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Sten Lillieström — 20/09/21

What about domains on the blockchain?

Bitcoin, the well-known crypto currency, has been defying critics for a decade and seems to have no plans to go away. And even though your local grocery store probably won’t accept it any time soon, it may be becoming harder to deny it’s steady trend towards greater adoption.

But the utility of blockchain technology far exceeds just cryptocurrency. Many new blockchain-based applications are being developed, and investment in the blockchain space is at an all-time high right now, according to Business Trend Watcher CB Insights.

Recently B1 (Block one) who develop blockchain-native software received a $300 million funding round from prominent venture funds such as Founders Fund, Nomura, and Galaxy Digital.

One blockchain project that particularly sparks the imagination is that of ”Web 3.0”, and several new frameworks now compete to build the best blockchain-powered internet infrastructure.

Some incorporate blockchain technology into the structure of the existing Domain Name System, DNS, others aim to be an alternative or even to replace it altogether.

The fact that the structure of the traditional internet as we know it today is hierarchical simplifies regulation and compliance. For example, a trademark infringement or a cybersquatting case can lead to deactivation or transfer of a domain name. This is made possible in part because there are laws and regulations devised for the technology, but also that the system is based on conditional access to central databases, managed and maintained by appointed stewards such as the ICANN and IANA organizations, tasked with governance of the integrity and function of the internet.

For modern-day brand owners, the current system allows for trademark enforcement within the DNS. If an accredited registrar (where domains are registered) is being uncooperative when it comes to abuse, they risk losing their accreditation. If a domain name registrant is cybersquatting, they risk losing their domain. You can’t get away with anything, and if you try, there are set and proven procedures and consequences.

It’s difficult to see how such a balance of rights could be superimposed on blockchain domains, where only the technology as such sets the boundaries. With blockchain, there are no obvious points of redress for regulators. No bottlenecks or ”virtual off-buttons”. Its distributed nature makes it resilient, and its public data structure where transactions are visible and at the same time immutable does make a strong case for a new, more trustworthy Internet.

In this way, the same hierarchy that allows for governance of the DNS is also at the same time the weak spot that blockchain-advocates on their part now criticize. According to them, the structure of the DNS is what makes it vulnerable to exploits by hackers, phishers, and scammers who somewhere along the line aim to hijack the process.

The traditional structure of the internet also makes it vulnerable to censorship, as seen in action when Turkish authorities blocked access to Twitter and other social media platforms in 2016. Something that would prove harder to accomplish on a blockchain-based internet, due to its redundant and distributed nature.

These are valid arguments that are very much in line with the anti-authoritarian signs of the times, and also a reason not to take this technological power struggle lightly. The fact that the financial world is seeing massive development and investment in so-called ”decentralized finance” or ”DeFi” also begs the question: what area could be next.

On the other side of the coin, new blockchain-based domains are entirely unregulated. There is no central authority and no agreements that parties are bound to. Blockchain is a so-called peer-to-peer system, free for all to access on the same terms. As such, the system is pre-disposed to accommodate anything and anyone without third parties involved.

In some systems being built, blockchain domain rights are not leased or time-limited, they are held more or less as property. From an intellectual property perspective, a more accessible Web 3.0 is, therefore, uncharted territory. At least until regulation catches up.

Even though Web 3.0 usage is slim today because of the fact that a standard web browser would need a software extension installed for blockchain domains to resolve, a potential paradigm shift is not unthinkable, as new potent technology goes head to head with old.

Recently the blockchain domain extension .eth (for Ethereum, the second most popular cryptocurrency after Bitcoin) has gained popularity among enthusiasts. In fact to the point that corporate businesses are taking both note and action. The beverage company Anheuser-Busch for example recently paid $95.000 to acquire the blockchain domain name beer.eth.

Another incredible development that can possibly pave the way for blockchain domains is the rise of the digital collectible market, so-called NFT:s or Non-Fungible Tokens, basically collectible art anchored in blockchain technology. The biggest marketplace, Opensea.com, is currently experiencing unprecedented growth, and recently recorded over 1 billion in sales, in a single week.

Web 3.0 domain names in theory could incorporate any trademarked terms and publish any infringing content, while current legal tools for remedy are still not up to date.

The domain name industry has often been referred to as the Wild West, and lengthy regulatory discussions have now come to terms with some of the things that earned this reputation.

But in an internet where the possibility to restrict and manage from top to bottom is removed, there is bound to yet again emerge new intellectual property conflicts that can prove difficult to settle.

For brand owners, it is yet too early to find measures to protect their brand in the Web 3.0 landscape.

If there is a technological shift in the way we access and use the internet, regulation and law will need to catch up, like it did when the internet was commercialized. At the same time, being ready to act if that time comes can be an advantage.

For the brand owner that still wishes to be proactive and research possible infringement in the Web 3.0 landscape, three of the most popular services for name registration are namebase.io, ens.domains, and unstoppabledomains.com.