© Reuters / FLORENCE ARCHIVE Fig. Image of non-fungible token (NFT)Lisa Pauline Mattakal and Meda Singh
(Reuters) - A new craze for trading NFTs, whose names are bought and sold for staggering sums, is providing multibillion-dollar relief to speculators reeling from the crypto winter.
"Domain" names like coin.crypto (which sold for $100,000) and beer.eth (which made $39,000) are a new generation of NFTs that owners can use for the 16 random numbers that make up their digital wallet, and to replace the letters . addresses.
The crypto equivalent of the number may sound like a lot of money, but supporters say the names could become valuable real estate in the coming years with the advent of Web3, a much-touted blockchain-based vision of the future of the Internet. .
Right now, this alternative asset trading market offers a rich and risky opportunity for some investors who buy buzz domains to sell on the secondary market for profit on NFT platforms like OpenSea.
"We have domain names starting at $5, some selling for up to $100,000," said Matthew Gould, CEO of Unstoppable Domains, which sells names ending in .crypto, .nft and .wallet.
"The theory is that there is some difference in perceived value between different words and lengths."
The company has recently made several high-profile deals, with wallet.crypto selling for $250,000 in April and Earn.crypto selling for $100,000.
Meanwhile, .eth names created by the Ethereum Name Service (ENS), the domain's largest seller, were the fourth most traded NFT type on OpenSea in September, with total volume up 75% from the previous month at $12.5 million . .
ENS domain names are second only to NFTs (non-fungible tokens) from well-known collections such as CryptoPunks and Bored Ape Yacht Club. Trading in the relatively new asset has grown rapidly, even as the crypto winter has begun in the NFT market.
According to Dune Analytics, the number of monthly .eth domain name registrations rose to more than 433,000 in September, a 12-month high and a 5,000% year-over-year increase.
According to experts, the most valuable domain names are names with short, simple English words, Web3 or pop culture terms and numerical sequences, such as crypto.nft or 000.eth.
WHAT IS YOUR NAME?
However, cryptographic domains are still in their infancy. There is no guarantee that they or Web3 will deliver on their promise, while the highly volatile nature of the crypto and NFT markets suggests danger for the unprepared trader.
The Block Intelligence report says there are also many questions about the scalability of the technology and the potential for confusion as competing domain providers issue identical names, which could lead to misdirection of funds.
Sacha Fleischmann, a portfolio manager at Los Angeles-based investment firm Arca, said the popularity of domains is likely to grow as cryptocurrencies grow in popularity.
He added that the 16-digit alphanumeric addresses used for digital wallets are "not exactly user-friendly, especially for people who don't speak the language of cryptography."
In a sign of investor confidence that digital assets tied to .eth domain names will continue to grow, the ENS project's cryptocurrency surged nearly 90% in the third quarter to $15.92, though it's still a long way from the stock market's $40. . . At the start of the year, Bitcoin ended the quarter essentially flat as it struggled to hold above $20,000.
However, many market participants warn that valuing a domain name is difficult because it means making speculative bets on what demand might be in the future.
According to Fleishman, this undermines the possibility of institutional investing.
"In terms of funds, it's quite difficult to make a fundamental investment in certain domain names," he added. "It's not up to us to decide which domains will have value and which won't."
(1 Ether = $1330.20)
(Reporting by Medhi Singh and Lisa Pauline Mattakal in Bangalore Editing by Tom Wilson and Pravin Char)