As the digital era progresses, we're witnessing the rise of an innovative web construct, web3. This term captivated the minds of tech innovators and investment trendsetters last year, marking a shift towards an internet world steeped in blockchain technologies, smart contracts, and a decentralized ethos. Unsurprisingly, these groundbreaking concepts have paved the way for blockchain domain naming services, giving birth to a unique category of domain names—blockchain domain names.
Given their decentralized nature, blockchain domain names exist outside ICANN’s jurisdiction and do not directly conform to the DNS-related regulations typically enacted to protect brand owners. Brand owners' rights in this emerging landscape is particularly critical. This new domain scenario can set the stage for the next generation of cybersquatting.
Cybersquatting involves the unlawful registration and usage of internet domain names that mirror existing trademarks, company names, or personal identities. In the context of web3, cybersquatting takes on a new form involving blockchain domain names rather than traditional ones.
Deciphering the Framework of Conventional Domain Names
To fully grasp the structure of conventional domain names, it's essential to initially appreciate the uniqueness of IP addresses and their pivotal role in the Internet's evolution.
Let's conjure up an image of a simple computer network: your personal computer linked to your friend's via a wired connection, allowing you to engage in multiplayer games. This setup, where two computers interact, epitomizes a local network. Now expand this concept to a grander scale, and you have the Internet - a global system comprising countless such interlinked computer networks. Unlike direct interaction on a local network, Internet communication relies on intermediaries such as ISPs (Internet service providers) and network infrastructure providers. With the emergence of new networks globally, standards or protocols were developed to enable interaction and ensure smooth operation. These included the pivotal Transmission Control Protocol (TCP) and the Internet Protocol (IP).
The TCP/IP, operating on the client-server communication model, utilizes a unique identifier known as an IP address. This facilitates data transmission from one device to another and allows devices to interact on the Internet.
Coordinating IP addresses fall on the Internet Corporation for Assigned Names and Numbers (ICANN), a non-profit entity based in California, USA. ICANN encompasses organizations worldwide, including five Regional Internet Registers (RIRs) responsible for allocating the IP address space.
Given the difficulty of memorizing such numeric sequences for every website, the concept of domain names was introduced. These alphanumeric, human-readable alternatives to numeric IP addresses improve user navigation across the Internet. To make this possible, a system was created to translate domain names into IP addresses: the Domain Name System (DNS). Through DNS, users can access hosts using memorable domain names rather than complex numeric IP addresses. DNS operates on a decentralized, hierarchical model maintained by various organizations and individuals.
Understanding the Mechanics of Blockchain
In essence, blockchain can be perceived as a self-regulating, ever-evolving chain of blocks—a dynamically linked list filled with data. Picture this as a database collaboratively built by a community of users. However, unlike conventional databases that reside in a single, centralized location, the charm of a blockchain lies in its decentralization—every participant, referred to as a node, possesses a copy of the comprehensive records.
Here's how it operates:
Each block within a blockchain holds three key pieces of data: a timestamp, transaction information, and a cryptographic hash linked to the preceding block.
By maintaining records of the preceding block, the blocks form a chain where each subsequent block is connected to the one before.
The integrity of the data within a blockchain is reinforced due to its intrinsic design—any alterations to data within a block would necessitate modifications to all subsequent blocks.
The beauty of this design is that should any alterations be made, they would be instantly recognized, as the recalculated hash would mismatch the original hash, failing the validation process.
At the heart of the blockchain mechanism are the nodes, which ensure the system's functioning. These nodes—devices that validate and store the transaction history—can be established by anyone across the globe simply by downloading the requisite blockchain protocol software onto their computers. An instance of this would be miners who authenticate transactions following a shared set of rules and software.
Typically, these nodes collectively form a peer-to-peer network, wherein each node retains a copy of the blockchain, facilitating data exchanges sans a central server. This network is accessible to anyone—they can connect with a node, obtain information from the blockchain, or execute a transaction.
Functioning of Ethereum Name Service (ENS)
On Ethereum's blockchain, every wallet (account) is distinguished by a unique 42-character address. This address is essential for sending tokens, transferring funds, or facilitating permissions via smart contracts. However, much like an IP address, this string of characters is far from user-friendly. This is where the Ethereum Name Service (ENS) steps in, essentially acting as the DNS of the blockchain world. ENS, a solution within the blockchain universe, allows for the registration of easily-readable '.eth' domains, which then map to their corresponding complex wallet addresses.
ENS operates through two Ethereum smart contracts:
The ENS Registry: A smart contract keeping track of all domains and subdomains, along with information about the domain owner and their blockchain address, resolver, and the cache lifetime for all domain records.
The Resolver: This smart contract translates domain names, like 'domain.eth,' into their machine-readable wallet addresses and can offer additional domain-related information.
Like DNS, ENS functions as a lookup service—first, a request is sent to the ENS registry to locate the resolver's address, followed by a second request to the resolver for domain details. ENS and DNS serve the same core purpose—translating user-friendly names into machine-readable counterparts.
The primary distinction, besides their technical and managerial aspects, lies in their registries' content. DNS records hold information about the domain and the IP addresses of the devices, while the ENS registry contains information about web3 domains and wallet addresses, alongside any other data the domain owner might wish to include. Despite the differences in naming systems between web2 and web3, systems like ENS may eventually replace DNS, blurring the distinctions between them entirely.
Legal Recognition of Blockchain Domain Names: An Examination
One of the key queries surrounding the evolution of blockchain technology is its legal standing, particularly concerning blockchain domains. Understanding the implications demands a meticulous inspection of existing laws, such as the Anticybersquatting Consumer Protection Act (ACPA), which provides a definition for a 'domain name.'
The ACPA describes a 'domain name' as an “alphanumeric designation which is registered with or assigned by any domain name registrar, domain name registry, or other domain name registration authority as part of an electronic address on the Internet.” How well do web3 domains fit into this definition? Let's dissect it based on the three criteria in the ACPA definition:
Alphanumeric designation: Both DNS and ENS domains satisfy this, consisting of top-level domains (TLDs) and second-level domains (2LDs).
A domain name registrar, registry, or other registration authority: In DNS, these entities are well-defined. In ENS, a smart contract functions as the registrar, and the registry is another smart contract, highlighting the fundamental difference between DNS and ENS: human-operated companies versus automated smart contracts.
The Internet: Here, the comparison becomes challenging. The ACPA refers to domain names as alphanumeric designations on the Internet, while ENS domains operate on the blockchain. However, two interpretations are possible:
The ENS domain is solely a blockchain identifier, or
The ENS domain is not just a blockchain identifier, but also an Internet address, as blockchain cannot be accessed without the Internet. Furthermore, an ENS domain name can link to social networks or websites.
If we subscribe to the first interpretation, the ACPA cannot apply to ENS and other web3 domains, as blockchain networks do not align with the ACPA definition of 'the Internet.'
However, the second interpretation, which views ENS domains as addresses on an application accessible through the Internet, makes the application of ACPA plausible.
The introduction of blockchain domains, concurrent with the ongoing operation of DNS and the rise of decentralized autonomous organizations (DAOs) launching their own TLDs, raises significant legal concerns. Two key issues are cybersquatting and name collision.
Given that ACPA's definition of 'domain name' does not strictly bind to DNS, it may be pertinent to consider infringements on blockchain domain names under existing cybersquatting laws and naming convention regulations.
Addressing Trademark Infringements in Blockchain Domains: A Legal Standpoint
Various measures exist for protecting the rights of trademark holders when dealing with domain names that may infringe upon these rights. In numerous jurisdictions, intellectual property (IP) laws are in place, which allow trademark and brand owners to legally challenge domain registrations that violate their rights. Furthermore, some jurisdictions have specific legislation addressing bad-faith trademark registration or cybersquatting.
The Anticybersquatting Consumer Protection Act (ACPA) in the U.S. specifically targets cybersquatting, providing protection for trademark owners against those who intentionally register similar or identical domain names with the aim of capitalizing on the reputation of a trademark or profiting from domain resale. However, ACPA only applies under these specific circumstances, and outside of these, trademark holders may need to prove the illegal use of their trademark in court to gain ownership of the domain.
Preventing Cybersquatting in the Web3 Domain Landscape
In the web3 realm, there's a notable absence of legislation addressing cybersquatting or other domain-related disputes. Furthermore, since web3's foundation rests on smart contracts, enforcing such legislation through forced domain takeover would be impracticable unless pre-determined conditions within a smart contract were met. ICANN, a global authority on traditional domain names, lacks jurisdiction over blockchain domains.
Unstoppable Domains' Stance on Cybersquatting
This blockchain domain registration service has positioned itself as quite supportive of trademark owners' rights. Unstoppable Domains has implemented a Protected Brands Policy, akin to ICANN's 'Sunrise Period' mechanism. It guarantees protection for trademarks registered with the United States Patent and Trademark Office (USPTO) during a specific 'sunrise period.' During this time, domains corresponding to well-known brands can only be registered by their legitimate owners. The service also designates 'protected domains' associated with brands, organizations, or notable individuals.
Ethereum Name Service (ENS)
Ethereum Name Service (ENS) upholds a more decentralized ethos regarding trademark holders' rights. Various statements from ENS's discussion forums reinforce its stance on decentralization:
• ENS clarifies its intention not to become an analog of ICANN.
• Many of ENS's responses underline its status as a decentralized system, emphasizing that all users are entitled to purchase any domain. They further contend that owning an ENS domain resembling someone else's brand does not necessarily constitute a violation.
• The owners of ".eth" names are free to relinquish control to the "rightful owner," acting out of altruism or to bolster web3 adoption.
However, despite the seemingly unrestricted approach, ENS does implement technical strategies to protect trademark owners from potential cybersquatting. These strategies, as described in their documentation, do not provide a perfect solution but rather aim to complicate the cybersquatting process.
Challenges in the Decentralized Web3 Domain Namespace
Despite the rapid evolution of Web3 naming services, they are facing a series of challenges that could impact their growth and stability:
Name Collisions: This issue has become prevalent in the decentralized domain space. A case in point is the lawsuit over the ".wallet" domain, illuminating the complexities and potential clashes in the decentralized network.
Absence of an Authoritative Hierarchy: In traditional DNS, an authoritative hierarchy, including ICANN, manages domain name allocation. In contrast, the decentralized nature of blockchain makes such governance tricky, leading to conflicts over domain name ownership.
Unsettled Namespace Distribution: While blockchain proves to be a perfect tool for recording ownership and transfer rights, it struggles to establish consensus on namespace allocation. With more players entering the field, namespace distribution becomes further complicated.
Integration with DNS: The decentralized nature of blockchain domain services, usually governed by Decentralized Autonomous Organizations, creates hurdles in reaching an agreement with the existing DNS.
* * * Facing legal challenges in the rapidly evolving world of blockchain domains? Prokopiev Law Group is at your service. Our experts stand ready to guide you through issues such as name collisions and domain rights. Don't navigate this complex landscape alone - reach out to us today. DISCLAIMER: The information provided is not legal, tax, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. Some parts of the text may be AI-generated. The information provided is for general educational purposes only and is not investment advice. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information. A professional should review any action based on the information discussed. The author is not liable for any loss from acting on the information discussed.
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