Permanent Registar Proposals - Overflow Funds, Fees & Rent, 3-6 Character Auction Start

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#1

The ENS team’s been discussing a number of open questions introduced here. Here are our proposals for -

  1. The use of overflow funds
  2. Implementing fees and rent
  3. The window between permanent registrar deployment and 3-6 character auction start

There’s also an ongoing discussion about reserving short names. That discussion’s happening here.

1. Overflow Funds -

For now, we propose that the ENS multisig holds all funds received. Nick’s spoken with Ethereum Foundation attorneys about potential tax implications. Holding the funds in the multisig won’t trigger a tax event, until the multisig transfers funds to an entity.

A tax event gets triggered when the multisig transfers the funds. The happens regardless of the ultimate recipient.

The funds are then counted as income for the “owner” of the multisig wallet. The “owner” must be designated in advance of the transfer.

It’s likely the designated “owner” would be True Names LTD. In this case, True Names LTD would become liable for paying taxes on the funds transferred from the multisig wallet.

This proposal gives us time to continue discussing how to use these funds. It also allows us to move forward with the implementation and stick to our planned timeline.

The approach will also provide insight into whether excess funds are even collected. If they are, we’ll also know approximately how much overflow exists.

We feel this approach provides us with more information to make a better decision, while introducing a negligible amount of risk.

2. Fees and Rent -

We propose a sliding fee scale, based on name length. As the number of characters decreases, the number of available names does too.

For example, there are only 26^3 = 17,576 3 character latin-alphabet names. Shorter names are likely to be more valuable than longer names, due to their relative scarcity.

The proposed sliding fee scale is -

3 characters - $640/year

4 characters - $160/year

6+ characters - $5/year

We propose the fee is paid in ETH. The ETH/USD exchange rate will initially be set using the DAI oracle. The oracle may change, if this becomes necessary in the future.

3. Window Between Permanent Registrar Deployment and 3-6 Character Auction Start -

We propose to target a 60 day window between the permanent registrar deployment and 3-6 character auction start.

60 days provides time for the permanent registrar deployment to settle. It also gives the ENS team a reasonable window to finish the Auction work.

We look forward to continuing the discussion in the comments :point_down:


Guide to Participating in the Permanent Registrar and 3-6 Character Auction Discussions
#2

Absolutely no reason to base the minimum fee scale on those of centralized solutions.

The suggested minimum fee, should probably be 1/10th of this proposal. What is the reasoning/study for this pricing scheme? Where do these numbers come from?
What makes them fair? Based on what assumptions. Why do we have to generate all these funds, what is the objective?

Not sure why the sliding scale is even being considered. What is the purpose? What does this mean for yearly recurring rent charges for keeping control of a name?

The ENS project was initially part of the core development, how is it now been converted to an outside, third party project? When I initially started to collaborate on the original project forums which seems like several years ago, it seemed much more of a community based project.

Regardless of what the plans are for fees, rents and overflow funds this pricing scheme is out of bounds. We should aim to keep any overflow funds to as close to zero as possible.

Alternatively come up with a plan/cost analysis for managing the ENS platform and burn any collected fees/rents/overflows just as we have been doing in the past that are above those needed in the cost analysis plan for operating the ENS system.

Thanks to Nick and the ENS collaborators for everything that has been accomplished.


#3

[quote=“rfikki, post:2, topic:797”]
The suggested minimum fee, should probably be 1/10th of this proposal. What is the reasoning/study for this pricing scheme? Where do these numbers come from?
What makes them fair? Based on what assumptions.[/quote]

The primary goal is to reduce the impact of squatting. $10/year was based on the traditional DNS model, where it seems to be a reasonable tradeoff between imposing costs on users and namespace pollution via squatting. With $1/year baseline, I’d be very concerned we’d see a large number of names snapped up.

The objective isn’t to generate funds (though paying for ENS development is a useful side-effect), it’s to impose a cost on registrants to discourage squatting.

The cost for shorter names was based on a factor of 4 increase for each shorter length, due to the limited availability of these names and thus increased impact from squatting. There are so few 3-character latin alphabet names that a single squatter could plausibly register and resell them all if the price were left at the baseline.

ENS was initially my personal project while working at the Ethereum Foundation. It’s since been spun out into its own organisation, funded by a grant from the EF. It’s still very much a community project. We’re not handing down orders from on high here; we’re seeking input, and ultimately we’ve got no power to enforce anything.

That’s an option the keyholders could take for any funds beyond those required for True Names’s operating costs. I’d prefer the funds go to a grant program that can encourage and further naming system adoption, though.


#4

I like what I see in #1.

#2 I see the point for $640 per year for a 3-letter and a high price for 4-letter because of scarcity. It will also create newsworthy “buzz” - 4-letter names could be more in line with the rent of 3-letter +/-$500/year.

5-letter names should probably be $10 ($20 max) each which would start to eliminate squatting.

6+ letters at $10 seems punitive but does not really affect me because I have what I need, but others will be put-off especially if we seek widespread adoption. Sometimes I can pick up domain for free with addition of other services and I see a similar fee just hindering .eth adoption unnecessarily.

$5 seems fair. Especially in light of some users will be using the domains differently than hosting sites, and more like a library of files, like smithfamily.albums.eth and supercharged.cars.eth. …

And finally, those who jumped in early like me who collected about 100 7+ letter names of which that might not go into service for a while hits me close enough to make it sting but not enough to let them go.

I hope we settle on $5 per year for early adopters or all 7+ letter names. That still pinches the budget. How about grandfather clause for early adopters?

As I have stated before, for some squatter seeking to capture “valuable” names these fees do nothing to dissuade them, it just makes them easier to clear the field of anyone else that may try to acquire them.
now Scott.eth is out of my budget, but Kimberly-Clark, Scotts Miracle-Gro Company, and Scott Sports SA can fight over it @40/year. Although my gut says those three companies are not paying attention to Ethererum yet and a squatter/investor will get it anyway and hold it for ransom/to make a profit.

#3 60-days passes pretty fast.

That’s just my tenfinney.


#5

@nickjohnson I’d like to see the funds go to a grant program that can encourage and further naming system adoption. You might also be able to qualify for tax exempt status and still be able to pay your staff.

In the US, Section 501 c 3 allows for federal tax exemption of nonprofit organizations for those that are considered public charities, private foundations or private operating foundations. (Private operating foundations is the key here)

I don’t know what your local rules are but the lawyers/accountants can clarify as long as they know the facts.

Holding the funds in multisig and also paying out grants, salaries, and admin/legal costs likely keep the funds tax-free even if they are separated from the wallet. Not legal advice, but worth exploring.


#6

In case it wasn’t clear earlier - owners of existing names will have 1 year’s free registration, but thereafter will have to pay for renewals just like any other user.

I’m inclined to agree that reducing the fees by 1/3-1/2 might be reasonable; this brings fees for longer names in line with what mass registrants are likely paying via wholesale schemes on DNS, rather than with retail prices.

I’d rather not special-case names based on when they were registered - that adds complexity to the system, and provides an incentive for a pre-deployment ‘land rush’.

True Names is registered in Singapore and is a Company Limited by Guarantee. That means it can’t pay out dividends (and so is a nonprofit), but in order to be tax-free in Singapore, it has to engage exclusively in a “charitable purpose”. Unfortunately, internet infrastructure doesn’t seem to qualify as a charitable purpose in Singapore.


#7

The primary goal is to reduce the impact of squatting. $10/year was based on the traditional DNS model, where it seems to be a reasonable tradeoff between imposing costs on users and namespace pollution via squatting. With $1/year baseline, I’d be very concerned we’d see a large number of names snapped up.

The traditional DNS model is based on centralized registrars, competing against other centralized registrars. That is not the case with ENS. Once it (ENS), becomes ubiquitous it will most likely be the only game in the ethereum space. Traditional DNS systems are making a profit at the approx $10.00 fee. Which by the way, is the same fee regardless of # of chars as to name length. Additionally the traditional systems are employing persons for customer service, paying for mass marketing, and other costs that ENS most likely not have to contend with. Not sure, why $10.00 was set for the minimum fee. Like I stated, we should realistically be talking about a fraction of the cost of traditional services.

What analysis has been done to determine the total possible fees/rents and the amount that could be overage/overflow? My personal view is that this proposed system will generate multitudes of the actual amount needed to run the ENS system into the overflow wallet. I would rather that amount be burned so that all ether holders benefit from the burn. I have no problem with keeping a small additional percentage in the order of 10% or so above what is needed for managing ENS to be placed in some vehicle to further adoption, etc.


#8

Again, the goal here is not to set the price based on a desire for profit (True Names is nonprofit), or based on anticipated operating costs. We explicitly don’t want to base registration costs on that, because the primary purpose of a registration fee is not to generate an income.

The primary goal here is to set the price at a level that discourages land-grabs and squatting. The only viable information we have to work with here is registration fees and rates in the traditional DNS world. From this we can see that fees in the range of $10 seem to work fairly well at keeping DNS squatting under control - though I agree now that we could likely go lower than this and have equivalent deterrent value, as DNS squatters likely benefit from reduced prices for wholesale registration.

We also have an example at the other end to work with: .xyz have often reduced prices to around $1/year, and as a result the .xyz namespace is heavily polluted with speculative registrations.

This is extremely difficult to determine, and basically comes down to speculation. With existing registrations on the order of 300k, and no reason for a sudden inrush of new registrations, an upper bound would be $3M/year under a $10/year fee schedule, but we should expect a lot of these names to be deregistered, as they were registered with the knowledge that the deposits could be recovered at no cost if the name was unwanted later.

For shorter names, we have even less data; we have no real way of knowing how many people will register under the new fee scheme.


#9

ENS was initially started in the gitter forums around mid 2015 by one of the core devs I believe it was Viktor Trón also known as @zelig . I was one of the regular posters and attempted to discuss the possible implementation of ENS. I agree that you at some point became very instrumental and build out the ENS system. But, initial discussions for the system in the forums were started by the @zelig with many others providing input. I do want to thank you for all you have done to contribute and deliver our current ENS system.


#10

$10/year for 7+ letter domains is unfair in my opinion. Does this apply to names that are already registered? I’ve purchased different domains for testing purposes only and would not have purchased them knowing I’d end up having to pay rent on them. I can understand a charge for shorter more valuable domains but I don’t think there should be rent on 7+ letter domains.

Additionally, I think this will hinder ENS adoption, as there is virtually none at this time.


#11

Unfortunately, no one will ever be happy having to pay for things they think they can get for free. I am no exception. The nice thing here is that anyone can take the existing open source code and develop a free register of those exact names market the heck out of it in hopes that this new free service is able to succeed in resolving the names.

I am inclined to support this ENS system because of the head-start and inter-relationships in the Web3/Swarm/Status community that is trying to wrap up these service to work together nicely.

For someone (most people, not speculators) that only care about a few domains, $5-$20 per year is not oppressive, but $5/year seems right for the stage we are at. Higher prices for 3-letter (super-premium) & 4-letter (premium) and maybe 5-letter (star).

At some point sub-domains of great .ETH names will be available for free to help drive user-adoption domain holders dApplication/Dapplication/Dapp/dApp anyway.


#12

I’m afraid you’re mistaken. I was the initiator and main architect of ENS, though other Ethereum-based naming systems existed before it came about. I briefly worked on the Swarm team under Viktor, and worked with his team on integrating ENS and Swarm.

The current plan is that existing name owners will get a year’s free registration, after which they can either relinquish the name or start paying rent.

Today, in fact - on now.ens.domains.


#13

Well, initial discussions gathering community input surrounding ENS and domain registrars was started as I stated back around the middle of (Aug) 2015. See here: https://gitter.im/ethereum/go-ethereum/name-registry?at=55defaedd7a6fe28762a836a, I am not claiming that you did not built the current ENS system at some future point.


#14

Right; that was namereg, which bears no connection to ENS except that both are trying to solve a similar problem.


#16

I don’t see ENS domains being mass adopted for a long time, largely in part because ETH adoption is still in infancy. I believe rent will hinder this too. Is it possible to hold off on the rent until there is more mass adoption? At least on 7+ letter domains?


#17

While I think there’s a valid conversation to be had about rent levels, evidence from other naming systems shows that without any rent cost, we will see massive numbers of speculative registrations. The net effect of this is to transfer money from legitimate users to squatters, and in the worst case, strangling the system in its crib.


#18

What is the problem with transferring money from legitimate users to speculators? As an example, this is incredibly commonplace in financial markets and also results in a very healthy price discovery system.

How would squatters “strangle the system in its crib”?


I have to wonder if the best solution is to make it so it is easy to buy domain names (trustlessly) from squatters (perhaps via fixed price or auction). Then we can just let squatters buy up all of the domain names and sell them off at market rates (which will change over time and the speculators can adjust while automated systems cannot).


#19

Because the goal of a naming system is to allocate names to their ‘best use’ with as little overhead as possible. Speculators extract all the value for themselves, forcing registrants to pay inflated costs.

By registering the vast majority of useful names and demanding high prices for them, to the point where legitimate users either have to select less useful names, pay the squatters, or (more likely) abandon the system entirely. This is the sort of problem that has affected other decentralised naming efforts such as NameCoin.

Why would you allow squatters to extract massive amounts of unearned rent from legitimate registrants? What legitimate value do they add to the system to justify that?


#20

Same purpose speculators serve in financial markets and ticket scalping, efficient and competitive price discovery that can adapt over time (unlike any pricing system that we can come up with). I believe it is impossible for us to define a price or pricing algorithm today that will hold up indefinitely. I would be surprised if we could even define a price today that is close to efficient other than perhaps by sheer luck. While I understand the desire to avoid squatters, they are very good at efficient/competitive price discovery and can adapt over time.

The primary argument I can see against this is that names are non-fungible, unlike financial instruments and less fungible than event tickets. This lack of fungibility may make it so speculators here are not as efficient as financial instrument speculators, but I would also argue that any price setting scheme we can come up with will similarly be worse at price efficiency because our system will be valuing all similar looking names (e.g., all 5 character names) equally while speculators will not.

Ultimately, whatever price we set will be too high for some portion of names (more than necessary to stop squatting), and too low to stop squatters for the rest. You’ll have some narrow band of names that are appropriately priced while the rest are not.

All in all, I’m dubious about the whole idea of trying to stop squatting/speculating as I think it cannot be done while still enabling/encouraging legitimate users, so I’m proposing “what if instead of fighting them, we enable them so the market can be efficient and have a nice UX?” As an example, imagine a marketplace for names where anyone could buy/sell a name easily. Squatters could buy/sell names among each other during price discovery until eventually a legitimate user shows up and buys the name, at which point it would go off the market…


#21

They’re not efficient in a naming system, though. An ideal naming system has zero cost and allocates all names to their ideal use. A maximally inefficient system charges each user the maximum they are prepared to pay for the name. A system run by squatters is far closer to the latter than to the former.

Names are not intended to be assets. We can’t prevent people treating them that way, but it’s not my desire to make a system to make people money - the goal is to provide a useful naming service instead.