Why the ENS Battle Over Eth.Link Matters

ENS Labs, the team behind the critical piece of wallet linking infrastructure Ethereum Name Service, has finally settled with its would-be challenger Manifold Finance over access to the all important eth.link domain name.

As part of the settlement, ENS has apparently agreed to a non-disparagement clause with Manifold, restricting what it can say publicly about the 18-month legal battle over the domain name, which served as a critical gateway between Web3 and Web2. But just because ENS can’t comment, doesn’t mean I can’t.

Manifold is a middleware blockchain firm that most people have only heard of because of the now nearly-resolved lawsuit involving ENS. While the project certainly had a legal claim to eth.link after paying $852,000 in a Dynadot auction in 2022, the better move would have been to simply relinquish control over the domain after discovering the circumstances under which it was put up for sale.

“http://eth.link was just sniped by us,” Manifold wrote on Twitter/X in 2022. It's not clear if the company ever actually took possession of the eth.link service, or what they intended to do with it, because ENS, after realizing it lost access to this critical gateway successfully obtained a preliminary injunction from a federal district court judge in Phoenix, Arizona to stop the transfer and return the domain.

This itself opened up a period of litigation that had been “proceeding slowly through the courts,” ENS Labs CEO Nick Johnson wrote in a recent DAO proposal regarding the settlement. Slow and almost certainly unnecessary litigation — given that Manifold never really had a moral claim to the service.

ENS Labs has been operating eth.link as a public gateway for the Ethereum community since 2017, providing a way for traditional web services to access on-chain ENS and IPFS data, which is otherwise incompatible with the DNS (or domain naming service) architecture behind traditional websites.

ENS lost access to eth.link because the domain name was registered by Virgil Griffith, the Ethereum Foundation developer and former ENS employee who was arrested after giving a lecture about public blockchains in North Korea and unable to renew the registration while serving a 63 month sentence.

There’s an extra wrinkle in that the eth.link name, originally registered with internet registrar and hosting company GoDaddy, was supposedly valid until July 2023, according to the ENS lawsuit. Allegedly, GoDaddy “unilaterally” determined the domain had expired after it was not renewed in July 2022, a year before its actual expiration, and unlawfully sold it to Dynadot that September.

“In so doing, GoDaddy has deprived Plaintiff True Names Ltd. of its livelihood,” the ENS complaint alleges. “The sale will disable a valuable cryptocurrency network and recklessly risk making it available to scores of malicious actors.” Further, ENS alleges it should have been allowed to re-register the domain on Griffith’s behalf, according to GoDaddy’s terms-of-service ENS cited, but GoDaddy failed to “respond to multiple requests.”

It isn’t exactly Manifold’s fault that the name was put up for auction — and to its credit, Manifold did offer to return the domain for price, a move that sits halfway between domain name squatting and extracting rent. Further, it’s not exactly clear that ENS had to bring Manifold into its lawsuit, which was really centered around GoDaddy’s practices. (Neither Manifold and ENS responded to a request for comment.)

The whole situation, in a way, is unsportsmanlike. Manifold at multiple points seems to have been taunting ENS, once posting on Twitter/X that ENS is “Literally suing us under torts Unfair Competition. We are so good at it that its unfair.” Manifold also filed a motion to dismiss the lawsuit and vacate the preliminary injunction returning eth.link to ENS, a bold move to keep possession of the domain.

Now the ENS community will pay $300,000 (on top of ENS Labs' $750,000 in legal fees) to Manifold to settle the matter. While the crypto industry is long past the phase where ideological commitments and overriding beliefs would keep disputes outside of the courts, the whole debate does raise questions about what is actually unfolding.

In a recent interview with CoinDesk, Johnson noted that Web3 cannot naively turn its back from the wider web, which is why ENS is partnering with GoDaddy while still technically fighting the company in court. This is true enough, which is why the eth.link name matters at all — having bridges between blockchains and the traditional web is invaluable.

But the sordid affair is not the last time ENS would threaten legal action over ownership of intangible assets. To be fair, any project as important as ENS — the go-to way to create human-readable names out of alphanumeric blockchain addresses — should look to protect itself. But as a matter of principle, two registered corporations duking it out in the courts doesn't exactly scream decentralization.

There is a silver lining in that this dispute shows DAO governance in working order. The settlement was put to a vote by the ENS community, with 88% of the voting power in agreement over the settlement and 84% approving the reimbursement of ENS Labs’ legal expenses. But in an odd way, this public vote is also a detriment to ENS’s litigation strategy.

Only 11% of the DAO’s voting power wanted to continue litigation. As DNS expert Andrew Allemann wrote in Domain Name Wire, with ENS still needing a to finalize its settlement with Manifold before dropping the case against GoDaddy and Dynadot, “Manifold will be in a strong position to get the terms it wants, given that the DAO publicly opposed continuing litigation.”

In a better world this lawsuit would help prove the value of and need for decentralizing digital identities — but in the end it looks like centralized entities all the way down.