Sui Name Service (NS)big pump – a burst of project potential or a flash in the pan?

Author: Luke, Mars Finance

Introduction

NS tokens surged by 103% in just one hour, breaking through 0.43 USDT, followed by a slight pullback, currently at 0.38 USDT. This wave of increase has attracted widespread attention and surprised many retail investors: why did a relatively unknown blockchain domain token suddenly become the market focus? This article will delve into the technical advantages and economic model of NS, compare it with Ethereum Name Service (ENS), and finally discuss whether the blockchain domain track has investment potential.

The surge triggered by Whale Clearing

The surge of NS is not entirely driven by the token economic model, but by the fund operation of whales, which is quite similar to the past GameStop incident. At that time, whales quickly created a short-term craze in the market through massive replenishment and airdrop positions.

A certain whale will invest funds in the Navi platform in early 2025 and use NS as collateral for loans, while engaging in short selling on the exchange. The whale first lends NS and sells it short, then uses the proceeds to repay the loan and re-mortgage NS, forming a continuous cycle of fund operations. However, the space for such operations has gradually dried up. If other investors start withdrawing their NS on Navi, the whale's short position may face rapid liquidation.

According to on-chain data, the sharp rise on February 20th was precisely due to a whale or a group of whales attempting to cover short positions and repay loans by repurchasing 75,000 NS per minute, which triggered dramatic price fluctuations. During this process, the collective counterattack from retail investors played a role in exacerbating the situation, similar to the 'squeeze' effect in the stock market, causing the price to surge to 0.43 USDT at one point.

Although this situation may seem to provide retail investors with short-term profit opportunities, it also hides significant risks. Whales' replenishment and airdrop behaviors may create an unstable capital cycle in the market, and if retail investors and investors withdraw their NS one after another, whales' short positions may be quickly liquidated, thereby exacerbating price fluctuations. Therefore, this type of market surge is both an opportunity and potentially a bubble.

What is NS? The blockchain domain name service in the Sui ecosystem

Sui Name Service (NS) is a core technology in the Sui ecosystem, providing users with a simple and memorable blockchain address solution. In the world of blockchain, long strings of addresses can often be headache-inducing. NS aims to make these complex addresses more concise and easy to identify. For example, the address "0xd77861e972e02feb0927611eb934b67a1f9e60782e36cdef61f6779919b6a8cd" on Sui might confuse you, but with NS, you can convert it to a short identifier like "@john" or "john.sui", similar to creating a username on social media, except fully decentralized and running on the Sui blockchain.

Developed by the Mysten Labs team, NS utilizes the high-performance architecture of the Sui blockchain, providing a transaction speed of up to 100,000 transactions per second, giving it the ability to handle a large number of transactions. Users can register a domain name for only about 20 SUI (equivalent to a few US dollars), and the V2 upgrade in June 2024 also added subdomain functionality, making naming more flexible, similar to "@john.family". The core mission of NS is to provide a decentralized "domain yellow pages" for Web3, providing more convenient digital identity and asset management for the blockchain world.

NS vs. ENS: A Showdown Between Newbies and Big Brother

To understand the potential of NS, let's compare it with the veteran giant ENS in the field of blockchain domain names. As a core project in the Ethereum ecosystem, ENS has long been the dominant force in the domain market since 2021. It provides users with concise addresses like 'vitalik.eth', and with the huge ecosystem and first-mover advantage of Ethereum, ENS has become the most popular domain name service in the blockchain world. ENS has registered more than 2.6 million domain names to date, with prices soaring from the initial $43 to $85.69 in November 2021, then falling back to $6.7 in the bear market (October 2023), and now recovering in the range of $25-35.

However, ENS also faces some challenges. The most significant drawback is the high Gas fees, which often result in annual domain registration costs of as much as $5 to $640, with short domain names being particularly expensive, often requiring 300 ETH (hundreds of thousands of dollars). In addition, due to Ethereum's transaction speed and fee issues, the registration and usage costs of ENS are relatively high for ordinary users.

Unlike ENS, NS operates on the Sui blockchain, with significant advantages. Sui is renowned for its high-performance transaction architecture, with transaction speeds easily reaching 100,000 per second, giving NS a huge edge in cost and efficiency. Registering a domain name like "@john" with NS only costs a few US dollars, while the Gas fees are almost negligible. Thanks to the rapid development and low-cost advantages of the Sui ecosystem, NS is likely to experience rapid growth in emerging markets.

However, NS's ecosystem is not as mature as ENS, and its user base and market size lag far behind ENS, so retail investors need to be patient and wait for its gradual development in the ecosystem.

Domain name track: Web3's "ID card fever", with both potential and risk

Blockchain domain names are rapidly becoming one of the infrastructure of the Web3 ecosystem, similar to the Domain Name System (DNS) in traditional Internet. It not only simplifies complex blockchain addresses, but also provides a decentralized and verifiable identity system for decentralized applications (DApps), NFTs, and digital assets. Just as .com domain names in the 1990s became scarce assets in the Internet, blockchain domain names may become the "digital ID card" in the Web3 field. With the surge of Web3 users, the market demand for blockchain domain names will also rise.

In this field, NS and ENS represent two different competitive strategies. ENS, as a leader in the Ethereum ecosystem, has become the "big brother" of blockchain domains with Ethereum's powerful ecosystem and first-mover advantage. It currently has registered over 2.6 million domains and has firmly locked the high-end market through its integrated wallets, DApps, and NFT applications. Nevertheless, ENS's high Gas fees and relatively high registration costs remain its main weaknesses, especially for ordinary users, the domain registration costs are high.

In contrast, NS relies on the high performance and low cost advantages of the Sui blockchain to show strong competitiveness in the market. The Sui blockchain is extremely fast for transactions, with only a few dollars to register a domain name and negligible gas fees, making it hugely attractive in emerging markets. However, NS is still in the early stages of development, and the ecosystem and user base are nowhere near as good as ENS, and investors need to be cautious.

Overall, although the market has huge potential, speculative activities and regulatory changes may still pose risks to investors. Nevertheless, blockchain domain names remain an important cornerstone of the Web3 ecosystem, and those who can accurately grasp market demand can profit in this race.

Conclusion: This surge is only a temporary opportunity, and risks remain

Although the short-term surge in NS has attracted a lot of attention from the market, this price spike may simply be due to short-term volatility caused by the liquidation of whale airdrop positions. Similar to the "squeeze effect" in the stock market, the whale conducts large-scale buybacks in order to cover short positions, and although it pushes prices higher, this volatility is likely to be temporary and unsustainable. Although retail investors have achieved higher returns in the short term, the risks behind this surge cannot be ignored.

With the volatility of market sentiment and the limitation of liquidity, NS may face the risk of a price correction, especially when the whale's operation is over, and the market's support may weaken. Therefore, despite the potential of NS in the Sui ecosystem, investors must remain cautious and not be tempted by short-term price fluctuations. For those investors who want to hold for the long term, they should pay close attention to the long-term development, technological progress and ecological construction of the project, rather than relying only on short-term market heat.

In the crypto market, opportunities and risks always coexist, and investors need to make rational judgments and do a good job in risk management. The future of NS is still uncertain, and this surge is only a short-lived theater in the crypto market, which may not last. Therefore, it is recommended that retail investors stay sober when participating and avoid blindly chasing higher prices to avoid the risk of falling into a short-term bubble.