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What are Web3 Domains?

January 25, 2023

10 min

What are Web3 Domains?

Internet domain names can be non-fungible tokens, called Web3 domains. Let’s find out what they are, how they work and what properties make them crucial for the future of the internet

Web3 domains: what are they and how do they work?

The innovation of cryptocurrencies is not limited to the economic sector: any information can be transferred via the blockchain, not just money. This technology, in a nutshell, can decentralise all services and content on the Internet, starting with online search mechanisms. In fact, there are so-called Web3 domains, also referred to as ‘crypto domains’, ‘NFT domains’, or even ‘blockchain domains’. 

Let’s briefly recall the concept of traditional Internet domains, before understanding what Web3 domains are and how they work. Basically, domain names are used by browsers to retrieve the IP addresses of the websites we are looking for, so as to show us the content we are looking for. For example, by typing academy.youngplatform.com, the Domain Name System (DNS) will locate the specific server that holds the data for all the articles available here; similarly, the interface of the Young Platform exchange is shown on our screens.

The complex domain name system is based on a multi-level structure, consisting of centralised databases and servers, because it is under the control of ICANN. The latter is the authority that manages the DNS and entrusts registrars with the sale of domain names, whose purchasers (registrants) will be stored in various registries. This is the administrative scheme on which the Internet is based, which is useful for assessing the differences with Web3 domains

NFTs, first of all, are non-fungible tokens issued on blockchain, i.e. unique, non-interchangeable or divisible digital objects, the creator and owner of which can be proven. In practice, you can tokenise any asset, i.e. immutably register its information on blockchain, so as to verify its authenticity and track its transfers. Any work of art, piece of music and collectible object can be turned into a non-fungible token, thanks to special blockchain software called smart contracts

Web3 domains, in particular, are one of the most recent applications: a solution that allows websites to be created and managed without intermediaries, as well as facilitating access to the Web3. Blockchain domains, in fact, are independent of ICANN, because they do not exploit the traditional name system (DNS), being managed independently by some providers, such as Freename, Unstoppable Domains or Ethereum Name Service (ENS). These particular registrars also make users truly proprietary: let us delve into this and other features of Web3 domains, so as to understand their uses.

Applications and Benefits

The traditional definition is not sufficient to explain what Web3 domains are, because this technology opens up other applications than just creating a website. Blockchain domains, in fact, are a product of the new Web3 era, based on the concepts of ownership and decentralisation, closely intertwined with the potential of cryptocurrencies. 

Here are the main advantages of Web3 domains in five points:

  1. Verifiable ownership and free purchase
  2. Pseudo-anonymity and privacy
  3. Decentralised and unencrypted websites
  4. Simplified wallet addresses
  5. Self-sovereign identity: Single-sign-on and Reputation

1. Verifiable Ownership and Free Sale

We anticipated that classic Internet domains are purchased from registrars, such as Google Domains, Shopify, Hover, GoDaddy. These companies, accredited by ICANN, can have a lot of power over the online space in some cases. Specifically, when you buy a traditional domain, you are taking out a subscription (typically annual) that gives you the rights to use that particular name on the Internet. At the end of the contract, if not renewed, the registrar can take the domain away from you, eventually putting it back up for sale: in short, you are not the real owner, but a mere ‘tenant’. A Web3 domain, on the other hand, works differently: once the minting is done, i.e. after registering it on blockchain, ownership is verifiable and no one can claim it. It will forever be yours, associated with your personal wallet, until you eventually decide to sell it.

This possibility is common to many Web3 domain providers, such as Freename and Unstoppable Domain, while ENS actually still charges renewal fees. In particular, Freename also allows you to become a Web3 registrar by purchasing a top-level domain (TLD). Basically, by creating or buying a domain extension, which usually corresponds to .com or .uk, you can earn money every time someone registers a name with that TLD. 

As mentioned, a Web3 domain can be transferred to other users once purchased, obviously in exchange for payment. Every purchase and sale is registered on blockchain, the owner is therefore verifiable at all times. In addition, some Web3 domains can be traded in marketplaces for Non Fungible Tokens, being such. Exploring Opensea‘s section on Web3 domains, you will find very varied and wide price ranges: as with Web 2.0 domains, there are names that are highly coveted in the market, and others that are of no interest at all – once again the law of supply and demand dominates.

2. Pseudo-anonymity and privacy

Registrars, when purchasing an Internet domain, are obliged to ask the buyer for certain information; this will go into a general registry, controlled by ICANN, called the WHOIS directory. Although registrars may obscure users’ information by listing their own as contact information, they may change their privacy policies. In any case, registrars will always have user data and, depending on where they operate, governments may force them to disclose it by law.

Web3 registrars, such as Freename, Unstoppable Domains or ENS, on the other hand, do not require personal data: the user will only be identified by the address of the wallet where they will store the purchased Web3 domain. In this way, the identity of the purchaser and their privacy will always be protected by the pseudo-anonymity of the blockchain, which does not reveal the owner but only the public codes of their wallet. 

3. Decentralised and unencrypted websites

Traditionally, following the purchase of a domain name, you have to take out another subscription for hosting your website. Essentially, you pay a fee to a database manager to host the content associated with your domain; in this way, you provide an IP address to the DNS, so that it associates it with your domain name. 

This system, however, may be subject to censorship, because it is centralised: ICANN may deliberately choose to blacklist your site, simply by excluding the one server where it is stored. The database operators themselves may also decide to no longer support the content of your domain, effectively eliminating your online presence.

Contents related to Web3 domains, on the other hand, are usually stored in IPFS, the decentralised cloud storage protocol par excellence. The InterPlanetary File System is a peer-to-peer network of nodes that stores all kinds of files in decentralised databases. In addition, each content is stored in multiple copies by different nodes: this makes the system more secure, efficient and above all not censurable. Websites associated with Web3 domains will therefore always be accessible, unless the owner decides otherwise; in addition, through special codes, the location of content can be recorded directly on blockchain. 

So, we know what NFT and IPFS are and how they work, but unfortunately they are still supported by only a few browsers, among them Brave and Opera.

4. Simplified wallet address

This use case directly concerns you if you own cryptocurrencies and especially if you have an interest in using them for payments or in DeFi. When you participate in Web3, you need a crypto wallet to store your cryptocurrencies or NFTs and make transactions. 

However, the wallet addresses, which are used to transfer and receive tokens, are composed of long and complicated alphanumeric strings (such as bc1qw508d6qejxtdg4y5r3zarvary0c5xw7kv8f3t4), which are difficult to remember. Sending and receiving crypto payments, therefore, may be error-prone, as the wallet address must be copied and pasted very carefully each time.

What’s more, as Web3 is decentralised, and thus lacks a central control authority (such as a bank), the responsibility lies with the user. The slightest error in the address could result in the loss of cryptocurrencies or Non-Fungible Tokens, with no possibility of recovery. This is why it is very important to be careful during transactions, or to take advantage of the features of a Web3 domain. 

Web3 domains, in fact, replace these long and complicated addresses with readable names, such as alice.crypto or mario.x, which simplify procedures and reduce the chances of making mistakes when sending or receiving tokens; simply associate your wallet with the Web3 domain you own. In addition, it is possible to combine several addresses in one Web3 domain, so that several cryptocurrencies can be administered with one tool. 

5. Self-sovereign identity: Single-sign-on and Reputation

Self-sovereign identity (SSI) in a nutshell means being in total control of your personal details and actions online, and Web3 domains obey this value, allowing for its popularisation and development.

Web3 registrars, and in general blockchain projects dealing with digital identity, are exploring ways to unify credentialing on Web 2.0 and Web3 apps through single-sign-on (SSO) solutions. In this way, it will be possible to use the same identity for different services, represented by your own Web3 domain. These, in fact, are often used as usernames in the metaverse, in play-to-earn video games or on social networks. The first blockchain registrar to have developed and launched a SSO  feature most successfully is Unstoppable Domains. 

Reputation is also a topic related to identity and increasingly relevant in the crypto sector: gamers want to preserve and prove their achievements, social users want to communicate their belonging to a community and their role within it. The ‘real’ world achievements of users, such as graduation certificates or in the professional sphere, however, are just as important: they all are ‘investments’ of time and energy that demand recognition. Unstoppable Domains also stands out in this case due to its partnerships and integrations, aimed at associating badges and certificates with Web3 domains, which, in general, can represent a sort of personal ‘showcase’, in which trophies and achievements can be displayed, again in the form of NFTs!

This is just a trailer of the potential of Web3 domains: we have understood what they are and how they work, the rest is to be developed and discovered together. In the meantime, you might want to investigate what the real value of a Non Fungible Token is, partly suggested by the different applications such a domain might have.