The year has been a tough year for the proponents of cryptocurrencies, non-fungible tokens, and other blockchain-based technologies.
In November, FTX collapsed, incinerating billions of dollars of investors' capital because it was exposed as a fraud. The price of many non-fungible tokens, such as NFTs, a type of asset that frequently resembles a digital trading card, most famously the Bored Ape Yacht Club collection, has plummeted. The SEC has retaliated against some of the most renowned crypto firms, and has introduced new crackdowns on those firms.
Many Americans are uncomfortably skeptical of blockchain-based technologies, he said. While some are tempted to dismiss the whole industry as corrupt or fraud, others are willing to believe that it's a scam.
That would be a mistake. The blockchain technology is incredibly powerful.
But to legitimize a blockchain-based, decentralized internet, companies within the industry will need to do a much better job of policing themselves, rooting out abusive practices, and creating a welcoming business environment.
Note that NFT domains are novel versions of the traditional '.com' or '.org' domain names most people are familiar with, but with some very important differences.
Traditional domains exist on a single centralized system managed by the non-profit Internet Corporation for Assigned Names and Numbers. When someone buys 'name.com' they are actually buying the rights to that domain. Companies may not renew their domains, causing them to lose control over important web content.
The NFT domains, instead, are hosted on the blockchain, a digital ledger distributed across a decentralized network of computers. When purchasing domains, the buyer must keep complete ownership of the domain and all data associated with it, usually for only a one-time payment.
Normally, blockchain wallet addresses are characterized by unruly string numbers and letters that are difficult to recognize, much less remember. NFT domains simplify their addresses into simple-to-recognize names that can't be duplicated or forged.
Although NFT domains can be used for displaying content like a traditional website, their applications go beyond that. -> NFT domains exist as a person or institution's main online identity, enabling them to conduct cryptocurrency transactions, sign into websites, or interact with the Metaverse.
'.eth' is owned by the blockchain platform Ethereum Name Service and is the most popular blockchain domain. While Budweiser recently purchased the NFT domain beer.eth domain, Nike owns dotswoosh.eth.
To appeal to young consumers, Budweiser has replaced its Twitter profile with an NFT of an illustrated, Budweiser-themed rocket. The company also launched a heritage collection of NFTs featuring historical beer cans.
Nike and Gucci are exploring Metaverse consumer experiences. With blockchain technology, luxury brands like Prada, Tiffany, and Balenciaga are collaborating on unique physical products with NFT collections, which help authenticate sellers and buyers via blockchain. In short order, NFT domains will also complement existing blockchain-facilitated marketing--from personalizing loyalty rewards programs to eliminating spam and bots.
But there are significant hurdles that are hindering NFT domains from going fully mainstream.
First, there's little to stop someone from purchasing an NFT domain for a well-known institution--a bank, for example, or a major retailer--and masquerading as that organization to defraud customers. In fact, a person might think they're paying bills or buying pants, when in fact they're sending a cryptocurrency payment to a bad actor. As a matter of fact, 'domain squatters' often buy top-notch domains and sell them to businesses for ridiculous amounts of money. Now,.eth domains are being held by squatters for companies on the Fortune Global 100 list.
Someone squatting on 'riteaid.eth ', hoping to sell the domain to Rite Aid's parent company, recently contacted me. The squatter is selling the domain, which he bought for $5,000, for $200,000. I declined to work with them. Samsung's eth and Google's eth are each listed for more than $100,000.
Brands can avoid being extorted by registrating their NFT domains now. No one will regret it, even those who don't.
Although underhanded domain-related behavior could normally be addressed with some well-crafted regulations enforced by a central authority like ICANN, the decentralized nature of the blockchain, and the fact that NFT domains are owned by the person who bought them, makes this improbable.
With a system of laws and procedures that prevent such infringement and provide recourse to wronged parties when it occurs, the NFT domain landscape will be too unpredictable to achieve widespread adoption. And the only way such procedures can take hold is if current NFT domain providers adopt them voluntarily.
To their credit, some providers, most notably members of the Web3 Domain Alliance, are discussing protective blocks to prevent infringement. But that won't remedy the fraud that's already underway. An industry-wide effort to increase trust and reliability is needed.
The dream of a secure, decentralized future Web may never materialize, unless these NFT domain companies succeed in their efforts to create a secure, decentralized web.