ENS Labs, the driving force behind the Ethereum Name Service (ENS), has revealed its ambitious ENSv2 upgrade plan, signaling a pivotal shift towards a Layer 2 network to bolster scalability and alleviate gas fees.

With ENSv2, ENS Labs aims to usher in a new era of efficiency by migrating core functionalities from the Ethereum mainnet to a Layer 2 chain. This strategic move is poised to significantly reduce transaction costs for users while enhancing the overall scalability of the ENS ecosystem.

While the specific Layer 2 network for the migration remains undecided, ENS Labs assures users that careful consideration will be given to selecting the optimal platform for seamless interaction with ENS services.

A key highlight of the upgrade is the introduction of a hierarchical registry system for managing .eth domain names. This innovative system will empower nameholders with greater control over their domains, facilitating streamlined management of subdomains and enhanced resolver configurations.

Nick Johnson, lead developer and founder of ENS Labs, elaborated on the benefits of ENSv2, stating, "ENSv2 will introduce a hierarchical registry system to .eth name management. Nameholders will have access to a unique name registry, where they will be able to manage subdomains and configure resolvers."

The Ethereum Name Service has long been celebrated for simplifying Ethereum addresses through its .eth name service, with over two million .eth names registered on the mainnet to date. With the advent of ENSv2, the potential for multi-chain interoperability is poised to expand, offering users broader utility across various blockchain ecosystems.

The decision to pursue the ENSv2 upgrade was further motivated by the release of Ethereum Improvement Proposal (EIP) 4844, which significantly reduced costs associated with Layer 2 networks through blob transactions.

Eskender Abebe, head of product and strategy at ENS Labs, emphasized the importance of EIP4844 in driving the proposal forward, stating, "The release of EIP4844 has made Layer 2 networks based on Ethereum vastly more affordable and scalable, which was a big driving factor for ENS’s proposal."

In line with the broader trend of Layer 1 protocols migrating to Layer 2 networks, ENS is poised to undergo a phased migration process to minimize disruption. Initial phases will focus on refining the resolution process to ensure a seamless transition for users, who will have the flexibility to move their names between the Layer 2 network and the Ethereum mainnet based on their preferences for cost, security, and functionality.

To support the development and deployment of ENSv2, ENS Labs is seeking additional funding from the ENS DAO, with a proposed annual budget increase of 4 million USDC. This funding will primarily be allocated towards hiring additional developers and covering infrastructure costs.

Despite initial fluctuations in token price following the announcement, the broader ENS community eagerly anticipates the realization of ENSv2 and the promising opportunities it holds for the future of decentralized naming services.