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The Dark Side of Decentralized Domain Names

Decentralization is exciting. Headline-grabbing, even. After all, in a world where frustration levels are sky-high and rising, it should not come as a shock that many individuals are willing to embrace what we might call “anti-system solutions.” Decentralized solutions, in our case, which come with the ambitious promise of providing everything their centralized counterpart can provide but without centralized points of failure and regulations. In our previous article, we enumerated several advantages associated with decentralized domain names. Unfortunately, when it comes to domain brokerage websites, there is a world of difference between promising and actually delivering, especially when you aim to replace the status quo Domain Name System, which has had the network effect working in its favor for extended periods of time. Some sober pragmatism is, therefore, a must.

A few of the primary drawbacks to decentralized domain names include:

1) The fact that having a working solution is not enough—convincing enough people to use it will be the truly Herculean task. In theory, it all sounds fairly straightforward, with something along the lines of installing a browser extension or using decentralization-friendly browsers such as Brave being more than enough so as to gain exposure to the brave new world of decentralized domain names. Unfortunately, we have quite a bit in the way of precedents involving such solutions not being adopted to enough of a degree to end up in critical mass territory—both centralized and decentralized examples.

The most (in)famous example involving a centralized alternative to the DNS was represented by New.net. Simply put, all one had to do was install the NewDotNet browser plugin so as to be able to access sites that used these domain names. It was an alternative DNS but a centrally managed one. Unfortunately, from lack of momentum-related issues to malware-related fears/problems as well as a legal mess, things did not exactly work out for New.net, with it essentially closing its doors as of 2012.

On the decentralized alternative front, we have the NameCoin example, which was mentioned in our previous article. NameCoin is a more than ambitious value proposition for the world’s first altcoin, yet meaningful adoption was nowhere to be found. With the “meaningful adoption” problem still being pressing in the cryptocurrency world, where progress when it comes to anything speculation-related still overshadows progress in terms of dimensions such as commercial adoption

2) Truly decentralized solutions are a rarity despite the fact that over 11,000 cryptocurrencies exist at the moment of writing. A weightlifter can call himself a ballet dancer, but that does not mean he can actually perform. In the same way, not everything that is blockchain-based and is called decentralized is actually decentralized.

As an extreme example, anyone can easily launch a 100% pre-mine cryptocurrency nowadays, and call said cryptocurrency decentralized. But in light of the fact that the person who launched it controls one hundred percent of the supply, how decentralized should it actually be considered? Being blockchain-based and surrounded by buzz words is not enough to be truly decentralized. Even Bitcoin itself is struggling with pockets of centralization when it comes to areas such as mining.

Thus, it would be wise not to assume there is no centralized point of failure just because one entity or another puts blockchain-based solutions on the table. There is no advantage in eliminating a registrar or a registry operator as a centralized point of failure if other (less than obvious) points of failure end up replacing them. Whether we are referring to domain names or anything else, do not take claims of decentralization at face value.

3) Complete freedom has a price, and many people are too quick to answer that they would be willing to pay it. For example, it’s easy enough to state you would be willing to pay whatever the cost of true immutability is. With the potential of publishing something, nobody can ever remove truly being game-changing. But what if the most unethical among market participants use said freedom to publish child abuse materials? Or content that encourages hate crime?

Even if you are not concerned about the behavior of other users, a decentralized domain name protocol that facilitates child abuse materials or hate crimes would inevitably end up on the radar of law enforcement across jurisdictions. A potential result would be that lawful users of the distributed protocol would essentially find themselves under suspicion. That sort of burden could discourage the adoption of the protocol.

4) Meaningful decentralization isn’t cheap. There is a reason why Bitcoin transactions sometimes end up being quite expensive, prohibitively so for smaller amounts. Or why gas fees on Ethereum sometimes spike up to outrageous values, with the same principle being valid for any blockchain where two conditions are met, being truly decentralized on the one hand and being widely used on the other.

Projects claiming to have less transactional overhead than Bitcoin pop up extremely frequently. But what they oftentimes (practically always) fail to mention is that transactions are very cheap either because we are not dealing with meaningful decentralization or because the blockchain in question is hardly used (with fee-related consequences manifesting themselves as soon as that changes, if it ever does). Promises of true decentralization at bargain-basement prices should make savvy market participants raise an eyebrow Developers from all corners of the world are aware that these disadvantages of decentralized domain names exist and are working on solutions, such as community-based mechanisms that make it possible to eliminate bad actors, among other approaches. The bottom line is this: as promising as decentralized domain names are, it would be premature to (yet again) predict the death of the “traditional” Domain Name System. While nothing in this world is impossible, such outcomes should be considered extremely improbable at this stage of the game. For a dimension as new as the decentralized domain name, setting more reasonable goals such as acting as a credible alternative to the status quo DNS would represent a far more realistic approach… for now.

By Jeffrey Gabriel, Co-Founder at Saw.com

Jeffrey M. Gabriel is an expert domain brokerage and building sales teams. Jeffrey most recently co-founded Saw.com, an industry-leading boutique brokerage that specializes in acquiring, selling, and appraising domains. Previously, Jeffrey was the Vice President of Sales at Uniregistry (recently purchased by Godaddy), one of the industry-leading domain marketplaces, domain registrar, and monetization platform on the net.

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