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Internet domains: from the dotcom bubble to speculation

October 17, 2022

9 min

Internet domains: from the dotcom bubble to speculation
Beginner

Finding answers online is almost a reflex nowadays, but what mechanisms and components actually lie behind a simple Internet search? Domain names are the real key to web exploration. Let’s find out what an Internet domain is and why “.com“created a bubble and attracted speculators.

What is a domain name?

Today, the Internet is the most accessible source of information on the planet: a web browser is enough to plunge us into a sea of knowledge. However, to orient ourselves, we need precise directions. Navigating the web would be impossible without domain names.

Though, what is an Internet domain essentially? The answer is a text label to easily and uniquely identify a resource on the web. Any entity connected to the Internet has an IP address. It is a code that is too complex to be memorised, because it consists of a string of at least four numbers (e.g. 123.4.56.789). Therefore, the IP address is combined with an easier name, the Internet domain, such as youngplatform.com.

The domain name system works like a telephone directory. It pairs names and numbers, but in this case it assigns the corresponding websites, if they exist, to IP addresses. To delve deeper into where Internet domains are registered and who manages them, we need to trace the history of their creation and spread, starting with the birth of the Internet.

Arpanet and the Domain Name System (DNS)

The first computer network was created by the US Department of Defence in 1969: ARPANET, the prototype of the Internet. In this computer network, each computer had a ‘host name’, associated with a numerical address. These correspondences were recorded in a text file (HOSTS.TXT) kept at a computer in the Stanford Research Unit (RSI). This registry was called up with every communication between the devices, but the centralised process limited the expansion of the network. Thus, in 1983, a more decentralised alternative was adopted: today’s Domain Name System (DNS).

DNS is the distributed database still used by the Internet today: it stores and ‘decrypts’ domain names, so that they are translated into IP addresses and indicate the physical location of the searched resource. The DNS structure is hierarchical: it is represented as a ‘tree’ of servers, because domains are also organised in levels.

Let’s take the Internet domain academy.youngplatform.com as an example, the name is divided by the dots into 3 parts. Starting from the right, we have the top-level domain (Top Level Domain,TLD), i.e. “.com”, and then the “.youngplatform” (Second Level Domain, SLD) and “.academy” subdomains. The DNS then dedicates subordinate databases to each of the levels, so as to divide the memory load thanks to a client/server structure.

Memo

DNS only stores domain names and IP addresses. The contents of websites are stored in other databases and sent via the Content Delivery Network (CDN), based on the Internet search made.

In 1984, there were only 6 top-level Internet domains (TLDs) available:

  • .com: reserved for commercial entities
  • .org: organisations in general
  • .net: realities dedicated to network technologies
  • .edu: organisations carrying out educational activities
  • .gov: government agencies (initially only US)
  • .mil: military organisations

On 15 March 1985, the first .com domain was registered by a computer company from Massachusetts: Symbolics.com, the site today is a kind of ‘showcase’ for the history of the Internet. The following year, domain registration was opened to all, after being previously exclusive to the ARPANET network. It is difficult to imagine that form of the Internet today, yet back in 1991, CERN created the World Wide Web that we still use today.

The ‘dotcom’ bubble

Until 1995, anyone could register an Internet domain for free and take ownership. This was until the organisation that managed the DNS (InterNIC) decided to put a price on the business. So private companies were created to sell domain names and associated services: the domain name registrars.

In 1997, the history of Internet domains saw the registration of Google.com. In the same year, 3-letter .com domains were exhausted, reflecting the spread of the Internet and the popular adoption of the first personal computers. It was in this context that the so-called ‘dotcom bubble‘ developed.

To understand the meaning of ‘dotcom’, we need to delve into the economic context of the late 1990s. In the US, this period was characterised by a great economic expansion, enabled by low interest rates and declining inflation, which facilitated access to money through loans. Thus, huge amounts of capital financed the emergence of start-ups based on the potential of the Internet, hence called dotcoms. Investors in the IT sector, certain of future profits, bought shares in companies that were often nothing more than an idea, or merely elaborate marketing strategies in the absence of a finished product. FOMO and speculation then inflated the valuations of these companies, associated with .com internet domains, taking the NASDAQ index from 1000 points in 1995 to more than 5000 points in March 2000.

Nasdaq

Nasdaq (National Association of Securities Dealers Automated Quotation) is an American stock market. It was the first example of an exclusively electronic stock exchange, i.e. based on a computer network.

With a get big fast approach, dotcoms tried to build strong brands through advertising and promotion, or even by offering products and services for free, in the hope of grabbing a ‘slice’ of the Internet market. This would allow them to obtain a customer base large enough to generate profits, but only then by raising prices. However, the initial capital soon ran out. Thus most of the companies, without a business plan, went bankrupt: their shares quickly lost value, leading to the bursting of the dotcom bubble.

Speculation on Internet domains

However, the history of Internet domains did not grind to a halt. In 1998 the non-profit organisation “Internet Corporation for Assigned Names and Numbers (ICANN)” was founded: the new organisation in charge of DNS management. Today still, ICANN assigns IP addresses and administers generic top-level domain names (gTLDs, such as .com and .net) and geographical ones, i.e. those relating to specific countries (country code Top Level Domain, ccTLD) such as ‘.it’ for Italy. The gradual introduction of new top-level domains, such as .coop and .info, as well as an increased awareness among Internet users stimulated by the dot com bubble, led to the creation of a new market around Internet domains.

Now that you know what an Internet domain is, it will be easy to deduce that much sought-after and common words and phrases, such as “business”, “travel” or “sports”, were preferred by many investors or web entrepreneurs. Building a website on these Internet domains would guarantee millions of hits, so these names represent a real opportunity for profit. This is why domain names are still the subject of speculation. Registering domains at the cost of a few dollars in order to resell them for exorbitant sums (domain flipping) soon became the interest of many, such as Mike Mann who bought 14,962 domain names in 2012 within the space of 24 hours for this purpose.

Fun fact

Sergey Nazarov, the creator of Chainlink, had already registered the domain smartcontract.com on the 25th of October 2008, 6 days before the publication of the Bitcoin whitepaper.

In 2013, combinations for 4-letter .com domains came to an end. However speculators could count on the release of hundreds of new TLDs, such as the recent .yoga and .pizza, in which to attempt to register the best names. Of course, it is extremely difficult to participate in the primary market: domain registrars are assailed by requests when a new TLD is released, so the most popular names go quickly. This leaves the secondary market to speculators: ownership of Internet domains is subject to the payment of a subscription which lapses if not renewed. Upon expiry, anyone could register the domain as their own, a practice called domain sniping or dropcatching.

However, registrars often do not return expired domain names to the public: they take ownership of them, turning them into ‘premium domains‘. They may keep them for their own purposes or organise auctions for resale. This activity, called domain warehousing, is not considered illegal by ICANN, but the public may consider it unfair, as it restricts access to domain names.

Fun fact

On the podium of the most expensive domain names are business.com ($345 million), lasvegas.com ($90 million) and carinsurance.com ($49.7 million).

However, there are prosecutable practices associated with Internet domains: it is illegal to register a domain name that is the same as a registered trade mark, or that can be confused with it in order to profit from its popularity. Such an infringement, called cybersquatting or domain grabbing, can be considered as counterfeit. The legitimate owners of the trade mark (and therefore of the domain) can appeal to ICANN through the Uniform Domain-name Dispute Resolution Policy (UDRP).

Typosquatting, i.e. registering a domain by replacing or reversing the order of certain letters of an original name, is also prohibited. In fact, typos on the Internet are frequent and could be exploited to perpetrate online scams (more on this in the article on Social Engineering).

Example

Registering the domain name wiikpedia.com would be typosquatting, because it is intentionally similar to wikipedia and generated by the inversion of the letters i and k.

Knowing what an Internet domain is is essential, not only to create a website, but especially to use the Internet with more awareness or even to create your own digital identity on the Web3.

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