Why brand owners should start preparing for blockchain domain names

In Insights

25 May, 2022

Blockchain technology is part of the Web 3.0 revolution, founded on decentralisation, privacy and individual ownership. It goes against the largely centralised and public Web 2.0 we have become used to over the past 20 years. Businesses are increasingly adopting Web 3.0 technology for smart contracts, supply chain management, domain infrastructure and several other applications.

Non-Fungible Tokens (NFTs) exist within the blockchain and are digital authenticity certificates used to assign and verify ownership of a unique digital or physical asset. For example, this can be artwork, videos or other data. Blockchain domains are typically represented as unique addresses on the blockchain. The emergence of blockchain domain names presents several issues for brand owners.

For traditional domain names (under Web 2.0), the Domain Name System (DNS) ensures the target website can be accessed (hosted by an IP address). When entering a domain name into the URL field, the DNS searches for the matching IP address and displays the website. A central body manages this practice – the Internet Corporation for Assigned Names and Numbers (ICANN) Registry.

Traditional and blockchain domain names share some similarities. They are both readable text strings that serve as an address to direct a user to a particular destination on the internet.

However, blockchain domain names do not use the DNS to determine an IP address because the ownership of the domain name is stored in the blockchain. This means instead of connecting to a central database, browsers search the blockchain to see the services associated with the domain.

Blockchain domain names present a variety of uses like simplifying wallet addresses to the blockchain domain name (as opposed to an alphanumerical code) as well as creating and hosting websites. Popular top-level blockchain domain names include. eth,. crypto, .nft and .bitcoin.

Blockchain domain names can also exist on the InterPlanetary File System (IPFS) – a decentralised alternative to the traditional web, where IPFS is a P2P network for sharing and storing files. This network operates through a system of nodes where data can be hosted while not being bound to a single location. The website files are then loaded onto the P2P network, where the website content like text and images can be linked to and accessed.

For the time being, surfing the decentralised web is largely limited to specialised browsers or through plugins to more widely used browsers.

As blockchain domains are minted, they are traded as a commodity on NFT marketplaces, where the purchase confers complete ownership to the domain name. As there is no central governing body for blockchain domain names, ownership is not subject to any DNS-related rules, including alternative dispute resolution mechanisms. A brief search on some NFT marketplaces reveals that domain names containing well-known trademarks are already being openly traded.

Blockchain domain names present several issues for brand owners, including using the domain names for cybersquatting, selling counterfeit goods and fraud. In its Digital Defense Report from October 2021, Microsoft termed blockchain domain names “the next big threat” as they are increasingly used to distribute malware.

Enforcement can prove challenging as blockchain domain names exist outside regular DNS regulations. One major obstacle is simply determining the ownership of the domain name (and thus where to file a suit).

Consequently, brand owners should consider alternative enforcement options, for example using takedown procedures offered by the marketplaces, where some operate a notice and takedown process for alleged copyright infringement per the Digital Millennium Copyright Act (DMCA).

Brand owners should also consider a proactive approach by purchasing domain names containing primary trademarks for safekeeping.

As blockchain technology becomes widely adopted, these issues will increase in scope, quantity, and complexity. It will prove to be a new battleground for brand owners everywhere in the not-so-distant future.

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