Dynadot

discuss Domain Name Tokenization

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Recently Nike announced a patent to tokenize limited edition shoes on the Ethereum blockchain. While it might not be practical to tokenize low-value individual domains, perhaps with domain portfolios or higher-value domains it might be a means of providing liquidity without depending on one unique buyer desiring to limit their risk on an individual domain.

Challenges:
-assurance all domains are controlled by a trustee / administrator (i.e. Godaddy, Epik, Uniregistry)
-renewal and administrative costs would need to be covered by a reserve from proceeds for some period beyond token sale date
-should limits be placed on the percentage of tokens any individual buyer can purchase (i.e. 10%) to minimize the risk of two or three related holders controlling pricing and renewal decisions
-legal - would SEC declare these as securities which need to go through an expensive registration process?
-administrative costs of managing might make it impractical
-who would want the role of administrating portfolios?
-how can administrative processes be automated?
-why would sellers consider this option rather than auctioning at Namejet or other existing options?
-would buyers be willing to participate?
-what rules would need to be in place regarding frequency of price changes, sales negotiations, ability for seller to retain an interest in the portfolio, token holders extending offers on domains within portfolio (conflict of interest), etc?I
-over what period would tokens be sold? Imagine a domain portfolio where seller wants $500k and 1000 tokens are issued but no investors are willing to pay $500 per token. What rules are set to bring token prices down to a point where buyers begin to appear? At what point is seller allowed to buy tokens?
-beyond token sale date, a marketplace would be needed allowing trading
-would a secondary market for these tokens materialize?
-what portion of sales proceeds would be distributed to token holders given need to cover future renewals?

Just some random thoughts...
 
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The views expressed on this page by users and staff are their own, not those of NamePros.
It's not if domains are tokenized, its when?
 
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Real Estate is securitized : REIT's

Domains could be - Crowd Funding permits issuance of virtually unregulated securities.

Let us say for example that ten guys on this website contribute 10,000 names to the Fund.

Epik is custodian of the names ( all must have three appraisals of $XXXX ); R.M. registers

them all in perpetuity ( for this he gets a % - TBD ). The name contributors can decide if they

want cash or stock. A criterion is arrived at by which the "fair value" of the stock can be

calculated ( Bob Hawkes can handle this one - for a % - TBD ). Then we simply make

a market in the stock ( I would be glad to do this, and I work real skinny - but these are

brown chips, unregulated, and I would have to protect myself from financial predators )

and in time ten million and more domains could be securitized, contributing to the

solution of the liquidity situation. EVERY DOMAINER has a vested interest in

making something like this a success...

Theoretically, one could buy stock instead of domains themselves; every time the portfolio

sells a name the value of the stock increases...

All this eventually leads to an I.P.O. and then we have made our asset class - if we do a

good job.
 
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One example of a company which is tokenizing real estate is RealT.co. An investor can invest in specific real estate properties for less than $100.
 
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I saw a headline on Domaining.com which mentioned Contrib.io planning to launch a domain token platform. Perhaps we will get more details in the coming weeks.
 
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I saw a headline on Domaining.com which mentioned Contrib.io planning to launch a domain token platform. Perhaps we will get more details in the coming weeks.
And did you see what they priced sub $10k domains at like $500K-$1M, and you wonder why the industry has a black eye.

realtychain.com value $589,000, like come on...
 
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If Namejet were to announce a premium domain auction and ask for submissions from the community, there would likely be criticism of certain domains having high minimum offers, being inferior to domains that were rejected, why don't they include more new extensions, etc. Tokenization offers domainers potential liquidity as well as the ability to invest in domains they would never be able to acquire outright. I believe it is best to look at ways to improve any platform under development as it could reap benefits for the entire domaining community. Tokkenization could also attract investors from outside the community who traditionally invest in stocks or real estate.
 
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Trying to tokenize everything reminds me of the ICO nonsense from recent years.

It might make sense for some assets, with proper valuations, management, regulations, etc.

However, for many things it is just not going to work for a number of reasons.

Brad
 
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And did you see what they priced sub $10k domains at like $500K-$1M, and you wonder why the industry has a black eye.

realtychain.com value $589,000, like come on...

Yeah, the valuations on these are ridiculous.
https://contrib.io/domain

Tokenization is especially stupid if the underlying asset is valued at a highly unrealistic, inflated number.

If I can get way above market value for my domains, sign me up. I am willing to tokenize it all!

Brad
 
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Tokenization, or fractional ownership on a blockchain, can be done on anything with value, any asset. Domains are an asset and are a great candidate for tokenization. Obviously, as an investment, one has to consider ROI and all aspects. Just as any investing, buying low and selling high, for profits, should be considered.
 
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What if tokens of ridiculously overpriced domains could be sold short? If an $xxx quality domain were priced at a market cap of $25 grand, sellers could sell high and cover when shares traded at an equivalent market cap of low $xxx.
 
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Tokenization, or fractional ownership on a blockchain, can be done on anything with value, any asset. Domains are an asset and are a great candidate for tokenization. Obviously, as an investment, one has to consider ROI and all aspects. Just as any investing, buying low and selling high, for profits, should be considered.

Absolutely, but if there is going to be no realistic pricing does it matter?

Liquidity is another issue, I would not want realtychain.com pushed to my account for free, I certainly have no interest spending money for a piece of the name.

I also do not think that domain owners are going to allow a scenario like @garptrader mentioned where you could short the domain. Who is going to let a run on the name take their asset to prices they feel are unrealistic, because someone could try to pull a move on a name that does have value.

Tokenization will happen but there is going to be a need for a better structure, and I don't know if domainers want to trade.

Michael Berkens has said to me for years, he does not understand anyone with 1000 domains or more who believes in .com and does not own shares in Verisign. Most don't and don't want to own stock for whatever reason. I think some have said 15% return in stock means nothing to them, they make 1000% on domain sales, (of course they only talk about the sales not the unsold expenses).

So it will be interesting to see how this gets developed properly.
 
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Tokenization would tend to be somewhat like wholesale pricing but what if an end user wants to buy the domain and the last trade was well below retail pricing. The buyer starts acquiring shares as the price moves higher and higher. Anyone who bought in shortly before the end user showed up would see a nice ROI. This would be comparable to an institutional buyer buying a stake in a small cap stock. I suppose a majority stake would be enough to use the domain for a project but then minority holders would still retain a share in the project revenue.
 
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Absolutely, but if there is going to be no realistic pricing does it matter?

Liquidity is another issue, I would not want realtychain.com pushed to my account for free, I certainly have no interest spending money for a piece of the name.

I also do not think that domain owners are going to allow a scenario like @garptrader mentioned where you could short the domain. Who is going to let a run on the name take their asset to prices they feel are unrealistic, because someone could try to pull a move on a name that does have value.

Tokenization will happen but there is going to be a need for a better structure, and I don't know if domainers want to trade.

Michael Berkens has said to me for years, he does not understand anyone with 1000 domains or more who believes in .com and does not own shares in Verisign. Most don't and don't want to own stock for whatever reason. I think some have said 15% return in stock means nothing to them, they make 1000% on domain sales, (of course they only talk about the sales not the unsold expenses).

So it will be interesting to see how this gets developed properly.

I agree implementation presents MANY challenges.
 
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I agree implementation presents MANY challenges.

Like what happens if a domain gets stolen?
UDRP? Who is paying to defend it?
What if UDRP loses?
 
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Well I have my 2027 prediction for the industry. Years after tokenization of domains takes off, the US Secerities and Exchange Commission is finally considering how to regulate it.

The more I think about it the more concerned I am. I think it's too much of a risk for a reputable company to get involved at this point, I could be wrong. But I would be concerned if it's not managed by a reputable company.
 
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As mentioned previously, a portion of token proceeds would need to be set aside to pay renewals and administrative costs. Let's assume tokens represent ownership in a portfolio of LLLL.com domains. The platform would need an underwriter to offer UDRP insurance and rates would vary based on the perceived risk of the underlying portfolio. If a UDRP is filed, the underwriter pays for UDRP defense. Investors would need to also assess the risk of a UDRP because if the domain is lost bye bye - but if the tokens represent a 50-domain portfolio well not so bad.
 
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What if the token proceeds were initially set aside as a portfolio development fund to develop mini online businesses with earnings owned by token holders?
 
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As mentioned previously, a portion of token proceeds would need to be set aside to pay renewals and administrative costs. Let's assume tokens represent ownership in a portfolio of LLLL.com domains. The platform would need an underwriter to offer UDRP insurance and rates would vary based on the perceived risk of the underlying portfolio. If a UDRP is filed, the underwriter pays for UDRP defense. Investors would need to also assess the risk of a UDRP because if the domain is lost bye bye - but if the tokens represent a 50-domain portfolio well not so bad.

Interesting, I would say this is a big undertaking and like @Ryan217 mentioned would have to be a company well trusted. I really can't think of anyone I would trust, maybe GoDaddy more like Verisign, and that's due to them being publicly traded and large companies. I would never do business with a startup that just came in and wanted to be the new player. I would watch it carefully, I think it's interesting, would write about it as well, but would not invest money.
 
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One example of a company which is tokenizing real estate is RealT.co. An investor can invest in specific real estate properties for less than $100.
Tokenizing real estate or classic cars for example is more feasible than domains imo. Certain assets like homes have a market based valuation that relies on real sales data. With domains there is just no way to accurately predict today’s value or future sales prices.

The only way I see the tokenizing of domains working would be if shares were sold into online companies, not just a name itself.
 
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I think we would also have to consider comparable asset classes that present less risk.

Lets say fractional ownership and tokenization worked for domains, why would one invest in it versus stocks, crypto, etc?

I agree with the position of investing in a profitable domain mgmt co stock.

I am still waiting for a publically traded domain portfolio management and monetization company to emerge. One that a domain investor can engage to manage, sell, buy, auction, etc. on behalf of a portfolio owner.

If a trusted company could take control of my portfolio and deliver returns I would pay for that.

Like real estate, I wish for management companies for domains.

They would also develop the domains, handle leasing, etc.
 
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I own Tokenizing.com so nobody wants this business approach to fly more than me. It’s an uphill battle as far as domains are concerned, imo.
 
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Note that with blockchain domains with no renewals or risk of UDRP filings, administrative costs would be reduced. But how much demand would there be for a portfolio of .ZIL domains?
 
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