Ethereum Name Service (ENS) has been engulfed in controversy lately. The ENS DAO, the governing body of the ENS protocol, has passed a proposal allowing it to buy domain names in premium and gift them to celebrities and brands to spur ENS adoption.

The proposal, made by the ENS Ecosystem Working Group, asked the ENS DAO to fund its activities for the first and second quarters of 2023. One of the projects the ENS Working Group requested funding for is ENS Fairy, a tool used to gift ENS names. 

The project will receive $50,000 in USDC and 174 ETH (around $270,000 at press time).

Alisha.eth, who works for ENS Labs, described the ENS Fairy initiative as a way to “compete with speculators” because “any ETH spent on premium names will then go back into the controller.ens.eth wallet.”

In other words, as some users pointed out, this would allow the ENS DAO to effectively bypass the premium fee by snatching domains in premium and paying the fees back to the DAO.

On top of that, ENS founder Nick Johnson suggested on Twitter that the DAO might purchase ENS names that might be considered offensive and burn them. He also called ENS investors “squatters.”

None of this sat well with the majority of the ENS community members. 

While the proposal did pass, the members of the ENS community, at least the ones active on Twitter, responded with criticism towards the ENS Fairy initiative and the way it was presented.

For example, a user under the pseudonym “sat” said on the ENS governance forum that the presumed bypassing of the premium fee “should not be allowed on principle” and that no matter how good the DAO’s intentions are, it “should not have powers to bypass this fair market mechanism.”

That’s because, according to sat, the whole situation can become a “very slippery slope” once there’s a “policing system” in place.

“This becomes a very slippery slope… Who decides what should be removed from circulation (at no expense to anyone)? We end up creating a POLICING system, and introducing bias to a credibly neutral system,” they said.

Others on Twitter echoed sat’s worries. tjlarking.eth said that it’s virtually impossible to determine what “counts as a brand or celebrity name.”

“If gates.eth came up, would that count so they could give it to Bill Gates? What about the hundreds of thousands of other people with that last name?” he asked, adding that everyday people would be unable to get their names because a “richer guy has it.”

Others, like anon.eth, pointed out that the funding request “was just bundled together with a lot of other requests” and that there were “no specific guidelines for how the funds would be used.”

But, despite the criticism, the ENS DAO still defended the ENS Fairy initiative.

ENS founder Nick Johnson responded to the critics saying that the goal of ENS was “always to get names into the hands of people who will use them,” instead of speculators.

“Anyone considering buying names that clearly identify a trademark or notable individual might want to remember, too, that in such a situation the buyer holds all the cards. It's a monopsony, and as such the buyer gets to set the price,” he said.

Johnson added that it’s hard to sell one’s domains if they turn down offers, especially if the buyer publicizes the offer.

Other ENS employees like serenae.eth offered potential solutions to the problem.

“Don't allow the funds to effectively be funneled back into the DAO. If such a purchase is made, then the DAO could decide to donate the same amount to a charity or public good. So the DAO would not be able to do this for "free" ad infinitum,” they said.

They also added that the DAO could do a snapshot vote before buying domains.

ENS is one of the most effective and adopted projects in the crypto space. ENS users should follow this discussion and see how they could be impacted once the decision on what to do with the ENS Fairy initiative is made.