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opinion Unpacking the Future: Tokenization and DAOs for New gTLDs

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Brands.International

MarekTop Member
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Hi guys,

Recently, I was thinking about how unprecise the domain valuations still are when it comes to new gTLDs (generic Top-Level Domains (gTLDs) like .life, .world, and .online) and how to put more of these new domain names to development.

In this post (my first after 4 years, I guess!), I want to discuss how tokenization and Decentralized Autonomous Organizations (DAOs) could potentially revolutionize domain valuation and speed up their development.

Understanding two main problems with new gTLDs in 2024

At present, if you are the owner of a new gTLD registry (that means you are the owner of one or a few new extensions) or a private domain investor with some amount of good-quality new gTLDs like me, you will probably agree that we have two main problems:

Problem no.1: the amount of development of domain names should be more significant:

For example, I own domain names like alien.life or new.properties. Indeed, these can form super brands for their respective areas. While I have plans to develop some of my domain names, it is inevitable that, as an individual, I can develop (or organize some joint ventures for) only a few of them at any given time.

The same goes for registries, where some bigger registries own thousands of great new gTLDs. However, registries usually do not develop them, and if there are some exceptions, they are rare.

So, both private investors (domainers) and registries are "sitting" on extensive inventories of high-quality domain names. Both parties are also patiently waiting for offers from other parties. Sometimes, we see great sales, which happens in case a very motivated buyer with a significant budget and lust for just that specific domain name happens to approach domain holders. However, most domain names are just waiting for the opportunity to be put into use, as potential buyers usually do not have sufficient funds to purchase these grail domains or do not understand the value of such domains. So we have a problem with liquidity here.

Underestimating the value of great domain names leads us to a second problem with new gTLDs:

Problem no.2: valuations of new gTLDS are usually on the lower end and pretty unprecise
Many entities (mainly domain registrars (domain resellers) and domain brokers) claim they can give you a valuation of new gTLD domain names. While in the .com era, this was pretty straightforward, in the era of new gTLDs, when we have hundreds of extensions, this task is much more complicated. In 2020 I wrote about some problems with the valuations of new gTLD in my article HERE, hoping to see some improvements, but everything has stayed the same. Valuations are still unprecise and, in many cases, do not make any sense.

For example, these days, one party values my domain name new.properties as worth 2040 USD. But what does that mean for me as a domain owner? Does this number tell me that when I have my domain name with BIN = USD 2040, it will sell within 1 day? Or 1 week? Or 1 year? Or ... if a student from a rich family wants to do his school project about new properties, will this be the price he will pay me? Or if a billionaire real estate mogul wants to develop a global website about new properties on various continents for his wealthy clientele, is this the fair price he will pay for the domain name? Is this the maximum price he will or can pay?

Number 2040 absolutely does not make sense when provided without any context. The valuation of a domain name should be a multidimensional vector array containing several values for several scenarios (seller in stress, the seller can hold, etc), time frames (immediate liquidation, the seller can hold 1 year, 10 years, etc), buyer types (poor student, fellow domain investor, millionaire, billionaire), etc. Of course, for human beings, such much more precise (and truthful) answer would be unusable (unless we speak about very knowledgeable domain owners). A typical domain owner wants to know 1 number: a domain valuation. But if that number does not make sense for one party, be it the domain seller or domain buyer, we are again stuck in limbo, and there is again a problem with the liquidity of the domain names, and transactions are halted.

Because of that demand, I think the most logical way would be to use "market forces" to evaluate the domain name. and to get a "fair valuation". But how to do it?

I believe both problems (better valuations and getting more domain inventory for actual use) can be solved by blockchain technology and domain tokenization.

Tokenizing New gTLDs: A Beginner's Guide

What is Tokenization?
Tokenization in the context of domain names involves converting the ownership rights, responsibilities, and benefits of domain names into digital tokens on a blockchain. These tokens are digital certificates proving ownership rights, responsibilities, and benefits, similar to a title deed but in a digital format that can be easily traded or sold. Basically, we are creating new internet coins here.

Let's imagine domain name new.properties: on some blockchain (for example, Solana or Base); one can initially create 100, 000, or 1000 000 (or any number of coins, really) with the symbol NEWP.

Reminder: Before you start creating new tokens (coins), you need to make sure this whole process is legal in your jurisdiction. Also, offering these coins to other market participants later must be legal; otherwise, do not do it. In some jurisdictions, various mandatory disclaimers are required. In further text, I will presume all these activities are legal in your jurisdiction so we can go to the more technical side of it...

Why Tokenize Domains?
  • Liquidity: By converting domain rights into tokens (coins), they can be bought and sold on digital exchanges, much like stocks. This makes it easier for domain owners to sell their assets quickly if needed.
  • Market-Driven Valuation: Instead of relying on appraisals or historical sales data, the market itself will dictate the value of domain tokens through trading activities. This dynamic pricing mechanism ensures that the domain's price at any given time reflects its current market demand.
  • Fractional Ownership: High-value domains often represent a significant investment. Tokenization allows multiple investors to own "parts" or "shares" of a domain, making it more accessible for smaller investors.
Imagine now the new.propeties domain name gets tokenized and there are 100 000 tokens created with the symbol NEWP. Tokens get into the open market, start trading, and the price stabilizes at 1 NEWP = 1 USD. This then gives a market-driven valuation for the new.properties domain name as 100,000 USD.

That all sounds nice and good (and solves our problem no. 2), but why would anyone want to purchase a fraction of domain name new.properties for let's say 100 USD? In other words, why would anyone want to exchange 100 USD to get 100 NEWP??? What would be the BENEFITS of such a purchase? For this, we need to understand another blockchain concept, the concept of DAOs.


Understanding DAOs: Governance on Blockchain

What is a DAO?
A DAO, or Decentralized Autonomous Organization, is essentially an organization run by rules encoded as computer programs called smart contracts. DAOs operate on a blockchain, which means they function in a transparent and secure environment without the need for a central authority.

Role of DAOs in Managing Domains

  • Democratic Management: Members of a DAO can propose and vote on initiatives concerning the domain's development, such as launching a related website or marketing strategies. This collaborative approach ensures that every stakeholder has a voice in the decision-making process.
  • Automated Operations: Since DAOs run on smart contracts, many operational aspects can be automated. For example, revenue generated from a domain can be automatically distributed among token holders based on predefined rules.
  • Enhanced Security and Transparency: All transactions and votes within a DAO are recorded on the blockchain, providing a tamper-proof ledger of all actions taken. This transparency builds trust among participants and makes managing collective assets straightforward.

In other words, DAOs are typically a global group of people, who have one thing in common: a shared interest. In this case, the shared interest would be to develop or somehow positively utilize the domain name new.properties, as they all hold its governance token, a NEWP.

Now, more people with shared interests have more energy, more ideas, and (in theory) more execution power than a single person, or even a registry. This can lead to better chances for the domain name to be developed into something really useful. After all, there is a direct correlation between domain token price and the status of its development or business performance: the more profit from the domain name (or the higher expectations of future development potential) the higher the token price, and the higher domain valuation for a specific domain.

Vice-versa, if DAO is not very functional and is doing nothing for the domain name development/promotion/advertisement, the token price will most probably go down (and will correctly reflect the current problems of DAO members)


Navigating the Challenges

Regulatory Hurdles:
Blockchain applications in real assets, like domains, face a complex regulatory landscape that varies by jurisdiction. Navigating this will require legal expertise and cooperation with regulatory bodies to ensure compliance.

Technological Barriers: Implementing blockchain technology for domain management is not trivial. It requires robust technical solutions to handle issues like transaction speed, data privacy, and integration with existing domain registration systems.

Adoption by the Industry: For tokenization and DAOs to truly take off, they must be embraced by key players in the domain industry. This includes registries, registrars, and investors who will need to understand and trust the technology.

First Steps Toward Implementation
  1. Educational Initiatives: Providing resources and training sessions for domain registries and investors can demystify the blockchain technology and showcase its benefits.
  2. Pilot Projects: Launching small-scale pilot projects can demonstrate the practical applications and benefits of domain tokenization and DAOs, serving as proof of concept.
  3. Partnerships with Tech Experts: Collaborating with blockchain developers and technology experts can help bridge the gap between traditional domain registration and cutting-edge blockchain applications.

But if we overcome all this, we can live in a world where thousands of domain names are developed by thousands of DAOs, bringing something useful to the world while unlocking liquidity for early new gTLD adopters, be it registries or private domain investors.

Conclusion

Tokenization and DAOs offer a futuristic but achievable path to enhancing how we value, manage, and transact domain names. By leveraging blockchain technology, the domain industry can step into a new era of efficiency.

Let’s start a conversation about this! What are your thoughts on tokenizing domain names? Do you think DAOs could be the future of domain development? I’m eager to hear your opinions.

Best regards,
Marek

(Disclaimer: I have used chatGPT and Grammarly tools to better express some points and to make the article more readable)
 
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The views expressed on this page by users and staff are their own, not those of NamePros.
Honestly dude, anytime I see terms like DAO or tokenization I'm gone like a when a hawk tuah gets dropped into conversation.
 
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Honestly dude, anytime I see terms like DAO or tokenization I'm gone like a when a hawk tuah gets dropped into conversation.
Why is that? :)
 
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Take a look at 1618.com in China.

They used this model seven or eight years ago.

Now they are in jail.
 
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Seems the hype for wanting these technologies this has died down a little.
 
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I don't really agree on tokenization of domains dramatically changing the landscape of domaining.

That being said, welcome back- its nice to see you posting again 🙂
 
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Tokenization Technology is being developed further,
behind the curtain.

The only question is:
When is the tipping point, that turns that into lucrative mass adoption.
 
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I don't really agree on tokenization of domains dramatically changing the landscape of domaining.

That being said, welcome back- its nice to see you posting again 🙂
Thank you, I much appreciate that! 😃
 
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Tokenization Technology is being developed further,
behind the curtain.

The only question is:
When is the tipping point, that turns that into lucrative mass adoption.
Yes, just recently watched Blackrock CEO's speech about how they plan to tokenize the whole economy in the future :)
 
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I knew it was bad for new gtlds but this bad that you want to turn them into internet coins? Just join King Com, where you don’t have to resort to this type of wizardry in order to sell a domain.

I agree with the problems you stated, low development, low valuations. Which is really nothing new and probably won’t change.
 
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I knew it was bad for new gtlds but this bad that you want to turn them into internet coins? Just join King Com, where you don’t have to resort to this type of wizardry in order to sell a domain.

I agree with the problems you stated, low development, low valuations. Which is really nothing new and probably won’t change.
I think these ideas might work for .com as well. Just I do not see .com registry would be much motivated to test or implement them as they do not own valuable .com names (all great .com names are distributed already), so there is not much incentive on registry level for .com, I presume.

Meanwhile, new gTLD registries still own much of that inventory, so they should think of how to best use it.
 
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I think these ideas might work for .com as well. Just I do not see .com registry would be much motivated to test or implement them as they do not own valuable .com names (all great .com names are distributed already), so there is not much incentive on registry level for .com, I presume.

Meanwhile, new gTLD registries still own much of that inventory, so they should think of how to best use it.
Yeah, I think most people will look at this and the eyes will glaze over having no idea what is going on. I got into crypto myself, making money, so I know a little about this stuff but I don't want any part of this.

Do you know if there have been any sales/success with this kind of thing? Any real life examples?
 
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The only bridges I'm currently aware of with current ICANN regulated tld's towards blockchain are dot-box and dot-lux. Maybe correct this post with more.

New-G's have always been victim to a variety of factors in terms of *sales but NOT adoption they are being used like crazy by an almost immeasurable amount of entities.

When bridging the gap to being able to use new G's or even legacy into crypto it's a back-end thing that only the registry's can adopt and while there has been some traction the issue is that:

- Domains rely on governance with yearly renewals plus ICANN overseeing
- Coins and crypto transactions are verified in real-time, domains aren't built for this

The solution is to look to actual native-based blockchain protocols like Handshake or Ethereum, or just continue to speculate on what "could be" with current Web2 solutions.

Personally I think domain names should be always be looked at in their raw form and any other builds are just icing and being used for these kind of flavour of the year like DAO or tokens or whatever comes next is like putting an empty water bottle between a bicycle tire and the rim to make some noise.

Internet "profiting" flux and fomo is nuts don't use it as an excuse to promote a good name in your portfolio it's thin ice.

Good luck buddy.
 
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Yeah, I think most people will look at this and the eyes will glaze over having no idea what is going on. I got into crypto myself, making money, so I know a little about this stuff but I don't want any part of this.

Do you know if there have been any sales/success with this kind of thing? Any real life examples?
I have not heard about any real life examples yet. I do not know about anyone who yet tokenized any domain names and/or established DAOs around such domains to enable their development.

The main reason why is that no entity yet offers custodian service for domains that could be tokenised. If domain is tokenised, trusted party (who respects the vote of DAO members) need to custody such domain, and I think that trusted party should be either registry itself or some major registrars. The reason why we need trusted custodian is that after the domain is tokenised, it does not have any specific owner anymore, while owners of token can vote in DAO as of how to handle the development or usage of that domain. So as an example, you will have 20 000 of token owners, and all of them can vote, but there is no specific domain owner.

Current systems do not support domain names without specific owner.
 
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I'm having a hard time seeing the value of tokenizing a traditional domain name. The smart contract has no effect at the registry / ICANN level.

As far as gTLDs, it doesn't really seem any more relevant.

I have nothing against trying out new protocols and ideas, I just don't see the current value in this. What would the best case scenario be with this? That ICANN somehow grandfathers in tokenized domains into a new blockchain technology in the future?
 
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Tokenization will be the standard new technology for every asset, digital in the form of NFTs and physical in the form of RWAs.

If you think about Meme coins and how much people invest in them imagine what could happen to real assets like premium domains.

Totally bullish in this industry.
 
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Welcome back, @Brands.International

I see the problem in your investment model overall. Basically, it is carriage before the horse. Same issue with NamesGuy's approach, albeit different mix of names.

So, you've collected names that look nice and could be nice hacks. At the same time, you want to sell them and make money instead of just sitting on them and making registrars happy. But you have ignored the fact that there is not simply market for all those names on the level that would justify what you are trying to achieve. So you are on a mission to create that market, just like the NamesGuy. Here is the thing though. If you or him had resources and skills to create a market for an industry or even a niche, you both would be multi-millionaires or billionaires in pretty much any sector. You don't even need to deal with domains.

Again, it takes lots of investment capital available, lots of expertise and lots of experience that only a handful of people/companies can boast.

A friendly advise: instead of living in clouds and thinking you can pull something like that, see where the market is and carve yourself a niche there.
 
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Welcome back, @Brands.International

I see the problem in your investment model overall. Basically, it is carriage before the horse. Same issue with NamesGuy's approach, albeit different mix of names.

So, you've collected names that look nice and could be nice hacks. At the same time, you want to sell them and make money instead of just sitting on them and making registrars happy. But you have ignored the fact that there is not simply market for all those names on the level that would justify what you are trying to achieve. So you are on a mission to create that market, just like the NamesGuy. Here is the thing though. If you or him had resources and skills to create a market for an industry or even a niche, you both would be multi-millionaires or billionaires in pretty much any sector. You don't even need to deal with domains.

Again, it takes lots of investment capital available, lots of expertise and lots of experience that only a handful of people/companies can boast.

A friendly advise: instead of living in clouds and thinking you can pull something like that, see where the market is and carve yourself a niche there.
Yep. It is a lot easier to go where the demand is than create the demand.

All this stuff ends up being extremely complex to the average person.

Brad
 
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Yep. It is a lot easier to go where the demand is than create the demand.

All this stuff ends up being extremely complex to the average person.

Brad

Not sure if it is always possible even to create the demand or take over the established default use (unless major screw up from the default guys). One of those gurus or companies, don't remember exactly, said once that if he was given any amount for marketing budget to overtake Coke and Pepsi as #1 and #2 for soft beverages, he'd politely decline as that is not possible.
 
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Creating demand doesn't have to be a one man show and shouldn't be, same argument we've had for years. Some of us aren't sheep and look to not where the market is, but where it should go.

Making money in an area where demand is proves nothing in terms of quality naming and this is where we have strayed from. Your internet should be better then what you are trying to make off it.
 
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if he was given any amount for marketing budget to overtake Coke and Pepsi as #1 and #2 for soft beverages, he'd politely decline as that is not possible.

In fact just recently Dr. Pepper has taken over Pepsi to hold the coveted #2 spot in the soda market.
 
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In fact just recently Dr. Pepper has taken over Pepsi to hold the coveted #2 spot in the soda market.

Dr. Pepper is still Coca Cola. Yeah, their brands can move up and down.

According to the data, shared with the Wall Street Journal, Coke still leads by a very healthy margin, taking home 19.2% of the soda market in the U.S. by sales volume. Next came both Dr. Pepper and Pepsi, with 8.3%, but Dr. Pepper took it by a nose. According to the data, another Coca-Cola brand comes next, with Sprite earning 8.1% and then Diet Coke at 7.8%.
 
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Welcome back, @Brands.International

I see the problem in your investment model overall. Basically, it is carriage before the horse. Same issue with NamesGuy's approach, albeit different mix of names.

So, you've collected names that look nice and could be nice hacks. At the same time, you want to sell them and make money instead of just sitting on them and making registrars happy. But you have ignored the fact that there is not simply market for all those names on the level that would justify what you are trying to achieve. So you are on a mission to create that market, just like the NamesGuy. Here is the thing though. If you or him had resources and skills to create a market for an industry or even a niche, you both would be multi-millionaires or billionaires in pretty much any sector. You don't even need to deal with domains.

Again, it takes lots of investment capital available, lots of expertise and lots of experience that only a handful of people/companies can boast.

A friendly advise: instead of living in clouds and thinking you can pull something like that, see where the market is and carve yourself a niche there.
Thank you, it is nice to be back! :xf.smile:

I agree it is a very large task to get these ideas in motion, but I am also sure that in a few years, something like that will spring into existence.

It is simply a way how to make illiquid assets liquid. Still, this task has to be undertaken by some large player, ideally a registry with a lot of premium inventory that is sitting idle.
 
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It is simply a way how to make illiquid assets liquid. Still, this task has to be undertaken by some large player, ideally a registry with a lot of premium inventory that is sitting idle.
Some things are illiquid for a reason; a lack of demand.

If this becomes a thing, I think it would only work with extremely valuable domains.

Brad
 
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I'm having a hard time seeing the value of tokenizing a traditional domain name. The smart contract has no effect at the registry / ICANN level.

As far as gTLDs, it doesn't really seem any more relevant.

I have nothing against trying out new protocols and ideas, I just don't see the current value in this. What would the best case scenario be with this? That ICANN somehow grandfathers in tokenized domains into a new blockchain technology in the future?
I think the smart contract should affect domain names on registrar levels. So if DAOs vote for let's say change of DNS settings for a tokenized domain, the result of that vote should be automatically reflected via smart contract in the database of the registrar.

ICANN does not need to do anything new imo, the only adjustment that needs to be discussed and implemented is that "owners" of such domain names are DAOs.
 
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