The rise of blockchain domain NFTs

The rise of blockchain domain NFTs

The rise of blockchain domain NFTs

Unless you’ve been living in a cave for the last couple of years, you’re certainly aware that non-fungible tokens (NFTs) have exploded in popularity. Digital art, music, game items and virtual land have all been tokenized.

This NFT craze also extends to blockchain internet domains, which can be more useful than a traditional domain. Purchasing one and setting it up takes just a few minutes.


    How DNS works

    First, let’s quickly review the basics of Internet Protocol (IP) and the Domain Name System (DNS).

    Internet Protocol (IP) is a set of rules for sending data on the internet so it arrives at the correct destination. Every connected computer has its own IP address, a string of numbers such as 122.100.199.155.

    Because it’s virtually impossible to remember the IP addresses of your favorite websites, the Domain Name System (DNS) was created. In a DNS name, the characters immediately after the “.”  are called the top-level domain (TLD) and the ones before it the second-level domain (SLD).

    DNS servers around the world act like phone books, translating website domain names into machine-readable IP addresses. It’s all managed by the non-profit Internet Corporation for Assigned Names and Numbers (ICANN), which creates new TLDs and oversees SLD registrations.

    Domain Name System (DNS) hierarchy

    Blockchain domains began with a Handshake

    As blockchain technology became popular, developers sought ways to decentralize internet domains and created the Handshake protocol. By registering new TLDs on its blockchain, the Handshake Naming System (HNS) bypasses ICANN and opens the doors for millions of new domains. Handshake sells TLDs through public auctions.

    Currently, at least two organizations have acquired blockchain TLDs and are offering SLDs to the public as NFTs; Unstoppable Domains and Ethereum Name Service (ENS). They’ve taken different approaches, which are discussed individually below.


    How can you use a blockchain domain?

    The first thing you’ll probably want to do is connect it to a cryptocurrency wallet to receive funds. A process known as “domain resolution” enables a human-readable blockchain domain to automatically direct payments to a wallet’s appropriate cryptocurrency addresses: Bitcoin to its BTC address, Ether to its ETH address, etc.

    How a blockchain domain works

    Your domain can also link to decentralized Web 3.0 applications. A growing list of supported apps is provided here.

    You can even develop your own website. Because it’s recorded on a blockchain as an NFT and launched on IPFS, a decentralized storage system, your website content can be deleted or changed only by you.

    Finally, blockchain domain NFTs can be bought, sold or traded at any time. In fact, a thriving resale market exists for popular domain names, primarily on major NFT marketplaces such as OpenSea and Rarible.


    How Unstoppable Domains work

    Unstoppable Domains is the largest provider of second-level blockchain domains, with more than 500,000 sold. Several TLDs are available:

    • .bitcoin
    • .blockchain
    • .coin
    • .crypto
    • .dao
    • .nft
    • .wallet
    • .x
    • .zil
    • .888

    In January, 2022, the company released over 1,000 four-letter domains at premium prices. Now you can own love.crypto, dogs.coin or iced.wallet!

    All domains are Ethereum ERC-721 non-fungible tokens except .zil, which is a Zilliqa NFT. They’re purchased outright, so you can own them for life or sell at any time.

    Unstoppable Domains is the largest provider of second-level blockchain domains

    After purchasing a domain, you’ll need to connect an Ethernet wallet. Unstoppable Domains supports many popular wallets, including MetaMask, MyEtherWallet and Trust Wallet.

    The next step is to “mint” the domain you’ve purchased. Minting is the process of claiming the domain and pushing it to the blockchain. After minting, you own the domain.

    Finally, you’ll want to add addresses of all cryptocurrencies your domain should manage. This would normally require running an Ethereum smart contract and paying a gas fee.

    Fortunately, Unstoppable Domains has begun using the Polygon Layer 2 solution to do this, at no cost to you. They’ve also provided a step-by-step video guide to walk you through this process. You can configure your minted domain with multiple wallets to receive over 270 coins and tokens, set up a Web3 website or NFT gallery, and more.


    How ENS domains work

    Ethereum Naming Service was the original provider of blockchain SLDs, using the .eth TLD. Unlike Unstoppable Domains, ENS is a decentralized organization (DAO).

    Original provider of blockchain SLDs: Ethereum Naming Service (ENS)

    ENS domains also exist as NFTs that can be traded on sites such as OpenSea and Rarible. Domains can include emojis,  and you can store addresses for over 100 blockchains, avatars, Twitter handles, and more.

    ENS domains are leased, though you can pay in advance for as many years as you wish to avoid annual renewal gas fees.


    Security concerns with NFT domains

    Blockchains are immutable, so hacking them is virtually impossible. But in these early days of blockchain domain adoption, things can occasionally go wrong with the services that support them.

    According to Decrypt, in September 2021, a bug in OpenSea’s code caused over $100,000 worth of NFTs that were transferred to ENS .eth domain owners to instead be sent to random, inactive addresses and be lost forever.

    In the end, these very occasional risks must be weighed against the greater security of never mistyping a crypto address or having your website hacked.

    This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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