What is a Domain NFT: What You Need to Know About NFT Domains
Alex Moskov May 3, 2023 Ethereum 0
A domain NFT is a unique domain represented by a single Non-Fungible Token (NFT) that functions as both a crypto wallet address as well as a standard website domain. Historically, domains have been some of the most valuable pieces of digital real estate on the Internet:
- Business.com was purchased for $7.5 million in 1999, and, eight years later, sold for $345 million to RH Donnelly.
- LasVegas.com was sold for $90 million in 2005 to a Las Vegas travel agency.
- Voice.com was sold to Block.one, creators of the EOS cryptocurrency, for $30 Million in 2019.
- Crypto.com was bought by the crypto visa company then known as Monaco (MCO) in 2018 for an alleged $12 million.
How Domain NFTs WorkOk, there are two paths to take in this rabbit hole. The first, which we’ll start out with, is basically all you need to know: NFT domains are crypto addresses that function as web addresses.
- You can buy them, sell them, and hodl them just like any other NFT.
- They double up as wallet addresses, so someone can send you (compatible) crypto directly to your NFT domain address, which looks something like mosky.eth
- They triple up as domain names, so you can go to a website like coincentral.crypto (don’t try it, doesn’t exist) and see the site’s intended content.
The Prequel: Traditional, or “Web-2” DomainsSimply put, a domain name is the text that you type into a browser (Google Chrome) to reach a specific website (coincentral.com). In technical terms, it’s a string of text that corresponds to a numeric IP address. There are billions of devices on the Internet at any given moment, and the IP (“Internet Protocol”) is a set of rules that allows devices to communicate over the Internet. When you type in a domain name, like coincentral.com, into a web browser, you’re initiating a request to CoinCentral’s web server asking it to serve you content (our homepage content). This request contains your computer’s IP address. Once our web server receives the request, it sends a response back to your computer and you see the content (or an error message.) The Domain Name System (or DNS) is basically the phonebook of the Internet; it makes accessing websites a human-friendly endeavor– the actual IP address for coincentral.com is a complicated numerical IP address like 184.108.40.206. Ok, let’s take a breather from all the definitions. If you think about it, it’s fascinating how everything just clicks together on this massive amazing Internet– this nitty-gritty stuff is actually really neat, but let’s get into the more functional stuff. So, where do all these domain names come from? Who owns them? Well, there’s a whole hierarchy in place: Most domain names are managed by domain registries, which are companies you’ve likely never heard of. For instance, a company named Verisign in Virginia is the authoritative registry for .com and .net domains among other Internet infrastructure assets– and they generate over $1 billion in revenue per year doing so. Registries “manage” domains by maintaining the records of which individual domain belongs to who. However, these registries are managed by a department called Internet Assigned Numbers Authority (IANA) within a global organization called Internet Corporation for Assigned Names and Numbers (ICANN). ICANN coordinates many of the processes and databases that keep the Web-2 Internet running. With over 300 million registered domain names, registries have their hands full. So, Registries like Verisign will delegate the commercial sales of domain name registrations to registrars, such as GoDaddy. The registrars essentially act as salespeople on the front lines who get paid for every registration but also pay the register a fee– all of which is factored into the price charged to the end-user. But wait, after I buy a domain, it’s mine, right? Here’s the kicker– you don’t actually buy it, and it’s not actually yours. When you buy a Web-2 domain, you’re essentially “renting” it through a complicated back-end hierarchy for a maximum of ten years at a time. You can either extend your registration by paying an annual fee, but if you forget, the domain goes back on the market. There have even been instances of less-than-reputable registrars preying on upcoming expired domain names by automatically buying the domains the moment they expire and then trying to sell them back to the original registrar (or open market) at a hefty price.
NFT Domains Explained: Putting Decentralized Domains TogetherThe problems Web-3 companies are looking to solve generally revolve around giving direct ownership to the end-user and away from a murky chain of command and intermediaries. With the explosion of blockchain innovation in recent years came a myriad of applications, and Domain NFTs are one of the most exciting, but rarely talked about– granted, pictures of apes selling for millions make for better headlines. Similar to DNS above, a company like ENS, or the Ethereum Name Service, turns a complicated crypto wallet address (0xb6060BFb836897EAECa521A7C2BE728D9BB5CE92) into something more human, like coincentral.eth. Now, just like how you can send $20 to a complicated jumble of letters and numbers that is a crypto wallet address, you can send it to something like coincentral.eth. Further, you can actually link your ENS domain to a website address (like in DNS), so when you enter something like coincentral.eth in Google Chrome, you’ll bring up a fully functional website that could be, in theory, identical to coincentral.com. Unstoppable Domains, another crypto domain provider, offers a few distinct advantages:
- It’s also a hosting service: Think of it like a WP Engine that also hosts the domain.
- Multiple wallet addresses: coincentral.crypto, for example, could correspond to Ethereum, Bitcoin, Cardano, and Solana. ENS only works for Ethereum, and only offers .eth domains.
- It’s a one-time fee rather than annual payments: this way you actually “own” the domain rather than lease it.