Web3/Blockchain Domains

What is Web3? And what are the associated blockchain domain names?

Web3 is a term used to describe the next iteration of the internet that uses decentralization, blockchain technology, and token-based transactions. The internet we know today, also called Web2, relies on centralized platforms and intermediaries overseen by a regulator, ICANN, while Web3 functions via peer-to-peer interactions with increased data ownership rights but no regulator or consistent curative measures. The decentralized nature and mission of Web3 enables users to navigate anonymously, which makes domain name enforcement efforts extremely difficult.

Blockchain domain names, also referred to as Web3 domains, enable users to navigate Web3. Like Web2 domains, blockchain domains are secured via registrars, but the process differs slightly – because there are no centralized platforms or regulator, Web3 providers and registrars have increased control of the purchase process. Many allow users to register TLDs (ex. .coin) in addition to second level domain names (e.g., example.coin). Many Web3 domain registries and registrars offer lifetime registrations with no renewal fees. And once the domain name is sent to the purchaser’s wallet, the registrar has no mechanism to pull the domain name back.

In terms of functionality, blockchain domains can be used just like Web2 domain names, but their abilities extend to crypto wallet naming addresses, universal usernames, and more. Although they offer increased functionality when compared to Web2 domains, decentralized websites hosted on blockchain domains do not consistently resolve when users navigate to them via traditional web browsers (e.g., Firefox, Chrome, Safari, etc.) – for now, specialized browsers, like Opera or Brave, must be used.

How widely registered are blockchain domain names?

Within Web3, .ETH is the largest TLD with ~2.98 million registrations. (Source) When included with Web2 TLDs, .ETH would rank 19^th largest. It is larger than the ccTLDs for Switzerland, Poland, Spain, the USA, and Japan as well as common New gTLDs .ONLINE, .TOP, .SHOP, .SITE, and .STORE.

From a growth standpoint, blockchain domain names are being secured more rapidly due to the overall growth of the Web3 ecosystem. As of 2022, the Global Web3 market size was $3.34 billion.² It is projected to increase to $49.1 billion by 2030, which corresponds to a 46.7% compound annual growth rate (CAGR). (Source)

Who is registering blockchain domains?

The entities registering blockchain domains typically fall into three buckets:

1. Blockchain/Web3 enthusiasts – Those who saw the potential value of blockchain domains early registered large quantities in the hope to resell them at inflated prices.
2. Internet users who value data privacy – Those who distrust Big Tech companies or wish to evade detection use blockchain domains to navigate the decentralized internet. This includes bad actors looking to capitalize on intellectual property owners’ rights and recognizability.
3. Forward-looking corporations – Organizations on the forefront of technology, e.g., IT, Finance, Retail, etc., are securing domain names for future or active use. Companies investing in Web3 include Google, Microsoft, JPMorgan, Nike, and more.

What is inhibiting blockchain domain adoption?

There are two main factors inhibiting adoption of blockchain domains:

1. Public awareness – The general public has not fully bought into Web3 largely due to unfamiliarity. Most users don’t know that Web3 TLDs operate on blockchains or where to buy the associated domains. But as brands and influential individuals adopt them, the public will follow.
2. Usability – The casual internet user is not aware of the specialized browsers and settings needed to visit decentralized websites hosted on blockchain domains. Until major browsers update their software and private companies develop technical solutions, decentralized websites will resolve more consistently and gather more traffic.

What are Web3 providers doing to increase utility and demand?

As a way to bolster demand, Web3 organizations are taking several actions:

1. Knowledge sharing and announcements – Blockchain domain providers and Web3 organizations are disseminating blockchain domain and Web3 educational materials through various channels – e.g., online via websites, webinars, and email; in person at conferences or fairs; as well as learning initiatives in various forms. The goal is to make the public aware of and comfortable with using blockchain domains and Web3.
2. Corporate alliances – Web3 organizations are forming alliances as a way to improve the technological and public policy environments for users of blockchain naming services. The primary vehicle is the Web3 Domain Alliance, which advocates for intellectual property protections and includes members like Unstoppable Domains, a blockchain domain provider, and MarkMonitor.
3. Free giveaways – In order to drum up demand, blockchain domain sellers like Unstoppable Domains conduct giveaways of domain names or physical goods. Some giveaways are specific to individuals (e.g., attendees of a specific tech conference), while others are open to anyone who completes an activity (e.g., link the blockchain domain name to the user’s X profile).
4. Technology upgrades – Web3 organizations are working with Web2 organizations to open the Web3 world to more users. For example, GoDaddy and Ethereum Name Service, the .ETH registry, partnered to allow Web2/Web3 domain pairing free of charge. This eliminates the associated transaction fees (i.e., gas fees) and ensures the Web3 domain can resolve consistently, thus increasing the utility.

How should brand owners prepare?

FairWinds recommends brand owners take the following steps to protect themselves within Web3:

1. Discuss internally –
   • Educate your organization on the risks posed by blockchain domains and Web3 initiatives.
   • Establish a Web3 strategy that is periodically reviewed and updated as the landscape evolves. Or incorporate blockchain domains into your existing domain name strategy.
2. Assign roles –
   • Select or establish a team to address/drive blockchain domains and Web3 initiatives.
   • Clarify responsibilities and communication channels.
3. Protect brands –
   • Monitor your trademarks in leading and emerging blockchain TLDs.
   • Submit protective blocks where available, and consider defensive domain registrations.

Action today proactively mitigates the risk of intellectual property infringement and enables organizations to utilize their brands in Web3 in the future. As always, FairWinds is available to answer questons and consult you on efficient practices.  For more information about our blockchain services see our Web3/Blockchain page under Services.