Translating Our Investment in Kodex
“If you want to get people to do something, make it easy. Remove the obstacles.”
– Professor and Nobel Laureate Richard Thaler
Despite our species’ capacity to build skyscrapers and aluminum tubes that climb to the heavens sky, we can hardly remember a character string longer than a phone number.
In the early days of the web, engineers knew this, and implemented the domain name service (DNS) that translates words into an IP address. Google.com is significantly easier to remember than it is 172.217.5.4. Fast forward, and today there are 342 million registered domain names.
As crypto was invented, a similar service called Ethereum name service (ENS) was implemented to translate a .eth domain into a public key, a string of 48 characters that’s randomly generated as you create a wallet. It’s a lot easier to remember heltzer.eth than 0x829D2ed63b5E07226A5AA116f5EC795855e7CCd4. ENS is a newer but critical catalyst to usher crypto into the mainstream by increasing usability.
As the web grew, a domain economy emerged with it. Companies like GoDaddy and Register.com and many others managed the buying, renewing, managing, and auctioning aspects of owning a DNS domain. In 2022, IBISWorld projects that domain name sales in the US alone will reach $6.7B, and an MIT study valued the global market at $8B, with $2B in secondary resale alone.
In the blockchain world today, the domain economy is nascent. OpenSea can process eth domains, but the platform is built for visual NFTs traded by consumers. You can register a new domain at ens.domains, but it doesn’t have a marketplace.
One important distinction between DNS and ENS domains: ENS domains adhere to the erc721 standard and are NFT tokens with associated smart contracts. This means that the blockchain can transfer an ENS domain instantly with counterparty assurance and no legal work. In contrast, DNS domain transfers have friction, with larger deals descending into month-long affairs with legal work, escrow agents, and drama. The consequence of this lack of transactional friction is that ENS domain trading should result in more liquidity as total volume climbs. The standard also accommodates leasing URLs, which should add to the volume.
Kodex is prepared for this revolution. One of the co-founders was recruited out of his astrophysics program to become a proprietary trader, following a history of trading crypto while he was in high school. The other is a respected crypto pioneer and venture investor. They were both early ENS domain speculators, collecting and trading hundreds of .eth domains apiece in college. It became clear to both of them that the infrastructure that exists for DNS would be needed in web3, and the impact of ENS domains being on the blockchain meant that trading was possible, so those tools would be demanded by the market. So they built Kodex, which recently entered a public beta.
We are in the early days of ENS, yet 2.2 million .eth domains have been registered already. Other blockchains have their own naming system and others are planning such, and Kodex is poised to include them too. What’s more, ENS is evolving to be an identity standard, where along with your crypto wallet, you will be able to log in to dapps, but now identified by your ENS domain.
We are excited to partner in Kodex with co-founders James and Max, and with several funds with blockchain and web3 expertise: Sfermion, CMT Digital, and Castor Ventures.
