today’s best practice for tomorrow’s challenges
Of Rob Kriner, Commercial Success Director at Com Laude
Despite economic uncertainty, interest in the commercial possibilities of Web3 has proven to be constant. Earlier this year, Unstoppable Domains achieved unicorn status after raising $64 million in a Series A funding round. Since then, the firm has gone on to register over 2.5 million blockchain domains – showing that many are eager to secure their place in the next iteration of the commercial internet.
However, some are concerned. “The next big threat” is how Microsoft’s annual Digital Defense Report labeled blockchain domains. But are they really that bad?
To answer that question, we must first understand what blockchain domains are, reflect on their growing popularity, and consider some best practices that apply to all domain name portfolios, regardless of size or sector.
The rise of blockchain domains
Blockchain domains are a fundamental building block of Web3 and serve several purposes. This includes identifying owned property and hosting assets in the virtual world of the metaverse, to make cryptocurrency wallets more accessible.
To take crypto wallets as an example, similar to how domain names were invented because people found it difficult to remember long strings of IP numbers, blockchain domains provide a human-readable name for wallets. Do you want proof? Which of the addresses below is easier to remember?
0x78743110A1B17c86cH43g09853c0vb2836c205 or Comlaude.eth.
As for the broader benefits, blockchain domains are decentralized, making them transparent, seemingly indestructible, secure and free from control by a central authority.
However, the lack of regulatory oversight means blockchain domains are also difficult to shut down and even trace back to their owners – a problem for brands potentially facing a new generation of cybersquatters.
An unwinnable battlefield?
In the DNS world of.com and .uk there is a harmonized set of technical standards. This means that traditional DNS domains work seamlessly across different browsers. But in Web3, because there are many competing blockchains, there is no unified architecture, and each blockchain works independently of the other.
In theory, any permissionless blockchain can support blockchain domains. But three of the leading blockchain domain providers, Ethereum, Handshake and Unstoppable Domains, have a combined seven million registrations. For example, Ethereum Blockchain developers created the Ethereum Naming Service (ENS) to allow the registration of .eth names on the Ethereum Blockchain, while .hns names can be registered on the Handshake blockchain.
The lack of regulation and the anonymity they provide make blockchain domains ripe for abuse by cybercriminals. For example, blockchain domains are perfect for tax avoidance and for moving and transferring the proceeds of crime.
Merchant with a blockchain domain owner
Thousands of brand names are already reserved in the blockchain world by speculators. However, there is currently no formal recovery process, leading many to ask: how do you negotiate with a blockchain domain owner when they are anonymous? It’s a valid question to ask, and the answer isn’t easy, but there are steps that can be taken. Many big brands have risked being burned by this problem. For example, back in 1998, Microsoft had to pay over $1 million after two cybersquatters tricked them into registering microsoftwindows.com and microsoftoffice.com.
High-profile cases like these combined with the absence of support from ICANN in Web3 mean that brands understandably lack the confidence to explore the space and its possibilities. But this does not mean that brand owners should give up. Instead, brand owners should seek to take a more proactive approach.
Since many brand names have already been taken by speculators, pragmatism and agility are essential. The obvious first step is to make sure you’ve registered your domain on the decentralized web early on. By doing so, you will not only future-proof your business for the next stage of the internet. But registrations will be relatively inexpensive, and you will make a cost-effective safeguard if Web3 does not end up living up to the expected hype.
Work with a domain name specialist
The issue of blockchain domains is only going to increase in importance as adoption increases, so businesses and brands would be wise to prepare sooner rather than later. Considering the future potential of Web3 and the Metaverse, brands should start taking the necessary precautions and laying the groundwork to ensure they protect their brand and IP. If we look back to the early 90s, we can see how far these domains can and will go.
Effective brand protection in Web3 is a collaborative process, both in terms of internal resources and external experts who can use their experience to stop third parties from profiting from your hard work, be it through astute dialogue with registrants or simple commercial negotiations.
Working with a domain name specialist and building a registration and enforcement strategy will ensure you have a trusted partner with the experience to guide you through a world that is complex and ever-evolving.
