The blockchain domains much like their predecessors 15 years ago are in an early stage of market development.
The blockchain domains much like their predecessors 15 years ago are at an early stage of market development, with newer players taking advantage of this unique technology. While some brands are rushing to explore this new frontier, others are still evaluating the space. Here we will investigate, what are the new risks and opportunities since the rise of the web3 domains, and how can brands protect their online presence? It seems like it wasn’t that long ago that there was a race for brands to register .com domains. The same can be said recently about blockchain domain name registrations. As we move towards the blockchain domain system (web3), this must be distinguished from the web2 domain name system (DNS). DNS allowed centralized systems, such as social media and e-commerce, to flourish, including facebook.com or amazon.com. Web3 means reliance on a decentralized public ledger system, or blockchain, that enables seamless, smooth processes with fast turnaround times. As such, blockchain domains operate on a specific blockchain via a “registrar”. For example, mcdonaldsofficial.eth found on the NFT marketplace Opensea has been registered with the Ethereum Name Service, a registrar that enables blockchain domains (.eth) running on the Ethereum blockchain.
Blockchain Domain Name System (BDNS) similarly to DNS translates unique addresses into a memorable phrase. In the case of DNS, that would be translating a unique IP address into a domain name, such as twitter.com. While for blockchain domain names, it is about translating a unique digital wallet (0x9b8c19500a8631c1f755bb365bDE398384E4f2Fa) into memorable address, for example minecraft.eth. However, unlike DNS, blockchain domains have taken domains to another frontier in terms of functionality.
What’s New With Blockchain Domain Names?
- First of all, blockchain domains are attractive to registrants since there are no established international regulations.
- Second, web3 domain names are a type of NFTs since it is a verified digital asset on a blockchain with a certificate of ownership, which can be traded on NFT Marketplaces.
- Third, blockchain domain names have wide use in the community. It can be used as a display name for social media, for example PUMA uses PUMA.eth on Twitter, as a digital wallet or a more traditional landing page.
This fascinating multi-use enabled by blockchain technology really expands many new opportunities for brands to interact with their customers.
Although we see some platforms taking steps to ensure that blockchain domain names are registered legitimately, such as Handshake (a blockchain domain registrar) which has reserved trademarked names for well-known brands, organizations and individuals, we observe a high level of bad faith- registration for blockchain domain names. One such case that is well known is cybersquatting. Bad actors without the consent of the brand owners register a blockchain domain name and wait for the brand owner to approach them. The aim is to sell the blockchain domain names for a lucrative amount of money, like appleinc.eth listed on NFT Marketplace, OpenSea for around $600,000.
The Web3 domains pose a risk to the brand’s image as customers can be misled by impersonating parties. Since blockchain domain names have the ability to be used as display names, it is not difficult to imagine that users with a display name such as “BrandXOfficial.eth” could mislead other users that they are a brand’s official representative. By establishing connections on social media, fraudsters can begin phishing or other data mining techniques to gain access to NFTs and cryptocurrencies of their victims, which was the most recent case of Seth Green losing 4 NFTs to Bored Apes (a notorious NFT -collection).
While web3 domains provide unique ways for brands to interact with customers, this new technology poses threats to brand image, including cybersquatting and counterfeiting.
