What is it and what it isn't
The ENS is a system that was created to provide shorter, more human-friendly names in place of long addresses, such as ethereum addresses or Swarm hashes that are often used in the ethereum ecosystem.
ENS is not a domain system: In the sense of internet domains, as managed by ICANN, ENS is not a domain system. While it can be used in a similar fashion on apps that replicate browser functionality, like Mist or Metamask, there is no claim on the ".eth" top-level domain system, which can only be managed by ICANN.
ENS does not grant a trademark or any sort of claim on ownership: registering an ENS name is a fully automated process and does not indicate ownership of any given trademark, copyright, brand name or any other kind of intellectual property.
This process is not a sale: ENS names are not sold or leased by any party or entity. While the process of claiming a name involves locking and/or burning funds, these processes were created to disincentive spamming and try to it make so that names are only claimed by users who will make use of them. All ether spent on the process is either given back to the bidder after some time, sent to a burn address or sent to a miner.
How the process works
The process of claiming a name takes five days and requires multiple transactions that are time sensitive and often irreversible, so it will be important for you to fully understand the process to ensure you do not irreversibly lose your ether.
Users start the process by opening a public auction for the name they want, which will send an alert that can be seen to anyone watching the blockchain for that specific name. After the auction is opened anyone who knows how to spell that name can bid on it in the next five days, by sending a transaction with the maximum amount they are willing to pay for the name. Bids are accepted until 72 hours after the initial auction opens. After that time, a 48 hour reveal phase starts during which, anyone who bids must reveal their bids (failing to do so will result in irreversible loss of funds).
The bidder who was willing to pay the most for the name will be the registrant, but they will only pay an amount equal to the amount of the second highest bid.
Once the auction process is finished, the user needs to finalize their name to complete the auction, after which they will be able to transfer rights of use to someone else, add a subregistrar (eg. mysubdomain.mydomain.eth) or add record types associated with the name (ethereum address, bitcoin address, swarm content, etc).
After one year, the registrant can release the name back to the market and retrieve the ether they deposited to the contract, if they so wish. After two years, it is expected that an updated version of the registrar will be deployed, which might require some sort of recurring fee, deposit or some other way to encourage unused names to be released back in the market.
What names are valid?
As names are hashed during the auction process to increase privacy, any name, string or file could, in theory be owned via this process. At this time, names that are shorter than seven characters are reserved until the system is more mature. If a user proceeds to registered, the name can be invalidated, which would result in irreversible loss of funds by the registrant.
What names are discouraged?
Names that use any character outside of alphanumeric, hyphen and underscore, while valid, are not guaranteed to be resolved by the wallet or client software. Users are discouraged from registering names with accented characters, non-latin characters, emojis or other type special symbols, etc.
How much ether is needed
The minimum amount required for a bid is 0.01 ether. When bids are revealed, any extra ether that was sent to mask the bid value will be returned in full. The auction registrar will apply some fees that are proportional to the bid value, in order to discourage spamming. See the following fees below:
- Non-winning bid: 0.1% is burned, 99.9% is returned.
- Once the auction is over, the winning bid is locked for at least one year: 100% remains in the contract until released.
- Bids that are not revealed during the 48-hour reveal period will be completely and irreversibly burned. The extra ether sent to the contract in addition to the bid amount, such as ether sent to mask the bid value, and an extra 0.5% of the bid value will be returned.
- Bids not revealed for more than 4 weeks are by definition invalid and can be cleared by anyone, even if the bid is still anonymous. In this case, the user doing the clearing will get 0.5% of the full deposit of the bid, and the remainder will be burned.
- Note that anyone can invalidate a name. If a name gets invalidated, 50% of the deposit will go to the user doing the invalidation, and the remaining amount will be returned to bidder.
- You are responsible for your own computer security and usage. Any consequence of the misuse of this code is your sole responsibility. No other party, nor any other entity can be held liable for any unintended consequence, loss of funds, illegal activity or any other issue that results from misuse of the code, use of the code for any purpose other than the intended purpose and any other "bad" usage of the code, including bugs in the current implementation. The full code can be inspected https://github.com/ethereum/ens but the deployment and usage of this piece of code is your own responsibility.
- You are responsible for your own actions. If you mess something up or break any laws while using this software, it's your fault, and your fault only.
- You are responsible for your own karma. Don't be a jerk and respect others.
For the avoidance of doubt, ENS is not responsible for any losses, damages or claims arising from, but not limited to:
- Mistakes made by the user of the code e.g., payments sent to wrong address, bidding of the wrong name, failure to reveal bids within time limits.
- Software problems, e.g., incorrectly constructed transactions, defective code, temporary disruption of service, malware affecting the ENS registrar and/or any related software or service.
- Security problems experienced by the user, e.g., unauthorized bid reveals.
- Actions or inactions of third parties and/or events experienced by third parties, e.g., information security attacks, and fraud conducted by third parties.
Risk of Loss
Bidding in the auction can lead to loss of value as described above. In addition, you can lose the right to a name if you do not take the correct steps to claim a winning bid or if there are intervening factors that impair you from claiming a winning a bid.