Trading names in a mind-boggling crypto craze

A non-fungible token (NFT) displayed on the website of NFT marketplace OpenSea is seen through a magnifying glass, in this illustration picture taken February 28, 2022. REUTERS/Florence Lo/Illustration

A new NFT trading craze where names are bought and sold for eye-popping sums is providing a multi-million-dollar lifeline for speculators shivering in the bleak crypto winter.

“Domain” names such as coin.crypto (which has sold for $100,000) and beer.eth (which fetched $39,000) are a new breed of NFTs that owners can use to replace the jumble of 16 random numbers and letters that form their digital wallet addresses.

It might seem a lot of money for the crypto equivalent of a custom car plate, yet backers say these names could become valuable real estate in the years to come with the advent of Web3, a much-hyped vision of a future internet built on blockchain.

Right now the trading market for these alternative assets is providing rich – and risky – pickings for some investors who are scooping up buzzy domains with the aim of flipping them for a profit in the secondary market on NFT platforms like OpenSea.

“We have domain names starting at as little as $5, we’ve had some sell for as much as $100,000,” said Matthew Gould, CEO Unstoppable Domains, which sells names ending in .crypto, .nft and .wallet on its website.

“The range is because there’s a definite perceived value difference between different words and lengths.”

The company has seen some bumper deals of late: for example wallet.crypto sold for $250,000 and earn.crypto went for $100,000, both in April.

Meanwhile the .eth names generated by the Ethereum Name Service (ENS), the biggest domain seller, were the fourth-most traded type of NFT on OpenSea in September, with total volumes rising 75 percent from a month ago to the equivalent of $12.5 million.

ENS domain names were topped by only NFTs (non-fungible tokens) from well-known collections such as CryptoPunks and Bored Ape Yacht Club. Trading in the comparatively new assets has grown apace even as the crypto winter has battered the NFT market.

Monthly registrations for .eth domain names jumped to over 433,000 in September, the highest in the past 12 months and a 5,000 percent surge from a year ago, according to Dune Analytics.

The domain names which command the highest value are often those with simple and short English words, terms referencing pop culture or Web3, and number sequences, according to experts, such as crypto.nft or 000.eth.

What’s a name worth?

Crypto domains are still in their infancy, though. There is no guarantee they, or Web3, will live up to their promise, while the highly volatile nature of cryptocurrency and NFT markets suggest perils for the unschooled trader.

Questions also abound on the scalability of the technology, and the potential for confusion as competing domain providers issue similar names, potentially leading to the misrouting of funds, a report by Block Intelligence said.

Sasha Fleyshman, portfolio manager at investment firm Arca in Los Angeles, said domain names were likely to grow in popularity as crypto became more mainstream.

The 16-character alphanumeric addresses used for digital wallets “are not exactly user friendly, especially for non-crypto native people”, he added.

In an indication of some investor confidence that digital assets linked to .eth domain names will grow in value, the ENS project’s crypto token soared nearly 90 percent in the third quarter to $15.92 – though still a far cry from the $40 it was trading at the beginning of the year. Bitcoin ended the quarter mostly flat, struggling to stay above $20,000.

Yet many market players warn that it’s tough to value a domain name as it amounts to a speculative bet on what might be in demand in the future.

This weakens the case for institutional investment, Fleyshman said.

“From a fund perspective, it’s rather hard to make a fundamental investment into specific domain names,” he added. “It’s just not our wheelhouse to say which domains are going to accrue value and which ones are not.”

(1 ether = $1,330.20)