Bypassing Premium Expiry - Discussion

🗳️ Meta-Governance Treasury Management
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Should the DAO be allowed to bypass the premium fee that everyone must pay in order to register a recently-expired name?

When a name expires, it enters a 21 day exponentially diminishing premium from $100 million dollars.
Every 24 hours, the premium fee is cut in half, until, after 21 days, it reaches $0.

This premium fee, goes directly to the DAO.

The DAO has now allocated funds to register names that are in this premium period, through “ENSFairy”.

Example:
ENS DAO → 100 ETH → ensfairy.eth
ensfairy registers tesla.eth from premium for 100 ETH.
ensfairy.eth → 100 ETH → ENS DAO.

The funds spent, simply return to the DAO, completing a full cycle.

This for all intents and purposes this completely bypasses the premium put in place by the DAO to ensure the fair distribution of expired names.

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An argument for this is simply that it should be allowed in order to acquire brand names or other names that can help adoption of ENS.

My counter to this, is that this should not be allowed on PRINCIPLE. It is not a precedent that we should set. The DAO should not have powers to bypass this fair market mechanism, no matter how good the intentions.

IF we allow this precedent, why should the DAO not also use this loophole to remove names that are unsavory from circulation when in expiry? such as: fuck.eth, faggot.eth etc (excuse the explicit nature).

This becomes a very slippery slope… Who decides what should be removed from circulation (at no expense to anyone)? We end up creating a POLICING system, and introducing bias to a credibly neutral system.

This is troubling…
I must stand on the side of condemning this action, although I will remain open to discussion and wish to hear counter-arguments.

Sources:

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(Image from proposal) [ [EP3.1.1] [Social] Q1/Q2 2023 Funding Request

Here are some discussions on twitter about this topic:

Tweet thread by anon.eth

Tweet by 👁‍🗨.eth

Argument for free market acquisition of names

Update

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I agree with what you said. This isn’t in the best interest of the future of a decentralized naming service to be buying names for celebrities or buy kkk.eth because it may be offensive. Nick previously suggested that when kkk.eth sold initially on premium that we donate the 20 eth to some cause. It wasn’t bought by a neo-Nazi, but by a Chinese man who likes repeating letters. We cant be impartial when it comes to these things because of our bias. We don’t want human intervention of the rules for acquiring a name. We want a smart contract to behave with no emotions.

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Thanks for posting this, I think it definitely warrants discussion.

Just one quick thought I want to add here… I think this will be a good test for the Ecosystem Working Group.

The amount allocated to ENS Fairy is just for this one term. If the community doesn’t like what they see, then they can vote down any such funding proposals in the future that include this ENS Fairy allocation.

We should observe any purchases made, and decide as a community whether they are good faith or not (however each person wants to define that for themselves). I can’t speak for the stewards, but my understanding is that the intent is to foster ENS adoption. For example, by purchasing names of other web3 public goods and giving it to them for free.

Of course, maybe you are right and that regardless of whether intentions are good or not, this just shouldn’t be done on principle (slippery slope, bad optics, etc).

This is good time for a reminder as well: If you have ENS governance tokens delegated to someone, you can re-delegate them at any time by going here: https://delegate.ens.domains/

If you want to vote by yourself and don’t want to delegate to anyone else, then click on “Enter ENS or address” and enter your own ENS name or ETH address.

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Thank you for bringing this on forum. @joshie.eth

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Why would this be a bad thing?

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Even if you think that it’s a good idea, I think it should be something that the DAO votes on, rather than at the discretion of a few people.

For example, maybe it can happen this way:

  • “Unsavory” name’s grace period ends
  • A social proposal is made to the DAO to decide whether the name is “unsavory”, and register the name in the auction then burn it
  • If it passes, then the Ecosystem Working Group takes that action

So the working group would still have those funds allocated, but the stewards agree to require a DAO vote before it purchases any names out of auction. If the stewards act without the agreed-upon vote, then they’ve broken the social contract, and the community can vote down future funding proposals.

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I think at first it seems like a good thing, and is easy to decide with overly explicit names, but it becomes difficult when you enter grey areas, words that may be offensive to some people or cultures, but are not for others.

Now you have to have an entire system setup for who decides which names should be removed and which should not, creating a sort of policing mechanism.

This idea will probably also introduce a lot of bias, either cultural or political. If we wish to remain neutral as a DAO, it seems policing is not a path we should venture down.

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Great thread by tjlarkin.eth (@TJLarkin23) on twitter articulating reasons against this path:

Quoting his thread here with his permission.

My take on the ENS DAO wanting to buy/gift names to brands and celebs:

While I’m certain that this is being done with the best intentions and with the ENS ecosystem’s best interests at heart, it would be a massive mistake.

Let me explain.

The #1 reason I believe ENS has grown as big as it has, and is 200x bigger than its nearest competitor, is because of the complete freedom in all respects.
All names were available with zero restrictions.
Only pricing differences are based on character count, and that’s it.
Minting house.eth cost the exact same as ef48b.eth.
Zero restrictions on the ability to mint brand names or celeb names.

This allowed early adopters thinking long-term to invest in the ecosystem by buying up great names of all kinds knowing they may be valuable later.
This excitement then grows to others who find out about this opportunity.
It’s a perfect flywheel to create engagement and trading, making the protocol more useful, valuable, and well know.
This is not the case with Unstoppable Domains, who “reserve” brand/celeb names (and then charge them a ton to release to them).
Or great names, which they charge 4-5 figures directly for.

When the parent company/DAO holds back names or charges a premium directly for them, it essentially eliminates the potential for an exciting and worthwhile aftermarket.
While ENS as a protocol has many things going for it outside of this issue, it wouldn’t be where it is today without this complete freedom.
So now the DAO is considering “buying” domains that have expired that are brand names or high-profile people’s names.
This has all kinds of problems, some obvious and immediate, and others that are unforeseen.

First issue; saying they’re “buying” them is semantics.
If they pay $1,000 for something through the system, that money is routed directly back into the same account, and they’re out nothing.
So it really is the ability to take names off the expiry list and put them in the DAO’s wallet.
With essentially no cap because they’d get the money back immediately.
This means they’d have the unfettered ability to pick up any name they want at any time.

The second and most obvious issue; is who determines what counts as a brand or celebrity name.
If gates.eth came up, would that count so they could give it to Bill Gates? What about the hundreds of thousands of other people with that last name?
They lose the ability to get their name because a richer guy has it?
trinity.eth, would that get pulled to go to Trinity Industries, a Fortune 500 company? I’m certain millions of people would want that domain for good reasons outside of it being a company name.
So these are obvious issues that would be extremely hard to deal with, even if you think it’s a good idea.

But then you get into the moral hazard issues.
Who is deciding on which names? Could the people deciding be benefiting?
Then you get into the slippery slope issues with this.

The complete freedom and lack of interference by the DAO got us where we are.
By changing that once, for a “good reason”, what’s the next “good reason” they’ll interfere for?
Once you set a precedent, things start to grow and become something that wasn’t intended.

Nick had brought up in the recent past the idea of changing the DAO in relation to “offensive” names.
Most of us used the same argument I’m making here.
It may sound good, but it will get going and get bigger once you start down that path.

The original decision may not have a massive impact, but the second and third-order effects of the first decision will.
Let’s also acknowledge there are legitimate issues with how things are done now.

We want mass adoption, and many brand/celeb names are held by people in the community who won’t sell for a reasonable price.
This means we can’t onboard them, which would be great for more adoption
To me, there is no perfect solution. There will be problems either way, and there is no escaping that.

The question is, which problems are better for the system’s health as we advance?
To me, not changing anything in this manner is much better, with much lower downside risk.

The DAO idea sounds great and may have some marginal positives come out of it, but would have massive downside risks that are difficult to account for currently.
TLDR;

•DAO wants to “buy” expiring names and gift them to brands/celebs
•Goal is to help onboard them to create mass adoption
•I see short-term problems with how to make these decisions and conflicts of interest
•Also see massive unforeseen problems due to DAO interference
Let me know your thoughts and what I might be missing.

I fully acknowledge this is a complicated issue and could have some of it wrong.

Good news, I think we’re all on the same page regarding the goal.

Let’s figure out how to make it happen!
That’s a wrap!

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I don’t believe this was ever discussed as a priority for the DAO by any the working groups. Do you have a link where it was?

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Let me start by saying that granting ENS Fairy this amount is fine with me, I voted for the proposal to pass. I think it’s worth experimenting with different ways to allocate Treasury funds. The proposal passed I believe but I still wanted to add some comments regarding this in hopes of better understanding the whole situation.

I also believe this is done with the best intentions by the DAO. However, I think gifting a celebrity something and them buying it themselves doesn’t has the same marketing effect. Celebrities get shit for free. That’s nothing new. But if they decide to spend thousands of dollars on something, that causes people to look into it and draws attention.

An example is the BAYC. I don’t think anyone would bat an eye if Eminem and Justin Bieber were gifted their BAYCs. Instead, they spent ridiculous amounts of money for one (which they can afford!) and people went crazy and now everyone knows about BAYC. I know we’re far from what BAYC is, but the argument given is that we’ll use it for promotion and I believe them spending money themselves will bring more eyes.

The second thing there that causes this backlash I believe is that if ENS Fairy gets to register names from the DAO funds, and if I’m someone who’s looking to buy names so I can resell them, I basically have no chance of outbidding the DAO if the DAO likes some name. So now instead of some lucky guy getting those thousands of dollars from celebrities, and maybe even meeting them who knows, they would get it for free, not even DAO makes money. So we’re essentially saving rich people from spending money in hopes of some promotion. We are a strong enough protocol that will make them come alone, we don’t need to give them stuff for free. We are big due to the product quality and strength of the community. And this doesn’t work in favor of that same community I believe.

I’m playing the devil’s advocate here, I don’t trade names, nor do I plan to. And I do genuinely hope I’m wrong about this and this turns out to be a positive thing and a good initiative. But I just know a lot of people who make a living selling names and they take it seriously. And it’s those people who collectively and for that specific reason generated our big treasury.

Because the word “fuck” was used 569 times in Wolf of Wall Street, 392 times in Straight out of Compton, 300 times in Goodfellas, 255 times in Pulp Fiction, and 250 times in Big Lebowski. The world likes it :smiley: And that word is not missing from any heated discussions (even within the ENS DAO and Twitter spaces) and is connected with more honesty in speaking. It’s not necessarily bad everything that has the potential to offend someone I think.

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No, it doesn’t. Names are still auctioned off starting at $100m. If someone values the name more than the ENS Fairy pod, they will get the name. The funding of the initiative is limited to the funding requested.

Fair opportunity in the context pictured means that the auction will actually start, rather than snipers paying miners thousands of dollars to register a name before an auction is able to start (which was happening in December 2021).

This initiative is not related to defensively registering “unsavoury” names. However, the DAO could very well vote to fund this specific type of initiative. The ENS Fairy initiative is intended to register names on temporary premium that could have a meaningful impact on ENS adoption.

The names that will be registered are names where there is likely one natural owner. For instance, an artist’s stage name that they made famous or the “first-and-last-name.eth” of a notable personality or sportsperson (e.g. billgates.eth, not bill.eth or gates.eth), or an internationally recognised brand or trademark (e.g. google.eth).

The parameters of the initiative have not yet been set. It would be useful to receive feedback on the sorts of names that could/should be covered under the initiative. The maximum spend per name might be another parameter set by Stewards. In reality, a large majority of the names in question might be registered for less than 5 ETH. Further, it might start with the limited scope of web3-related names, rather than going after people/orgs with no context for an ENS name.

There will be complete transparency — every name registered as part of this initiative will be disclosed, along with the registration price. The outcomes of each name registration will be measured against the relative cost to the DAO.

While there are many differing opinions about whether this is a good strategy, I don’t see any drawbacks to trying this and seeing how this particular strategy goes. If the initiative does not lead to the desired outcomes, it won’t be funded in the future.

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Why is this proposal being discussed now?

Is there an uptick in interest from big brands, celebrities or people of interest?

Is it part of marketing strategy?

Or are we doing some housekeeping and creating an expense line in the pnl?

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Alisha, I think your response is missing the main issue here.

The idea that the DAO can snipe names at no expense, I think is the key moral qualm.

It does bypass this feature. This dutch auction system allows fair competition because of the cost to the individual (the premium). This initiative bypasses that cost, because the money goes back to the wallet it came from.

Although this proposal only allocates ~$320,000 - the sum is not the issue here. It’s the fact that the money is meaningless, as it just goes directly back to the DAO.
The only limitation is of course the funding cap.
ENSFairy can pay a price for names that is much higher than others would pay, because the money is going back to the DAO.
This is basically an infinite money glitch for the DAO, as it doesn’t cost the DAO anything

I like this idea floated by @serenae, where we solve this issue by introducing a cost to the DAO by way of charity:

Don’t allow the funds to effectively be funneled back into the DAO. If such a purchase is made, then the DAO could decide to donate the same amount to a charity or public good. So the DAO would not be able to do this for “free” ad infinitum.

I think we would need to be careful with this, in that it still needs to feel like a cost to the DAO. Because if you’re for example planning on giving money to charity, why not funnel it through ENSFairy first to pickup names at no cost, then donate it.

I’m curious what you think about this idea @alisha.eth @nick.eth

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Working groups are not the DAO. Working groups are funded by the DAO, but they are not the DAO.

No, it doesn’t. Names still go to auction, and everyone still has a chance to acquire the names.

It’s not free ad infinitum. As explained, the amount of money behind this initiative is restricted to funds that are approved by the DAO each term. There are four funding windows in a year, and funds requested for this initiative will likely be made in two of the four windows if this initiative is successful.

It does cost the DAO something — the opportunity cost of this initiative is that the DAO misses out on registration fees from the names that are registered as part of this initiative.

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You can make this argument. But I don’t believe there are any other instances where money allocated to working groups circulates directly back to the DAO?

This is the main issue here. If you take some time to look through the discussions on twitter, this is what everyone is up in arms about.

Thanks for bringing this up, I genuinely had not thought through this. It took some thought to wrap my head around what this means. This is the example I worked with to understand this idea.

I think you may have changed my mind with this :slight_smile:

Setting:

google.eth is expired, and in temporary premium at $100,000

Scenario 1:
The ENS DAO (by proxy of ENSFairy) buys this domain, there will be effectively 0 upfront cost as they’re using recycled money.

Scenario 2:
The domain was not registered by the DAO, the user chad.squatter.eth registers google.eth a few hours later for $80,000.
This $80,000 premium fee goes to the DAO.

By the DAO deciding to register google.eth in Scenario 1, they have sacrificed the revenue ($80,000) in Scenario 2.

This is effectively their cost, $80,000 to register google.eth

The DAO now has $80,000 less because they registered google.eth

This price can never be known. The true cost to the DAO for the domain cannot be known, because no one knows what chad.squatter.eth or any other user would pay until they have paid. But this is just an inconvenience, unless there are so many registrations that it starts to hurt the ENS DAO’s revenue.

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Thanks @alisha.eth and @sat, it is a very good point. The DAO registering a name means 0 revenue, versus nonzero revenue for someone else registering it. And it’s true that it’s not “free ad infinitum” because there is a cap on funding.

Alisha also made the same point that I made above, that this is funding for just one term. The community can weigh the outcomes and decide to vote down such funding in the next term, if they want.

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Can someone please provide a list of names that they think should be “faired”, including examples from all intended use cases.

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You basically hit every point I wanted to make. As long as this mechanism is used for names which clearly define an established identity, and the names are disclosed, this seems like a great experiment — especially for bringing someone new into the ENS/Ethereum ecosystem.

Many commenters on Twitter seem unaware that a name in premium is a neglected registration. The intersection of (neglected registrations) and (names which ENSFairy should claim with DAO funds) should be small.

This mechanism should not be used for claiming names that fall into an existing, well-defined ENS name category, like 999, :nine::nine:, or any common first name.

Agreed, a list of names from the last 6-12 mos that would of been targeted by this method should be the next step.

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A million is insaine is there a happy meduim?

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@cory.eth

I addressed your question in the Ecosystem WG meeting. There is a list of specific names. but publicizing the names would compromise the ability to acquire them.

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