exact match .com domains but only a few.
Since the NFT market is so new and most of these brands are not established yet, I think it’s the main reason that most are on starter domains but I expect that to change with time and competition. I have consistently noticed the importance of brands, nearly begging OpenSea for a verification checkmark, so they should also realize that same importance reflects in the brands domain name on the web.
The domain industry stands to see a bump up with all these new brands needing domain names and often upgrade domains now and into the future.
To note, there are many established "new" brands using really great domain names like Gemini.com, Lazy.com, Candy.com, Voice.com and many more but current massive players like OpenSea and MetaMask both using .io domains and no indication they have secured the .com yet.
Building a community is a huge driver to success in the NFT space. For the artists and the collections. Owning a bored ape gets you into the club, which is housed at the companies website as an example. There are currently about 5,000 different owners of BAYC, which is one of the highest asset/unique ownership ratios in the space that I’ve seen. BAYC members are like minded individuals, who like to do business together and communicate. It's very interesting to watch and see the different projects that come out of it.
The NFT brands are trying very hard to create a solid following with collectors and offer unique benefits to owners of them, mainly on there main website. This is smart and also highlights the importance of easily being found and establishing a trusted brand. Securing the make sense and most common .com domain is the natural thing to do for these brands and it will continue to important as the values of NFT's the brands and perks related to them grow financially.
Many of these communities are growing rapidly and the brand confusion is high right now (slews of ducks, goats, "punks" and more). Overall, I think the brands that are driving followers to self-owned and controlled websites is the best choice and owning/protecting the brand is always important. Providing value to buyers of the NFT, like Bored Apes giving 100% IP commercial rights is a smart move. Again, I see this increasing the demand on premium domain names as the NFT market continues to grow and get crowded.
There are many terms in the NFT space that relate to domains. Drops for NFTs is essentially the “creation” of the NFT and it’s mainly done in two different ways that I’ve seen.
Most “big drops” are done on the NFT brands website directly. At a specific time and date, the drop starts. This opens the process of “minting” the collection onto the blockchain. This is a very interesting and often intense process that sees a 10,000-piece collection that ranges in offering prices (often around .03 to 1 ETH each) within minutes.
There are also fees called “gas” to mine the purchase onto the blockchain which get very expensive when there is high demand toward one smart contract. (aka, minting). I have seen gas fees as high as $1,500 + minting fees, so things get expensive and intense like I said!
Since this type of drop involves the NFT brand’s website, it relates to domain names and the brand. If there isn’t much of a community effort, the website is then essentially just providing information related to the project and housing the drop.
In general, it appears best to use the website for drops, the community, news, brand building and more. Again, this is a big win for the domain industry at the rate NFT brands are being created. Each one needs a domain of some sort.
OpenSea style “drops” are where the NFTs are put onto the blockchain and listed on OpenSea by the creator/brand. The NFT’s are not available for BIN purchase but do become available for purchase by BIN at a set date and time. Once the BIN’s are turned on, this becomes the “drop” and essential race for collectors to get the ones they want.
The OpenSea style drop is nice for buyers because it prevents “gas wars” and the high fees related to the first style of drop I mentioned but also removed community engagement from your website, along with control if OpenSea is functioning properly. This style of drop doesn’t drive demand toward a website owned and operated by the NFT brand but I’d also expect high demand during a “big drop”, so there are also challenges related to that. I’ve seen several “big drops” delayed by days due to technical issues.
Domains on OpenSea
There is a Domain Names section on OpenSea.io which was nice to see. There are domains for sale but all of them are .eth, .crypto and a few other ENS related ones. Some users will use a .eth domain for their wallet identity but overall I see little use for them and it's a fluff situation, like the page reporting the "If the sale of "sex.crypto" for 230 ETH (~$90k) on OpenSea is anything to go by, the market could explode as adoption increases over the coming months and years.". I'll call the fluff on that one. IMO, stick with .com as it's the most established and trusted around the world.
There are several aspects of NFT’s that relate to domain names, with the most common one being that both are digital assets. Most NFTs will fail, just like most domain names are not and likely will not be valuable.
There is a high learning curve when it comes to NFTs from domains because you must learn crypto (ETH), OpenSea (marketplaces), stats and data related to NFTs, fees, art, community, taxes and so much more. The majority is different from domains.
Just like anything, there is A LOT of fluff that you must block out to ignore the noise and see the real value. Although there are some things NFTs and domain names have in common, they are two different animals beyond being digital assets.
NFTs are like brands that seek a following or else they will fail. They need to provide a reason for someone to love them, the story, the art, the community, exclusivity etc. Online brands need to establish and make it easy for people to find, trust and be apart of them. The domain name they use will play a part in it just like any other brand trying to establish themselves and stand out in the crowd online.