When the time is right, old trees can bloom anew.

Yesterday, the ENS (Ethereum Name Service), which has been quiet for a while but remains a favorite of Vitalik, announced its V2 version on its official Twitter account: extending the existing domain service to L2.

With the anticipation of the ETH ETF approval, ENS tokens have surged by 60% in the past month. Leveraging this momentum to launch new products seems like a logical choice.

What benefits and impacts will supporting various ENS domains on L2 bring? We reviewed the new ENS technical whitepaper to find the answers.

Why support L2?

ENS (Ethereum Name Service) has evidently observed the current decrease in activity on the ETH mainnet and the increase in L2 (Layer 2) activity, which is one of the main reasons for its strategic shift.

Moreover, ENS has supported CCIP-Read in its technological developments over the past few years. CCIP-Read allows querying off-chain data during the ENS name resolution process. This means that name resolution is not limited to on-chain data but can also fetch data from other systems, including L2 and external databases.

In simple terms, CCIP-Read provides your domain name with more possibilities and choices. You can freely decide where to resolve and manage your domain names, no longer being confined to the Ethereum mainnet.

Technically, the ability to manage domains on L2 combined with the trend of user migration helps explain ENS’s motivation.

More importantly, the Ethereum mainnet (L1) has become a bottleneck for ENS expansion due to its high transaction fees and limited processing capacity. Every registration, renewal, and update operation on ENS requires paying high gas fees, which not only increases the burden on users but also limits the adoption and application of ENS.

With ENS V2, users can delegate domain resolution to L2 or other external systems. This allows them to enjoy the low costs and high speed of L2 while choosing the most suitable solution based on their needs.

ENS V2: Lower Fees and More Flexible Domain Services

To understand how ENS V2 achieves its improvements, we need to look at its core components.

ENS (Ethereum Name Service) allows you to map complex Ethereum addresses (e.g., 0x1234…abcd) to simple, memorable names (e.g., alice.eth). This means that when you want to send cryptocurrency to someone or interact with a decentralized application (dApp), you only need to remember a simple name instead of a long string of characters.

But what powers all this?

Registry

The registry is a place where all domain names are recorded. It tells you who owns a particular domain name and the address of the resolver responsible for resolving that domain name.

Resolvers

When you enter a domain name, the resolver is responsible for converting it into the corresponding Ethereum address or other resources (such as IPFS content hashes).

Registrars

Registrars are entities responsible for allocating and managing domain names. They ensure that domain names can be registered, renewed, and updated.

In ENS V1, all these components ran on the Ethereum mainnet, meaning that every time a domain was registered or updated, users had to pay high transaction fees (Gas fees). This not only increased costs for users but also limited the adoption of ENS.

ENS V2 brings several improvements to these key components to address the issues in V1 and enhance the system’s flexibility and scalability.

New Layered Registry Architecture

In ENS V2, the registry is designed as a layered structure. Each domain has its own registry, responsible for managing its subdomains and resolvers. The benefits of this design include:

• Support for Name Expiry: When a domain name expires, it immediately disappears from the registry, reducing management complexity.
• More Efficient Subtree Management: It allows for recursive replacement or deletion of entire subtrees, making it more efficient to manage multiple domain names.

Universal Resolver

ENS V2 introduces a universal resolver that simplifies the domain resolution process. Users only need to call a single resolve method, and the resolver handles all the internal logic. This not only simplifies the client implementation but also provides a convenient migration path, allowing existing users to smoothly transition to the new system.

Support for Layer 2 (L2)

ENS V2 allows users to delegate domain resolution to L2 networks or other external systems. This means users can benefit from the low fees and high speed of L2 solutions while choosing the most suitable option for their needs. This change significantly reduces transaction fees, enhances system capacity, and improves the user experience.

How to migrate to V2?

With the launch of ENS V2, users are provided with more efficient and cost-effective domain services. This may likely lead to a rush for domain registrations on L2, similar to what was seen in the past. However, to enjoy these new features, existing ENS users need to migrate their domains from V1 to V2.

According to the official technical documentation, the ENS team will deploy all ENS V2 contracts on both L1 and L2. These contracts will initially be granted temporary permissions, such as disabling registration and renewal functions, to ensure a smooth migration process.

Migration Steps:

Initial Deployment and Sync:

After the initial deployment, the first synchronization will take place. This will create entries for existing .eth second-level domains (2LDs) on L2 and transfer ownership of these entries to the migration contract.

Migration Options:

Migrate to L2:

Users transfer their ENS V1 names to a system contract, which then creates or transfers the ENS V2 name to the user on L2. During this process, the L1 domain resolver will continue to reflect the status of non-migrated names to ensure no resolution interruptions.

Migrate to L1:

Users can choose to keep their domains on L1 for enhanced security and availability. The migration process is similar, ensuring that the resolver and registration information on L1 are synchronously updated.

Through these steps, ENS V2 provides a smooth migration path, allowing users to transition to the new system easily and benefit from lower fees, higher speeds, and more flexible domain management functions.

However, the current migration roadmap is still in the planning stage, and the exact execution timeline will depend on the official announcements.

Implications and Market Impact:

Domain services are not currently a hot sector, and the recent price increase of ENS is largely driven by the ETH BETA narrative. With product updates and more collaborations with L2s, there are additional reasons to extend this BETA cycle. Migrating ENS to L2 reduces domain registration costs and increases speed, potentially sparking a new wave of domain registrations. Lower registration fees may encourage more users and developers to secure their desired domains, expanding the ENS user base.

Additionally, the launch of ENS V2 could be a catalyst for an increase in the price of ENS tokens ($ENS). Lower transaction fees and higher system efficiency will attract more users and developers to use ENS services, thereby increasing demand for $ENS. As ENS expands on L2, more use cases and integrations will emerge, enhancing its value capture effect.

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