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The rise of blockchain domain names opens the floodgates for opportunities and equally, risks. As the ever-evolving use case for blockchains traverses the realm of domain names, one has to ask whether this new development will be a boon or bane to those willing to take the innovative plunge.

Similar to a traditional domain name, a blockchain domain name, or simply, a blockchain domain, consists of human-readable alphanumeric text strings functioning as an address to locate a particular place on the internet. The main difference with blockchain domains though, is that they link to an address on a blockchain through an NFT which is provided by a blockchain domain name service. Each blockchain domain can be minted in the blockchain as an NFT. As a result, the domain name becomes a unique cryptographic token on a blockchain. This is why blockchain domains are also often referred to as “NFT domains”.

But while it may be similar in some ways to a traditional domain name, a blockchain domain is an entirely different animal. Traditional domain names link to an Internet Protocol (IP) address which serves to locate a website on the internet. It utilizes the traditional Domain Name Service (DNS) server which sources the address and thereby displays the webpage associated with the domain name.

On the other hand, a blockchain domain does not utilize a DNS. Instead, it links to a specific entry on a blockchain through an NFT that is created by utilizing a blockchain domain name service. Instead of being stored on the internet on a single server, the address linked to the blockchain domain is stored on a blockchain, running on a peer-to-peer server system and therefore, is decentralized.

Another peculiar characteristic of blockchain domains is that because they are embedded in a blockchain, the owner exclusively holds the private key to their wallet which houses the domains. This is because the blockchain address linked to the domain is also a specific crypto wallet that may store crypto and NFTs. This way, only the owner has complete control of their domain, and such allows them to exclusively manage and alter their website without needing permission from any third party.

The rising popularity of blockchain domains is primarily because of their use case. Blockchain domains can conveniently replace the long alphanumeric string used to designate a crypto wallet address. If you are familiar with a crypto wallet address, you would know for sure that it is near impossible to memorize the unwieldy string of alphanumeric characters which identifies the crypto wallet. Such a problem has been solved by using blockchain domains to replace and identify the crypto wallet address.

Blockchain domains can also be used as a sign-on identity. Because blockchain domains are unique and strictly private, they can be used by their owners to sign in both on the traditional and decentralized web like a crypto wallet does.

Aside from identifying a crypto wallet address, blockchain domains can be used as an address for websites housed within a blockchain. The new iteration of the internet lies on the principle that sites would be housed on a blockchain and hence, decentralized. This is often referred to as “Web 3.0”. Under such a setup, the blockchain domain which is already docked on a blockchain can be used to link an address of a website that is also blockchain-based.

The innovative use cases for blockchain domains obviously carry with them the advantage of security, decentralization, consistent and portable identity, and seamless blockchain transactions. However, these advantages must be weighed with the risks and pitfalls that blockchain domains carry with them.

Blockchain is essentially decentralized and unregulated. These characteristics likewise form part of the foundations of blockchain domains. For one, the highly decentralized nature of blockchain domains and the anonymity attached to them create a different level of attraction to squatters and trademark grabbers. Enforcement against infringers would also be, cumbersome to almost impossible because, at the moment, blockchain domains are unregulated. Unlike traditional domains, blockchain domains are not governed by the Internet Corporation for Assigned Names and Numbers (ICANN). As such, blockchain domains and their owners are not subject to ICANN procedures to settle domain disputes, including the often used Uniform Domain-Name Dispute-Resolution Policy (UDRP) as well as the Uniform Rapid Suspension System (URS).

Added to the risks posed by the decentralized nature of blockchain domains, the veil of anonymity and the fact that it is almost impossible to ascertain the identity of a blockchain domain equally pose enforcement problems. For one, failure to identify the owner of an infringing blockchain domain would present legal problems like determining the proper party, jurisdiction, and venue. An aggrieved intellectual property (IP) rights owner has only the blockchain domain naming service to run to. Compelling the domain naming services or blockchain exchanges to produce owner identity or information is limited to one.

Also, in the remote possibility that an offended party will be able to obtain a legal remedy or a court order directing that an infringing blockchain domain be assigned to the genuine rights owner, most domain naming services are not able to transfer ownership of a blockchain domain after the initial distribution.

In some cases, though, blockchain domain naming providers undertake to reserve domain names they consider famous and well-known, a far cry from respite for trademark and IP owners as they are virtually left at the mercy of name services’ determination of which trademarks or brands warrant protection.

In perspective, blockchain domains present both opportunities and risks for Ip rights holders. As it stands, IP rights owners especially brand owners should consider innovations such as blockchain domains with extreme caution and take proactive steps so that emerging technologies could be exhausted to create opportunities rather than vulnerabilities.