information Best. Fractionalization Selling Point. Ever.

[jberryhill]

Don't all jump at once to be a minority owner of shares in a domain name the majority owner might not even renew:

 

[SpareDomains]

Cool time to sell 49% of the entire portfolio and then just let them all expire into retirement.

 

[Eric Lyon]

 

[bmugford]

Cool time to sell 49% of the entire portfolio and then just let them all expire into retirement.

Perfect way to dump those registry "premium" domains.

Sell shares, and then just let the domain expire.

You get money on the front end and don't have to be burdened with the high renewal fee.

Brad

 

[bmugford]

Don't all jump at once to be a minority owner of shares in a domain name the majority owner might not even renew:

Show attachment 282534

"The entity that holds the most significant percentage of ownership units makes domain decisions".

That doesn't really make sense.

What if no entity owns 51%?

The top shareholder could be 5%. Then what?

I think they need to go back to the drawing board.

Brad

 

[bmugford]

What exactly am I owning when I purchase units?

You receive a fraction of the domain name that’s tokenized on the blockchain. This represents your proportional stake in the domain asset that you can exchange.

Who cares if something is tokenized on the blockchain if the underlying domain expires or is lost via some other action, like legal dispute.

At that point all you are holding is worthless tokens.

Brad

 

[Future Sensors]

It's the kind of idea that might have suited Monster, except he no longer reads the forum and is busy with other priorities now.

 

[jberryhill]

Are you sitting on a pile of illiquid value because your domain won’t sell at a price you like? Well, get a bunch of folks to give you money for illiquid shares of it!

Although the one I like better is “give me money to buy and sell domains, and I’ll cut you in for a percentage of the profit I make.”

Someone should combine those. You buy shares in my domain and I use the proceeds to buy another domain, and you get a pro rata share of the proceeds from fractionalizing that second domain name. Then it just runs like a classic pyramid scheme as we bring in new investors at the bottom of each level each month or quarter.

With just 100 invested in one share of one domain name now, you can start earning that money back in monthly payments AND have shares in a dozen other domain names within a year! Just by doing nothing which is, as we all know, the best way to get rich.

And, oh yes, it is all on a blockchain and you can use crypto. We even have AI picking the domain each month.

 

[jberryhill]

That doesn't really make sense.

What if no entity owns 51%?

I believe the idea here is that you would not sell off more than 50% of your domain name.

Of the various fractionalization schemes already in existence, I have never heard once of a fractionalized domain being sold, nor have I ever heard anyone claim to have made a profit speculating in shares of one.

The proposition is "I can't sell my domain, but I can round up a bunch of folks to give me money for nothing, so that I still can't sell my domain, but at least I'm less motivated to try."

 

[Future Sensors]

Don't all jump at once to be a minority owner of shares in a domain name the majority owner might not even renew

 

[Kyle Tully]

With ENS names anyone can renew them, it’s just a function in a smart contract. Fractionalised domains would have to implement something like that to be viable (among other things).

 

[fka1080405]

Mostly just ruminating and stating the obvious to clarify my own thoughts:

I think "shares" in domains is an interesting idea that has potential but it doesn't solve liquidity. Domains are not illiquid because you can't buy and sell them on the open market... they're illiquid because the "value" is based on an "appraisal" of what a hypothetical end user might someday pay... which is often so hypothetical it becomes wilful fiction or delusion.

If I own 10,000 shares in John's Department Of Defence War Against RDNH Limited, the shares are illiquid because buying and selling shares in a private company is complicated. The shares still have a fairly easy to appraise value based on something like the price per share at the last share issuance or the dividends due to share holders. The shares may still trade at a discount because of the illiquidity but there remains a clear path from value to price.

The public stock market is pretty bananas nowadays and meme stocks are defying common wisdom, but even then the majority of the stock market still follows a fundamental: more risk means lower value. The value of an asset is discounted based on its risk. The likelihood that a domain name ever sells to an end user is tiny, the domain's appraised "value" is very high risk, so these investments will have to trade at a significant discount, at which point, the domain's owner is selling shares at such a low price that even with the competing interests it's just not worth it.

If we all agree that the value of example.com is $100,000 but there's only a 1 in 100 chance of the domain name ever finding an end user to buy it (very charitable) then a 1% share of the sale proceeds is not going to be valued at $1,000: investing $1,000 to have a 1% chance of making $1,000... is worse odds than vegas. Would someone invest $500 for a 1% chance of $1,000? Probably not. $100 for a 1% chance of $1,000? Maybe. $10 for a 1% chance at $1,000? Okay, sure, there's enough gamblers on the internet willing to do that.

So, you've got a domain "worth" $100,000 which can be divided into 100 shares each worth $10 for a total of $1,000. The registrant wants to keep majority ownership so they're only willing to sell 49% of the shares. That means, for a domain everyone has agreed has a value of $100,000... it can raise $490 in a share sale. And for $490, the registrant is passing up on half of any future sale proceeds. If the registrant believes in the domain's ability to sell for $100k they'd be an idiot to sell half of the proceeds for so little unless they need money to cover the renewal fees. If the registrant doesn't believe in the domain's ability to sell... then sure, sell some shares, it's free money.

And how many domains would we all appraise at $100k? Most end user domain name sales are much closer to $10k than $100k. So, 10% of $490... a share sale can raise $49. Who cares about $49? That wouldn't even cover the renewal fees.

...and so the only domains that are worth fractionalizing are the tiny number of ultra-ultra-ultra premium domains in the portfolios of Hilco and the like that are already liquid. Operations like Hilco's are already well funded and sophisticated and able to participate in joint ventures through traditional approved-by-their-expensive-lawyers not-on-the-blockchain methods that don't involve dealing with the unwashed masses.

The only reason domain name "investing" even exists is because we're all a bunch of rubes who've seen people get rich off of "investments" that had a cost basis of nothing (e.g: registering icon.com in 1996) and tried to get a slice of the pie by making "investments" with a cost basis many orders of magnitude higher. You get rich registering[1] a lot of domains for very little and then selling a couple for outsized returns.

[1] And registries have gotten wise to that with the introduction of premium pricing. And while certainly, some of us do make money buying and selling domains rather than registering, we are a tiny fraction of an already tiny fraction of profitable domain name investors. And the people successful at that are not paying these appraised prices for illiquid domains, we're buying very cheap.

 

[jberryhill]

With ENS names anyone can renew them

Yes, with only one exception, ENS solves all of the problems of the legacy, centralized root domain name system.

Unfortunately, that exception is "being useful as a domain name to a significant population of internet users".

The likelihood that a domain name ever sells to an end user is tiny, the domain's appraised "value" is very high risk, so these investments will have to trade at a significant discount, at which point, the domain's owner is selling shares at such a low price that even with the competing interests it's just not worth it.

I believe you've nailed most of the key insights here.

I've never seen anyone who (a) thought this was a good idea, and (b) wasn't themselves selling it.

One could argue that the value proposition to shareholders is, "Yes, sure, we know the owner hasn't been able to sell this domain name for 15 years, but the point is the 'value' of the domain name keeps increasing, so you can hold your shares until the value increases enough to sell them to someone else."

Of course, looking at the previously fractionalized domain names at Rally, it does not seem the share price of a domain offering has ever increased beyond its initial offering price. But that was then. This is now.

 

[DigiNames]

I have been interested in fractional ownership of domains for a long time. I could see it being a way to attract attention and investment from outside the "domainer" space. Buying and selling domains isn't for everyone and all the good ones are taken, but they clearly have value. I personally think good domains are way undervalued overall for such a finite resource.

Having thought a lot about it, there are a lot of potential issues and potential stumbling blocks. It will be interesting to see how this new platform takes a shot at it.

 

[jberryhill]

I could see it being a way to attract attention and investment from outside the "domainer" space

Why?

People with no interest or awareness of the domain name marketplace are going to be interested in buying shares of things they didn't care about in the first place?

And what is the value of attracting this "investment"? So... people with no prior interest in the "domainer" space hand over their money to someone who owns domains they haven't been able to sell. Then what happens?

 

[DigiNames]

Why?

People with no interest or awareness of the domain name marketplace are going to be interested in buying shares of things they didn't care about in the first place?

And what is the value of attracting this "investment"? So... people with no prior interest in the "domainer" space hand over their money to someone who owns domains they haven't been able to sell. Then what happens?

High-quality domains are true digital assets — they have real value and utility. Most people recognize that, but very few know how to invest in them. If the barrier to entry were lowered, I believe many would jump in. Just look at crypto and NFTs: people poured money into assets with little intrinsic value. By contrast, premium domains are tangible digital real estate with far greater long-term potential.

The real challenge is liquidity. Domains aren’t “unsellable” just because they don’t move quickly — they’re unique, and the right buyer can take years to appear. For example, John.com might be worth millions, but you wouldn’t flip it overnight at full value; you’d wait for the buyer who sees its best use. That ties up capital.

Fractional ownership could change that. Instead of needing millions, investors could buy small shares in a name, making it easier to trade and creating a more liquid market. That benefits both sides: investors get access to an asset class once out of reach, and domain owners unlock value closer to retail pricing without waiting years.

Eventually, when the perfect buyer does come along, the domain can be sold outright, and shareholders could be paid out at a profit. Of course, the mechanics would need to be carefully worked out — but the concept shows how domains could become a mainstream, tradable investment.

 

[jberryhill]

I was born on a Wednesday, but not last Wednesday.

Domains aren’t “unsellable” just because they don’t move quickly — they’re unique, and the right buyer can take years to appear.

...investors could buy small shares in a name... and domain owners unlock value closer to retail pricing without waiting years....

Eventually, when the perfect buyer does come along, the domain can be sold outright, and shareholders could be paid out at a profit.

Do you have an interest in any of these things?

We went from one person sitting on a domain name that might take years to sell to a bunch of people holding shares that nobody wants to buy.

That person then collects something "closer to retail pricing" from a bunch of rubes who now have shares. By "unlock value", you mean "collect a pile of cash from rubes" for nothing. This isn't like stock, where the money raised is used to build the company, and where there is a prospect of dividends. This is literally just giving someone money for something they already own. And, even if the domain registrant does decide to use the domain name for some profit-making activity, the shareholders get absolutely no part of the profit.

Then those rubes sit there and hold their shares waiting for "the perfect buyer comes along". Instead of having some person sitting on a domain name that's going nowhere, you have a bunch of people sitting on shares that are going nowhere.

...with the notable exception that since these shares were priced "closer to retail value", then the "perfect buyer" is someone who is going to pay way above "retail value" in order to produce that profit.

But... what was the offering share price based on? I can guarantee it wasn't based on a proportion of the domain owner's cost basis in the domain. So, the shareholder upside - if the share price bears any relationship to the "market" value - is only based on hoping that domain name DOESN'T sell any time soon, assuming that domain name values, in general, will only increase.

Except, while waiting for that "perfect buyer", the shareholders have NO say in the price at which the domain name is going to sell, and the only person with the ability to sell now has reduced incentive to do so, and is under no obligation whatsoever to sell the domain name at a level which produces a profit for the share holders.

Although, really, if the domain registrant just wants to get out, then there is no need to sell the domain name. Let's say the domain registrant fractionalized 49% of the domain name to a bunch of shareholders. Well, the only thing the registrant needs to do is to sell the remaining 51% to someone else to "unlock" the rest of the value, and the shareholders get nothing. The majority owner can sell that 51% to someone else for less than what the shareholders paid for the 49% if the owner is looking to get some cash quickly to pay bills, go off and relax somewhere, whatever.

Incidentally, we have also now reduced the ability to sell the domain name. As someone who see multi-million dollar unreported sales several times a year, I can tell you that it can make things a lot easier if the sale is structured over time in multiple payments which, there is utterly nobody in any of these schemes talking about. Since I'm a little thick-headed, I'd like to know how this scheme deals with LTO's or, the other way top-dollar sales go through, taking an equity interest in the purchaser. Nope? Those common options are now off the table for the seller. Oh, and, you want that purchase to be confidential? Not happening, since we have to report the sale price to a whole collection of people who bought shares.

The whole thing just strikes me as a way to get people to fork over cash for nothing.

 

[DigiNames]

You really raise some good points John. I like the idea of fractional ownership, but I don't claim to have all the answers.

I personally would like to find a way for the domains I own to be more liquid, that is the interest I have in seeing it succeed. I would also invest in shares of high quality domains if I saw a way to potentially profit from it.

There are clearly some rules of what an owner must do, can do, can't do, that would need to be established. How a sale price is determined (owner, shareholder vote, total share value + a determined percentage?) and many more details. Protections would need to be in place to protect shareholders from an owner abusing rules or diminishing the value of the domain.

There are surely benefits and negatives to selling or buying shares in a domain name like we are talking about. I just see it as a possible way to add liquidity to a multi-billion dollar market that is currently made up of a relatively small number of people sitting on stockpiles of domains and waiting.

If it is operated in a clear and transparent way, the participants of a market will ultimately determine if it will succeed or not. I know of some attempts that didn't work, and I am sure others will fail, but I think it is an interesting idea that has the potential to be successful if it can be flushed out properly.