It is the NFT season at Nas Academy. We have been talking about what NFT is and why they are so expensive. Our hypothesis is that most NFT projects out there are likely to fail. However, NFT as a technology has immense potential to unlock so many possibilities.
NFTs can act as proof of ownership, proof of authenticity and provenance. This makes it possible to use NFTs in the fashion industry, medicine, real estate etc. However, there is one more place where NFTs can come in really handy. And this is anNFT domain. What? Domains and NFT? How do these relate? That is what we are planning to discuss today. What are NFT domains and how do they work?
To truly appreciate the working of an NFT domain, we need to understand how domains usually work. An oversimplified explanation coming up! These websites that we see today did not always look like this. These websites are hosted on servers (powerful computers). This server has an address associated (called IP address) with it. For example, google.com has the IP address as 126.96.36.199.
But imagine if you had to remember this string of numbers each time you wanted to access a website. It would have been a nightmare for our memory. Therefore, a system was proposed called the Domain Name System.
Domain name system or DNS in short mapped each of these IP addresses with a human readable name like ‘Google or Nas academy’ etc. This might look like a small change now, but back then it was a major bottleneck in the adoption of the internet.
Whenever you type in “Google.com” in your browser, it automatically figures out that this address (Google.com) is associated with IP 188.8.131.52 and takes you there.
For this to happen, these domain names have to be registered in the Domain Name System.
DNS servers are spread all over the world, and help browsers resolve domain names to IP addresses. Internet service providers then connect users to the appropriate IP address.
There’s a central authority called ‘Internet Corporation for Assigned Names and Numbers (ICANN)’ that takes care of this entire architecture and overall system. Before Web3.0 knocked our doors, ICANN and DNS were the only ways to get a domain.
The websites like Godaddy or Bigrock are mere intermediaries. They rent out the domain you chose with ICANN/DNS and give you the ownership for a fixed time period. Since these websites don’t own these domains, you have to renew it periodically by paying a fee.
Since ICANN is managing the entire internet domain name here, they have become an extremely powerful, centralized authority. While they are obviously doing a great job by maintaining the status quo, there are some obvious downsides of this system:
ICANN has the authority to take down any domain name it feels inappropriate. While this can be really handy to curb the spread of misinformation, there is a definite downside of giving this power to a single authority. They can succumb to pressure and lead to the spread of propaganda.
You are not the real owner of your domain name. You are merely renting it out for a limited period. Therefore, the ownership of your domain remains a cause of concern.
Centralization always comes with a risk of a single point of failure. ICANN is no different. It also has a risk of being hacked or defrauded. In such a case, millions of users who are trusting this centralized authority will be impacted.
NFTs are nothing but immutable records of ownership in the Blockchain. These records are unique and non interchangeable. Now apply those principles to a domain. Imagine that you could purchase a domain name directly from an authority such as NFT.
This would mean that you could own this domain for once and all. Secondly, these domains would be held by you in your decentralized wallet.
A few projects that offer these services are ENS or Ethereum Name Service, Unstoppable Domains, Bonafida etc.
NFT domains have more than one use case. Let us explore all of them. This would also highlight the metrics that you would consider before buying an NFT domain:
We always vouch for the fact that Blockchain and Bitcoin is not just a technology but also a movement. As more people get absorbed by this revolution, it would become an extremely important factor for brands to consider decentralization.
Therefore, we would see more of google.eth or google.x coming up in the future.
NFT domains offered by different blockchains provide various choices to the buyers. For example, Unstoppable Domains has about 8-10 options for each domain name.
Another very important use case of a NFT domain is wallet address. Currently, a decentralized wallet like Metamask has a lengthy alphanumeric address like 0x8aB4a886AdC5fFD8FAeC3324A303381028FF4f93.
Since these addresses are used to send and receive crypto, there is no way someone can memorize it without copy pasting the address. It is an extremely inefficient and non user friendly way of transacting crypto.
NFT domains try to solve this problem by replacing all your alphanumeric wallet addresses with your domain name. So instead of asking someone to send you crypto on 0x8aB4a886AdC5fFD8FAeC3324A303381028FF4f93, you can ask them to send it on pandatechie.crypto. Simple!
Another important use case of NFT domains is the ability to use them as social media handles. Twitter currently allows you to replace your social media handle with Ethereum Name Service. You could also replace it on other social media networks.
A noteworthy point is that social media companies do not recognize this ownership (except Twitter). However, if we were to ask you if you really own your Instagram handle right now, how many of you would agree?
Cryptoverse is all about democratization of wealth. Ethereum Name Service recently launched their token called $ENS.
ENS rewarded all the early adopters with massive airdrops. People who bought even one domain from ENS got a value worth $5000 airdropped to them.
Back in the day, when the internet was becoming a mainstream phenomena, a lot of people bought domain names (.com) for some key brands out there. Later, they charged a handsome amount of money to release these domains.
NFT Domains have a similar use case involved. Although some brand domains are protected and one cannot purchase them without proper authentication, there’s still a lot of opportunity to flip domains at a higher price. One could purchase domains which are topical, belong to mid-cap companies etc.
Although these decentralized domains are feature packed and transformational, there are some technical shortcomings as of now. It is imperative that one must be aware of them before investing. This space is still evolving and we are sure that these issues would be a thing of past, but for now, it is what it is:
Regular mainstream browsers like Google Chrome and Firefox are not equipped to run decentralized domains as of now. There are certain extensions that enable that. But unless it is available as a default feature without any additional effort, it is going to be challenge for mainstream adoption.
This means even if you purchased and configured your NFT domain, it would be very difficult for your customer/readers to reach you without having the extension installed.
There is a limit to the number of wallets which are currently being supported by these domain names. Last time we checked, there was no support for Metamask or Phantom wallets which are the key players in this space.
But as we mentioned before, it is simply a matter of time before these loopholes are plugged.
Sooner or later, NFT domains are going to be a thing. They are likely to replace conventional domains because that is how disruption works. The bigger question is, are you ready for such a shift? Is your brand well equipped to embrace web 3? If you are still wondering, the time is now. Act fast.
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