Liquidity Analysis Are Web3 Domains Truly Tradable Assets

The promise of Web3 domains extends beyond digital identity and naming—it is rooted in the belief that these domains are valuable, tradable assets, akin to non-fungible tokens or traditional real estate in the digital realm. As the market for decentralized domains matures, questions about their liquidity—how easily they can be bought, sold, or exchanged for value—have taken center stage. While the infrastructure for trading Web3 domains has advanced significantly over the past few years, especially with integration into NFT marketplaces and wallet UIs, the actual liquidity picture is more nuanced and depends heavily on protocol, market dynamics, user intent, and economic models.

At a technical level, Web3 domains are architected for transferability. Domains on Ethereum Name Service (ENS) are minted as ERC-721 tokens, meaning they are natively supported by nearly every NFT marketplace, including OpenSea, LooksRare, and Blur. This gives them immediate visibility and accessibility to Ethereum’s vast NFT trading community. Similarly, Unstoppable Domains mints their domain assets as NFTs on Ethereum and Polygon, with some support for Solana and BNB Chain through bridging or multi-chain minting. Handshake domains are not tokenized in the same way but are still transferable via native blockchain transactions and are increasingly supported through wrapped versions or escrowed trading interfaces. These structural decisions enable listing and ownership transfer, but liquidity depends on more than the ability to transact—it hinges on demand depth, price transparency, and market confidence.

Market data from 2025 shows that while ENS domains have relatively high visibility, only a small percentage of registered names trade with frequency. Of the 6.4 million active ENS names, fewer than 4 percent changed hands on secondary markets in the last twelve months. The most liquid ENS names are typically short, generic, brandable words, such as finance.eth or game.eth, or numerical combinations like 1234.eth, which are coveted for speculation and brand-building. These domains often trade hands multiple times, with certain names appreciating in value over time as they accrue attention or utility. However, the vast majority of ENS domains are thinly traded, with infrequent bids and low buyer activity outside of name-sniping bots and collectors. Price discovery is difficult, as valuations are subjective and depend heavily on perceived prestige, keyword relevance, and integration history.

Unstoppable Domains reports a higher volume of lifetime purchases—over 9 million domains minted—but secondary trading activity remains largely siloed within their own platform or associated resale portals. Unlike ENS, which relies on decentralized and open marketplaces, Unstoppable often handles domain issuance and resale through a centralized interface. While this makes for a more user-friendly buying experience, it limits external price signaling and open-market liquidity. Furthermore, Unstoppable’s promise of “lifetime ownership” without renewal fees has led to domain hoarding, where users buy dozens or hundreds of names with speculative intent but no intention of ever reselling them. This inflates the total market cap of the domain space but dampens actual circulation, resulting in a large pool of dormant assets.

Handshake domains occupy a unique corner of the market, where liquidity is influenced more by TLD ownership than subdomain sales. Handshake auctions for TLDs like .art, .app, or .meta attract early adopters and infrastructure builders, but resale liquidity is fragmented. While some TLDs are being monetized through subdomain leasing or whitelabel registries, the market for TLD resales is underdeveloped, with few standardized platforms for pricing, escrow, or marketing. Efforts to wrap Handshake domains into Ethereum-compatible NFTs have improved tradability, but the overall liquidity remains limited to niche communities and over-the-counter negotiations.

Another key factor affecting liquidity is the lack of standardized valuation models. Unlike fungible tokens, which are priced based on liquidity pools and order books, or NFTs like profile pictures (PFPs), which often derive value from community status and rarity traits, domain names are context-sensitive assets. The value of music.eth depends on whether it’s used by a major artist, held in speculation, or integrated into a dApp. This fluidity complicates automated pricing and makes floor pricing misleading. Some tools have emerged to estimate domain value based on historical sales, keyword popularity, and usage metrics, but these tools are still rudimentary compared to those available in traditional crypto markets.

Moreover, liquidity is constrained by the behavioral patterns of domain holders. Many Web3 domains are registered not for resale but for active use—as wallet aliases, decentralized website addresses, or identity anchors. Once a domain becomes embedded in someone’s on-chain presence or social media profile, it gains personal and utility value, which disincentivizes selling even in a bull market. This contrasts with PFP NFTs, which are often bought and sold with investment returns in mind. As a result, the circulating supply of tradable Web3 domains is lower than registration figures might suggest.

Protocols are experimenting with solutions to improve liquidity. ENS subdomain markets are emerging as a way to generate recurring income from premium names, creating cash flow even in the absence of resale. For example, owners of dao.eth can lease subdomains like treasury.dao.eth or devs.dao.eth to projects and contributors. These arrangements, often enforced through smart contracts, introduce a new layer of economic utility and may increase the overall attractiveness of holding and trading domains. Similarly, Unstoppable Domains is developing social and verification layers that tie identity reputation to domain ownership, which could make domains more attractive as long-term identity assets with embedded value rather than one-time tradables.

Cross-chain compatibility is also playing a role in liquidity expansion. With growing support for domain bridges and multi-chain resolution, domain names are becoming portable across ecosystems, enhancing their value proposition and appeal to a broader range of users. ENS names can now be used in Layer 2 solutions like Arbitrum and Optimism, and Unstoppable supports domain-linked identity on Polygon, Solana, and beyond. This interoperability increases potential buyer pools, which in turn boosts market liquidity—though not to the level of fully fungible tokens.

In conclusion, Web3 domains are technically tradable and increasingly treated as digital assets, but their liquidity remains uneven and protocol-dependent. ENS names, particularly those with high visibility or utility, exhibit moderate levels of resale liquidity supported by open NFT marketplaces. Unstoppable Domains benefits from higher user adoption and transaction simplicity but suffers from closed ecosystems and speculative accumulation. Handshake offers deep-root infrastructure ownership but lacks vibrant resale markets. The result is a market where tradability exists in principle but is constrained in practice by fragmentation, subjective valuation, and limited demand for mid- to long-tail assets. For Web3 domains to become truly liquid assets, more work is needed in the areas of price discovery, protocol interoperability, utility-based valuation, and standardized marketplaces that can capture the full complexity of this emerging asset class.

The promise of Web3 domains extends beyond digital identity and naming—it is rooted in the belief that these domains are valuable, tradable assets, akin to non-fungible tokens or traditional real estate in the digital realm. As the market for decentralized domains matures, questions about their liquidity—how easily they can be bought, sold, or exchanged for…