Is the hype around Bitcoin Domain Name System (BNS) an opportunity or a risk?

Is the hype around Bitcoin Domain Name System (BNS) a chance or a danger?

Author: Xiyu, ChainCatcher

On May 28th, a screenshot of the 001.btc domain name being sold for 0.3 BTC (about $8,100) circulated in various cryptocurrency communities. According to the seller, he engraved the domain name in February and spent about $10, making a profit of over 800 times from this transaction. This transaction has completely ignited the enthusiasm of Bitcoin domain name players.

In fact, the 001.btc domain name is a text inscription (Text) that users engraved based on the Bitcoin Ordinal protocol. Although it looked like a domain name with the .btc suffix in the early days, it did not have the so-called domain name function and did not support Bitcoin address resolution. Users only held text NFTs.

With the completion of the transaction of 001.btc, text domain names based on the Ordinal protocol began to attract the attention of users and related service providers, and they will truly be domain-ized and provide related functions.

Domain names have become a new hot spot in the Bitcoin ecosystem following BRC20 and NFTs. Domain name players are racing against time to engrave new domain names, lest they miss this wealth train. Some applications on the Bitcoin chain have also started to support Bitcoin domain name services. On May 30th, the Bitcoin inscription trading and wallet service platform Ordinals Wallet announced support for domain name resolution for .btc, .sats and other domain names, and users can now use domain names to send and receive Bitcoins and inscriptions, etc.; On May 31st, the Bitcoin wallet Unisat launched a domain name trading market, supporting the trading of domain names with the suffixes .sats and .unisat.

The text inscription of the Ordinal protocol can be engraved by anyone, which means that users can engrave any text with a .xxx character suffix similar to a domain name. Currently, the consensus domain names that have been formed in the Bitcoin text domain name market include .btc, .sat, .sats, .ord and a series of suffix character domain names.

In addition, some domain name service providers have also started to provide domain name services, but the ecology is very chaotic. Among them, there are three .btc domain names, including the text .btc domain name, the BTC.US .btc domain name based on the Stacks chain, and the decentralized domain name service provider BTCDomain’s Jason format .btc domain name based on Ordinals. Although they all seem to be .btc, they are operated by three different domain name merchants and operating systems behind them.

According to the domain name payment mechanism, the products in the Bitcoin domain name system (BNS) market can be roughly divided into two categories: one is the lease payment domain name dominated by domain name service providers, which requires paying annual service fees, representing products such as BTC Domain and BTC.US; the other is the Ordinals text domain name (.sats, .sat, etc.), which only needs to pay the on-chain gas fee when engraved and is valid for life.

So, what are the differences between these domain names? What are their functions? How do we choose? This article will try to provide some answers.

About Bitcoin BNS

BNS (Bitcoin Name Service) is the collective name for Bitcoin domain name services, referring to domain name services built on the Bitcoin blockchain network. BNS functions similarly to Ethereum Name Service (ENS) and can convert Bitcoin addresses into characters that are easy for humans to remember and identify, forming Bitcoin domain names that end in “.btc”, “.sats”, “.sat”, and so on.

BNS is a converter for Bitcoin chain addresses that can convert non-address strings starting with “bc1p” on Bitcoin into domain name characters that are easy to recognize, similar to Twitter or Weibo usernames. After users bind Bitcoin addresses to domain names, they can send and receive on-chain assets like BTC using the domain names without having to copy and input complex Bitcoin addresses. At the same time, BNS domain names are also user identity credentials that are valid throughout the Bitcoin chain world. In the future, users can log in to Web3 applications with their BNS, which will be displayed as usernames and allow users to manage corresponding wallet addresses and data.

Additionally, some social media accounts, email accounts, and other Internet accounts can also support users in binding BNS domain names, and the NFTs they hold can be recorded on the domain names or set as domain name avatars. For example, decentralized social application Damus supports users in using .sats domain names as usernames.

What are BNS domain names? How do you choose?

Today, in the Bitcoin ecosystem, there are mainly two ways for users to obtain domain names depending on the payment method: one is the paid lease-type domain name provided by domain name service providers, represented by projects such as BTC.US and BTCDomain; the other is the text-based domain name (Text) generated based on the Ordinals protocol.

Since text-based domain names (Text) belong to the wallet address that engraved them for life and do not require subsequent payments, and there is no project issuer, everyone is equal, and anyone can engrave the domain name they want based on their preferences. Therefore, text-based domain names are the most popular and popular in the current Bitcoin domain name market.

However, before the popularity of text-based domain names, developers had already deployed Bitcoin domain name-related products, such as BTC.US and BTCDomain. Among them, the domain names with the .btc suffix have the most types. BTC.US and BTCDomain both provide domain name services with the .btc suffix. In addition, users can spontaneously generate text-based .btc domain names based on Ordinals. This means that there are currently three types of .btc domain names in the Bitcoin ecosystem. This is mainly because .btc is a symbol of BTC, making it easier for users to recognize and spread, and also the preferred suffix character in the minds of domain name service providers.

So what are the differences between these three types of .btc domains? How should users choose?

1. Ordinals text domains: only need to pay Gas fees, released equally

Text domains mainly refer to character content similar to domains issued based on the Bitcoin Ordinals protocol. Users only need to pay on-chain Gas fees to inscribe them, and once inscribed, they are valid for life with no subsequent fees. The main representatives are “.btc, .sat, .sats, .ord, .unisat,” etc.

The Ordinals protocol makes each satoshi unique by inscribing inscriptions on the smallest unit of Bitcoin. By using the Ordinals protocol to issue domains, the domain name string (textual inscriptions) is inscribed on the satoshis, which is why domain names have always been called Text domains.

Since the domain name is a textual inscription, it conforms to the rules of inscriptions: it supports any user to inscribe any suffix domain name through code and first come, first served. The former can be understood as anyone can deploy a domain name with any character suffix, such as .uniswap, .bank, .pepe, etc.; the latter rule is that for the same domain name, the one registered first is valid, and the rest are invalid domain names. That is to say, it does not limit users from registering domain names with the same characters, but once the inscription of the domain name is registered, even if others register the same one later, it is invalid and not recognized or accepted by the market. For example, someone registered 001.btc for the first time in February, and others can also register 001.btc later, but the latter 001.btc is an invalid inscription.

The process of inscribing a domain name inscription is similar to deploying a BRC20 token, except that the inscription on the BRC20 token is a unified Jason data, while the inscription on the domain name is a unique string, so each inscription domain name is also an Ordinals NFT asset.

In addition, in the current Bitcoin text domains, there is no distinction between uppercase and lowercase letters. There is no difference in inscribing and identifying uppercase and lowercase letters. That is to say, if someone has already inscribed SUSHI.btc, you do not need to inscribe SUshi.BTC/sushi.btc, etc., because this domain name has already been taken, and the later ones are invalid.

Although Ordinals supports inscription of domain name characters with any suffix, it does not mean that any suffix of domain name characters can become a domain name with value. If it does not have the function of a domain name (such as not being able to support binding a Bitcoin wallet address) or there is no consensus, then it can only be a textual inscription NFT.

Whether text inscriptions like .btc, .sat, .sats, .stas, .ibx, .gm can become so-called domain names depends on whether there is consensus on them and whether wallet or related service providers offer domain name-related functional services, such as supporting address resolution, which can be used to receive assets or log in to decentralized applications. Only if there is support for domain-related functions, then these text-like domain names may have domain name value.

Take the .btc, .sat, .stas, .sats, .ibx, and .gm domain names as examples. Currently, the Unisat wallet supports resolving .sats, so users can use the .sats domain name to receive and send Bitcoin assets; the decentralized social application Damus supports setting the user name as .sats, so users can use .sats as their identity representative. At this time, .sats has already the function of a domain name, while other .xxx suffix pure text domain names are just a text NFT because there is no wallet application that supports address resolution or other domain name functions.

How to obtain a text domain name?

If the domain name has been registered, users can buy it in the Bitcoin NFT trading market or off-market peer-to-peer, and the price depends on the seller’s order price. If the domain name has not been registered yet, users can directly inscribe it on a platform that supports engraving inscriptions on the Bitcoin chain, or use code to inscribe it, and only need to pay the Bitcoin chain Gas fee (currently about 3 US dollars per transaction), with no additional fees in the later period.

Take the Unisat platform as an example, to inscribe a new domain name:

Step 1: Before registering, you need to check for duplicates to confirm whether the domain name has been registered.

Use the platform’s search function (Search) to enter the desired domain name and see if it already exists. If it already exists, any subsequent registration will be invalid. It should be noted that during the duplication checking process, some data may not be very accurate due to certain reasons, so users need to check for duplicates on multiple platforms and cross-validate.

Step 2: After confirming that the domain name has not yet been registered, use the platform’s inscription function (Inscribe) to register the inscription.

Since Unisat supports .sats and .unisat, users only need to click on the relevant domain name suffix and enter the desired character to register, and multiple domain names can be batch-cast.

If there is no relevant suffix domain name on Unisat, users can enter the desired character suffix domain name through the Text (text) dialog box, and support batch casting of domain names with different suffixes.

What are some well-known text-based domain names?

Bitcoin Name Service (.btc) – is a community-driven effort to create domains with the .btc extension. One notable example, satoshi.btc, was donated to the Bitcoin Foundation. As of May 31st, there were 100,000 registered .btc domains according to Unisat.

sat.names (.sat) – sat is short for satoshi and there are 307,000 registered domains.

sats.names (.sats) – sats is short for satoshis and there are 298,000 registered domains.

.unisat – introduced by the Unisat wallet, .unisat domains come with platform fee discounts.

.ord – the first token to pay tribute to BRC20.

Text domain name-related tools-

  • Check and engrave new domain names

iDclub – can be used to check for domain name duplication and batch registration, with a certain amount of handling fees.

Unisat – supports domain name checking and registration. On May 31st, the .sats and .unisat domain name trading markets were launched. Users can also resolve their domain names to Bitcoin wallet addresses and receive Bitcoin assets and engravings using .sats and .unisat domain names.

Best in Slot – aggregates various assets under the Ordinals protocol, including NFTs, domain names, and engravings, allowing users to check for duplication and view the holding address information for each engraving.

  • Domain name secondary trading market

Ordinals Wallet – similar to Unisat, it provides wallet and Ordinals asset trading functions. On May 30th, it announced support for .sats, .btc, .unisat, .xbt domains, and supports domain name resolution to Bitcoin wallet addresses, allowing users to bind these domains to Ordinals Wallet Bitcoin addresses, and receive and send assets using domain names.

Ordswap – also a platform that combines wallet and Ordinals asset trading functions, supports text-based domain name listing transactions.

Magic Eden – added a Bitcoin NFT market and supports .btc domain trading.

2.BTC.US: .btc domain name based on the Stacks network

BTC.US is a domain name service system with the suffix “.btc” based on smart contracts built on the Stacks network. Stacks is a Bitcoin smart contract chain that can provide smart contract functionality support for Bitcoin, helping to deploy DeFi, NFTs, and various decentralized applications.

Currently, users who want to obtain a domain name on BTC.US need to apply for registration through their official website and connect to wallets such as Hiro or Xverse, using the Stacks platform’s native token STX for payment. Each registration requires a one-time payment of 2 STX tokens (about $1.3) for a 5-year annual fee, which will be automatically deducted upon expiration.

Domain names provided by BTC.US

The .btc domain names provided by BTC.US support users to bind Stacks chain addresses and Lightning Network addresses, allowing users to receive and send Stacks ecosystem assets and Lightning Network assets through their .btc domain names.

From this perspective, the .btc domain names of BTC.US are generated based on the Stacks chain, and the data is stored in Stacks. Its main function is to serve as an identity pass for the Stacks network and its ecosystem.

3.BTCDomain: Pay-for .btc domain name based on Ordinals

BTC Domain provides .btc domain name services based on the Bitcoin Ordinals protocol. It is more like a comprehensive domain name service platform that not only provides domain name registration, but also domain name resolution and other related services. It is committed to providing a user-friendly domain name service platform for the Bitcoin community, and its product operation is similar to ENS on Ethereum.

If a user wants to obtain a domain name on BTC Domain, they first need to have an Ordinals-type wallet address. In the registration process, they need to pay an additional annual service fee in addition to the gas fee on the Bitcoin chain, and can choose to pay up to 5 years.

When registering a domain name on the BTC Domain platform, the cost varies depending on the length of the domain name. The annual service fee for a 4-character domain name is 0.01 BTC (about $280); for a 5-character domain name, it is 0.004 BTC (about $112); and for domain names with 6 or more characters, the annual service fee is 0.001 BTC (about $28). Currently, the annual service fee is discounted by 50%.

BTC Domain fee situation

The .btc and text-based .btc domain names provided by BTC Domain are also based on Ordinals, but the two operating systems are completely different. According to the official website, the .btc provided by BTC Domain is designed to be de-duplicated and anti-counterfeiting signed in Json format at the initial design stage, so the registration of .btc domain names through BTC Domain has ensured uniqueness by de-duplication.

Compared to .btc of BTC.US, the .btc domain name data provided by BTC Domain is completely stored on the Bitcoin chain, it is a native domain name of Bitcoin, which can be bound with Bitcoin wallet addresses, and users can receive and send Bitcoin and inscription assets through their .btc domain names.

In addition, the .btc domain name resolved by BTC Domain can not only resolve to a Bitcoin wallet address, but also to webpage content. This is a convenient solution for businesses, charities, and individuals who want to create identifiable identities for their Bitcoin transactions. Currently, the .btc provided by BTC Domain supports resolving Tokenview, TP Wallet, Foxwallet Wallet, etc.

However, some users have expressed that due to the existence of the BTCDomain official, it is not as decentralized as text-based domain names, and the cost paid by users for using the leasing model is too high. In response, the official stated that it is precisely because there is the BTCDomain team that more resources can be invested in the development and management of .btc, and support domain name development and management, which will make .btc domain names have more application scenarios.

The brutal growth of the Bitcoin domain name market is difficult to unify

Although Bitcoin domain names have brought convenience to users in managing chain addresses, the domain name service system is not yet sound due to being in the early stage of development. As any person can inscribe the .xxx suffix on a text-based domain name, there are multiple suffix characters for text-based domain names in the current Bitcoin domain name market, such as .btc, .sat, .sats, .ord, .xbt, etc., and there may be more such as .uniswap, .xen, etc. in the future. In the short term, it is difficult to achieve uniformity in domain name suffix characters, domain name resolution methods, registration format requirements, etc. within the Bitcoin ecosystem.

Taking .btc domain names as an example, although the btc character of the suffix is easy for users to recognize and disseminate, there are actually three different service providers and operating systems behind it. Although BTC.US’s .btc uses the btc suffix, its functions and usage scenarios are more inclined to domain names within the Stacks ecosystem; BTC Domain’s .btc is a native domain name of Bitcoin and supports multiple wallet resolutions, but it has been criticized by users for its fees, domain name registration restrictions, and centralization issues, and it is not pure enough; while text-based .btc, although popular among users due to no subsequent fees and relatively fair issuance methods, requires community-based organization and operation, and the application scenarios and resolutions of text-based domain names in the later stage remain a problem, currently only Ordinals Wallet address supports the .btc text-based domain name resolution. Although these three .btc have differences in product design and operation mode, they are easy to confuse for most users.

Moreover, even if they all belong to the same text class domain name (such as .sats, .ord, .unisat, etc.), the registration rules are not unified. For example, some domain names support spaces or special characters and emojis, while others do not.

Text class domain name format differences, image source.btcdao

In terms of domain name usage scenarios, especially address resolution, they are also divided into various schools. For example, some wallets only support partial text domain name resolution. In addition, the domain name resolution rules and types between wallets are not unified.

Ordinal Wallet supports .sats, .btc, .unisat, .xbt and other domain name resolution services; Unisat supports .sats, .unisat domain name resolution, and the domain name market launched also supports the transaction of suffix domain names such as .sats, .unisat; TP wallet supports the resolution of .btc of BTC Domain. This means that users can only use the same wallet to use the domain name for asset transfer and receipt. For example, Xiao Ming’s .btc domain name in Ordinal Wallet does not support BTC transfer to the .btc domain name address of TP Wallet.

In addition, the speculation of text class domain names is greater than their real application. Although text class domain names are valid for life and without additional fees once registered, they currently have a single application scenario. Even most suffix characters are not supported by wallets for address resolution, and they do not have the function of a domain name. The trading of these domain name characters is more about gambling on future expectations, and their prices will rise once they are supported by wallet resolution.

Furthermore, although text class domain names may appear to be equally engraved for everyone, the reality is not so simple. Some users have already engraved a large number of 3D (3 characters) and 4D (4 characters) premium domain names before promoting certain suffix domain names, and then they hype up the domain name prices and take the opportunity to sell for profit. Therefore, users need to understand the risks when investing in text class domain names.

In addition to the chaos of the Bitcoin domain name market itself, the development of the decentralized domain name ecosystem itself is controversial. Many people doubt whether domain names are a good business in the Web3 world. Taking the decentralized domain name leader ENS as an example, according to Dune data, the registration volume in May was only 15,702, the lowest level since June last year, while the monthly registration number was as high as 400,000 during the peak period in September 2022. Since September last year, the monthly registration volume of ENS has been decreasing. After the airdrop boom, the attention to the Binance Chain’s .bnb domain name project SBlockingce ID has greatly decreased; the Bonfida (.sol) domain name project on Solana has only 716 registrations in the past seven days.

Will Bitcoin domain names also become a flash in the pan like other products? Although from the current popularity, it is still in the early stage of rapid growth. Community organizations such as .btc, .sats, .sat are spontaneously and actively exploring the market, attracting more wallet support for domain name resolution to expand more application scenarios. There may even be specialized text domain name resolution services in the future. As for which suffix character will eventually become the king of the Bitcoin ecological domain name, it still requires time and the community to jointly choose.