Wild, Wild Web3: The Blockchain Domain Gold Rush Is Well Underway – Brands Should Act Now To Secure Their Web3 Domains 

ArentFox Schiff

Arent Fox

The advent of distributed ledger technology has ushered in a new digital era – a decentralized internet, neither owned nor controlled by a central authority. While blockchain enthusiasts hail this lack of centralization as representing a new chapter of freedom and individual empowerment, the punchline for brands is that the absence of adjudicating bodies and authorities also brings an abundance of uncertainty, risk, and discomfort.

Blockchain domains present a perfect example of the risk/reward endemic to this emerging digital frontier. Given the accelerating adoption of blockchain domains along with limited dispute resolution recourse available, we strongly encourage brands to consider securing intellectual property rights now.

What Are Blockchain Domain NFTs?

Blockchain domains are suites of smart contracts coded onto a public blockchain. While blockchain domains, upon first encounter, superficially resemble “traditional” domain names, a closer inspection reveals the similarities quickly diverge. Unlike traditional domains, which are essentially alpha-numeric naming references to IP addresses, blockchain domains are highly customizable computer programs. For example, blockchain domains can be coded to not only reference a holder’s digital wallet address but also to direct users to blockchain content, such as websites and decentralized applications (DApps) with wide-ranging use cases (e.g., chat, gaming, exchange/marketplace, social media).

By virtue of the underlying blockchain technology, blockchain domains are permanently affixed to a blockchain network. Thus, once a blockchain domain is acquired, it cannot be controlled or altered by third parties such as ICANN; essentially ownership is absolute. Accordingly, if a cybersquatter registers a blockchain domain, legal recourse is severely limited. 

As mentioned, ICANN has no jurisdiction and, if recent Twitter and Discord discussions are considered, squatters are not above threatening to “burn” domain NFTs (i.e., sending the NFT to an inaccessible digital wallet, thus rendering the blockchain domain forever useless and inaccessible) if their demands go unmet or if litigation is initiated. Lastly, unlike “traditional” domains, where the registrant’s information can be unmasked or is readily accessible via a WHOIS lookup, blockchain domains can be anonymously stored in digital wallets, sometimes with no means of unmasking the owner.

Multiple “Registries”

Not all blockchain domains are available from the same issuer. For example, .eth and .sol extensions reside on different blockchains (Ethereum and Solana, respectively) and are issued by different companies. While .crypto and .nft are both on Ethereum, they are not available from the same company that issues .eth. Additionally, some features of blockchain domains can differ based on the underlying smart contracts coded by the issuers that initially “mint” (i.e., create) the blockchain domain.

Time is of the Essence

Given that, for the most part, brands have one shot at securing blockchain domains with limited legal recourse and given further that blockchain domain adoption (and with it squatter exploitation) continues to accelerate, we urge brands to consider their options now, including the acquisition of domains on multiple blockchains. 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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