Blockchain technology is part of the Web 3.0 revolution, based on decentralization, privacy and individual ownership. This goes against the largely centralized and public Web 2.0 that we have grown accustomed to over the past 20 years. Businesses are increasingly adopting Web 3.0 technology for smart contracts, supply chain management, domain infrastructure, and several other applications.
Non-fungible tokens (NFTs) exist on the blockchain and are digital certificates of authenticity used to assign and verify ownership of a unique digital or physical asset. For example, it can be works of art, videos or other data. Blockchain domains are usually represented as unique addresses on the blockchain. The emergence of blockchain domain names presents several issues for brand owners.
For traditional domain names (under Web 2.0), the Domain Name System (DNS) ensures the accessibility of the target site (hosted by an IP address). When entering a domain name in the URL field, the DNS looks up the corresponding IP address and displays the website. A central body manages this practice: the Internet Society for Assigned Names and Numbers (ICANN) Registry.
Traditional and blockchain domain names share some similarities. They are two readable text strings that serve as an address to direct a user to a particular destination on the Internet.
However, blockchain domain names do not use DNS to determine an IP address because ownership of the domain name is stored in the blockchain. This means that instead of connecting to a central database, browsers search the blockchain to see services associated with the domain.
Blockchain domain names have a variety of uses such as simplifying wallet addresses to the blockchain domain name (as opposed to an alphanumeric code) as well as building and hosting websites. The most popular top-level blockchain domain names include. eth,. crypto, .nft and .bitcoin.
Blockchain domain names can also exist on the Interplanetary File System (IPFS) – a decentralized alternative to the traditional web, where IPFS is a P2P network for file sharing and storage. This network works through a system of nodes where data can be hosted without being tied to a single location. The website files are then uploaded to the P2P network, where website content, such as text and images, can be linked and accessed.
For now, decentralized web browsing is largely limited to specialized browsers or via plugins to more widely used browsers.
As blockchain domains are created, they are traded like a commodity on NFT markets, where purchase confers full ownership of the domain name. Since there is no central governing body for blockchain domain names, ownership is not subject to any DNS-related rules, including alternative dispute resolution mechanisms. A brief search of some NFT marketplaces reveals that domain names containing well-known brands are already openly traded.
Blockchain domain names present several problems for brand owners, including the use of domain names for cybersquatting, the sale of counterfeit products, and fraud. In its October 2021 Digital Defense Report, Microsoft called blockchain domain names the “next big threat” as they are increasingly used to distribute malware.
Enforcement can be difficult because blockchain domain names exist outside of regular DNS regulations. A major hurdle is simply figuring out who owns the domain name (and therefore where to file a complaint).
Therefore, trademark owners should consider other enforcement options, such as using the takedown procedures offered by marketplaces, where some apply a notice and takedown process for alleged copyright infringement. pursuant to the Digital Millennium Copyright Act (DMCA).
Brand owners should also consider a proactive approach by purchasing domain names containing core brands to retain.
As blockchain technology becomes widely adopted, these issues will increase in scope, quantity, and complexity. This will prove to be a new battleground for brand owners around the world in the not so distant future.