Why blockchain domains will be a huge asset class
Who remembers what domain investing was like in the 1990’s or early 2000’s? New digital real estate was being created from scratch and sold, launching an entirely new, purely digital, asset class. And as the internet filled up with new websites, premier domains began to shoot up in value. Some companies in the .com era may have succeeded largely due to their domain and it’s primacy in search results. Today, this market has become stagnant, but innovation is popping up in a new area — blockchain domains.
But first, what’s wrong with the current domain system?
- No new domain extensions
If you’ve ever gotten curious about how the domain industry works, you may have come across a group called ICANN. They are an international regulatory body that approves applications for new domains extensions. An extension is the part to the right of the dot like .com or .info. Companies can pay to submit applications to ICANN to get permission to launch a new extension. Most applicants are private companies who intend to make money by selling domains & collecting annual registration fees. New extensions haven’t been approved since 2013, the last time applications were open!
The next approval process is supposed to open in 2021–2022, but right now it’s impossible to launch a new extension. And even after spending years applying & paying $500K or more in expenses, there’s no guarantee when or if you will prevail and be permitted to launch. How can a company plan and execute on a roadmap as a business if approvals could take several years?
- Payments aren’t native to the internet
Payments were meant to be a core part of the design of the internet, but at the time no cryptographically secure ways to send money existed. Only recently, 25 years later have tools like Stripe made it easy for businesses in the US and the west to accept digital payments. Yet this infrastructure doesn’t integrate easily with other solutions around the world. Worse, most of the world doesn’t have reliable digital payments at all.
- No censorship resistance
The current domain system is based on a singular registry, that a series of approved parties can update. Those parties are called registrars and are companies like Godaddy or Google Domains. When you buy a domain, you buy directly from a registrar and they are the custodian of that domain for you. Because registrars are custodians, they can take the domain away from you if someone asks them to.
In the US at least, this is happening for 3 primary reasons:
- Public anger against sites expressing unpopular political views has led to pressure on registrars to ‘de-platform’ a domain
- Court orders asking to take down a website
- Pressure from powerful companies — large corporations claim trademark/IP violations, etc. to prevent websites from being used
These combined forces have led to a variety of restrictions on new applications, uses, and user behaviors. These problems exist to varying degrees around the world, but it’s definitely a global problem. DNS can be a place where countries try and censor one another by rejecting character standards beneficial to certain countries, lobbying against certain extensions, or favoring certain technology players.
So how can blockchain domains fix all of this?
Some good news finally — blockchain domains address the above problems directly.
- New domain extensions
If there’s one thing that blockchains are great at, it’s permissionless innovation. New blockchain domain services can just launch on a public blockchain, no ICANN approval necessary. Now of course, there are many challenges with this, but getting approval from a regulator that may take years isn’t one of them. Instead you need to worry about deploying smart contracts correctly, getting apps to support your new extension, and of course getting users to buy and use the domains
- Payments are native
Another thing blockchains are pretty great at is payments. So what if I told you that your blockchain domain will replace your cryptocurrency addresses for payments? Rather than sharing your bitcoin, eth, and other addresses when you want to get paid, just share yourname.zil. Now when I go into a wallet to pay you, I type yourname.zil, choose from a list of currencies you accept, and pay. Not only is this is a way to replace long addresses, but it’s also a way to easily accept any cryptocurrency. If you just want to receive whatever currency is easiest for folks who are you paying you, then set up your domain so you accept all of the top cryptocurrencies.
With blockchain domains, the user stores the domain asset themselves inside of their cryptocurrency wallet, in the same way they store cryptocurrencies. Blockchain domains are just assets on top of a smart contract platform like Ethereum. The only way to move a blockchain domain or change what information it points to, would be to control the private key of the wallet. This is completely different than with traditional domains, where registrars like Godaddy & Google Domains are the holders of your domain asset.
So the next step after domain custody is to make it easy to build censorship resistant websites. Right now, users could point their blockchain domains to content stored on a self hosted server or a decentralized storage network. That means that today it is possible to have both a domain asset and a website associated with it that can’t be taken down.
So how does this all lead to a big new blockchain asset class?
Traditional domain names as an asset class are a big asset class worth between $20B-$100B. Of more than 300M total domains sold, the most valuable domain ever was Cars.com valued at $872M in an SEC filing. There are also 1500 different domain extensions that are live and operating.
Blockchains are great at supporting digital assets and it’s hard to think of a digital asset class much bigger than domains. .Eth, the first blockchain naming service achieved the following sales:
$33M in eth used to register domains in 1st year
$3.5M locked up for most valuable .eth domain
And this is all before blockchain domains are in regular use for payments or for censorship resistant websites.
Blockchain domains could be a much bigger asset class than current domains
This is due to:
- New features — Payments and censorship resistance solve huge problems that exist with current domains, turning them into global, permissionless tools for business
- New users — Traditional domains are for businesses, but everyone will need a blockchain domain to pay and get paid. There’s a consumer and a business use for blockchain domains so we could easily see 3B instead of 300M traditional domains
- Portability — The entire current DNS infrastructure could easily port from the current centralized DNS registry to a public blockchain at any point in the future. Eventually, blockchain naming systems will be the tech of choice