Blockchain domain names, domains that are stored on blockchain or cryptocurrency exchanges, are part of a growing, unregulated, and decentralized internet. Right now, blockchain domains are used mostly by cryptocurrency users, but they are growing in popularity—the Ethereum name service reported over 2.2 million .eth domain name registrations in 2022. At the same time, crypto scams are also exploding, reaching a total of $3.5 billion in losses in 2022.

There have been past attempts to create alternative domain name resolution systems outside the regular Domain Name System (DNS—administered by ICANN), though none of these have achieved real traction. A large hurdle has been, and still is, the need for a user to use a crypto browser or special plug-in to an existing browser to access the blockchain. So, while this isn’t entirely “new,” the use and adoption of blockchain domains could be spurred by increased acceptance of cryptocurrencies among users. At the very least, blockchain domains can be used to further scams of all types, and their unique ability to be both “brand named” and the end-point for a transaction make them well worth focusing on as the market expands.

Traditional Internet and DNS

The architecture of the traditional internet requires users to have a unique internet address to enable users to find each other. The unique addresses are coordinated with the domain name system (DNS) to create domain names—so that the internet address 74.125.239.82 turns into the www.google.com domain name.

DNS requires an accreditation system where organizations (registrars) hold identifiable internet domain name owners accountable for how they use the domain and may terminate the domain if they use it for malicious purposes.

Every domain name that is registered is subject to specific terms of use and arbitration under the Uniform Domain Name Dispute Resolution Policy (“UDRP”), and the system is centralized and built to have transparency, even if recent privacy initiatives have made it more difficult to find the registrant of a malicious domain name.

Domain name registrants are typically referred to as “owners,” as the registrant of the domain is able to sell/transfer domain name assets, sometimes for significantly higher prices than they were purchased for, but the ownership is really more of a potential long term lease because every registrant has to pay fees to maintain ownership to the registrar that “sold” them the domain name. The domain name itself still “lives” subject to the registrar and hosting company, so ownership is relative to their activities. Companies that have lost DNS domains due to faulty transfers or fraud will be intimately aware of this.

Blockchain Domain Names

Blockchain domains have a few other interesting qualities. First, Blockchain domain name systems turn blockchain resources (long form complicated numbers/letters) into domain names with extensions such as “.bitcoin,” “.crypto,” “.nft” and “.eth.” Blockchain domains can work as either i.) a naming registry for cryptocurrency wallet addresses or ii.) they can point to content that is hosted on the blockchain, like a website.

Second, blockchain domains themselves exist in the owner’s crypto wallet (you have to have one to own a domain), so the owner of the domain name can do whatever they like with it (like they would with a regular NFT), without being subject to a registry, registrar, hosting service, or ICANN. There are no administrative procedures to deal with cases of infringement, like a UDRP or terms of use. Further, once the domain is purchased, there are no fees to be paid—it’s a one-and-done purchase—and the domain/asset is owned by the purchaser (not rented or leased). Budweiser brewery, for example, recently purchased beer.eth for roughly $90,000 or 30 ether (for those familiar with crypto valuations).

So What’s The Problem?

Putting on our online security and defense hats, blockchain domains present a number of problems for companies with valuable brand names.

Foremost, there are no set rules in terms of what is allowed when someone goes to purchase a blockchain domain. For example, Unstoppable Domains is in charge of writing domain names for a number of the more popular blockchain TLDs. In an interview with Fast Company, their CEO stated that the company would not let just anyone register branded domains and that the company had measures in place to screen applicants. But there is no guarantee here, no system in place to deal with infringements, and no accountability or central authority to assist.

There are also a number of registrars selling blockchain domains alongside regular domains. This has led to some consumer confusion and a warning from ICANN, which emphasized that alternative or non-DNS domains are not what they seem, stating that:

If [users] click on such a link [to a non-DNS domain], it will fail with an error message that the domain cannot be found. In order for Internet users to connect with such names, they would have to either install a specific browser, install a special plug-in to their favorite browser, or configure their system to use a specific DNS resolver that would bridge to the Handshake blockchain world. (emphasis added)

Lastly, from our perspective, the potential rise of blockchain domains amongst consumers will follow cryptocurrency—that is if crypto becomes increasingly popular and a go-to consumer-friendly way for users to buy/sell things (widely accepted), then blockchain domain names could become very popular and valuable assets amongst brands, and criminals alike—similar to domain names.

What Should Companies and Organizations Do?

It is still early days for blockchain domain names, and not entirely clear how things will play out in terms of which currencies will stick. The most popular right now are Bitcoin, Ethereum, and Binance, but the market is highly volatile. For those charged with digital and online brand security, the important thing is to make sure you are aware of the space and look at how blockchain domains could impact your business from a growth and liability perspective. A couple of points to remember:

• The law still applies, so in the same way you would track a domain name registrant in the DNS, you can do so via the blockchain—it should be easier, in fact, because there is no hiding where things are in the blockchain. While it is easier to anonymize things, and there is no central authority or repository for blockchain domain names, tracking should not be a problem.
• Domain naming companies (like Unstoppable) have internal rules to make sure that they do not hand out brand names to just anyone. In some cases, branded domain names have been set aside and can be claimed for free.
• Ask your Intellectual Property counsel and Brand Managers about blockchain domains, see if there is an opportunity for your business in the marketplace, and start to ask if your business or users have been impacted by scams using your brand name that are tied to cryptocurrency or blockchain domains.