The Crypto Domain Valuation Conundrum: Factors and Formulas
Crypto domains are more popular than ever. In 2022 alone, a record 2.8 million .eth domains were registered. Experts predict this figure to increase in the coming years. If you’re looking to get into the game of crypto domain investing, there are a few things you should know regarding valuation.
In this article, we will look at certain factors and formulas to get the valuation right.
Factors Affecting Crypto Domain Value
Not all domain names are created equal. Some are more valuable than others. That’s the case with crypto domains. For example, of the 2.8 million .eth domains, some will fizzle out, but some will rule the roster. There are certain factors that will help pick the winner.
1. Memorability and Brandability
Presently, the immediate use case of blockchain domains is to act as a payment gateway. Users can send and receive payments from their Web3 domain names.
A standard crypto wallet address looks like this: bc1qxy2kgdygjrsqtzq2n0yrf2493p83kkfjhx0wlh. Needless to say, the sender will have a hard time sending over the payments by manually entering the address.
Just like domain name services (DNS) connected to IP addresses, domain names will connect to wallet addresses. And the domain names that will be memorable will carry more value. Think of apple.eth. If Apple ever decides to set up a crypto wallet and get a domain name for it, what would it choose?
You can go for similar domain names that are brandable and easy to remember. The name 000.eth was sold for 300 ETH, which is around $667,290.
But be aware of going after crypto domain names that match trademarks. That’s called cybersquatting and can lead to disputes.
The TLD or top-level domain plays a vital role in the popularity of the domain name. In the Web2 world, .com reigns supreme, followed by TLDs like .net, .org, and .io. In the Web3 world, for now it’s .eth that leads the pack. So, domain xyz.eth is perceived as more valuable than xyz.maya. So opt for crypto domains that are backed by a strong TLD.
3. Trends and Popularity
Trends affect the value of any asset. During an uptrend, the value of the associated assets shot up. The opposite during a downtrend. So, when valuing a crypto domain, it makes sense to look at trends and popularity of the domain name.
You can start off with Google Trends. It reveals how popular a particular keyword or phrase is. You can select the timeframe and get an idea of the evergreen topics and keywords. Crypto domain names associated with those keywords can turn out to be a gold mine.
4. SEO and Search Traffic
Google doesn’t yet index crypto domains. So why is SEO and search traffic important?
That’s because Web2 domain names are being mirrored into Web3 crypto domains. Some services like WebUnited enable anyone to mirror their Web2 domain name into a Web3 domain. The Web3 domain is then minted into the blockchain.
The Web3 domains mirrored from Web2 domains with substantial SEO and search traffic will have more value. Consider SearchEngineLand.com. How valuable will be SearchEngineLand.eth if the team at SEL decides to mirror their domain into the Ethereum blockchain? Very valuable indeed.
Thus, consider the SEO and search traffic potential when valuing crypto domains.
5. Age and History
In a Web2 setting, aged domain names carried more value than brand-new ones. While it’s less clear whether that’ll be the case for crypto domains, it makes sense to go after aged crypto domains, the ones that have been on the blockchain for quite some time.
This will ensure the domains aren’t fraudulent and there’s some stability behind it. Look at its history and change of ownership as well.
The world of the crypto domain is still new and evolving. And there’s no clear set formula to get a winning domain. However, you can employ the above factors when purchasing a crypto domain and increase your chance of success.