Mark Franks, Head of User Interface and Experience at names.co.uk, considers NFT domain names.
The fanfare surrounding non-fungible tokens (NFTs) emerged after arthouse Christie’s sold the first NFT digital artwork ever offered by a major auction house, selling for just shy of $70m earlier this year. The sale of these valuable digital assets has generated a staggering $1.2bn in July alone. And the trend is no longer creeping limited to just works of art, with domain name NFTs being brought into the fold.
With inherent value attached to the domain names, phenomena like URL hijacking and other related cyber-attacks are becoming more commonplace. This leaves some beginning to question whether the NFT craze is nothing more than a bubble waiting to burst.
What is an NFT?
A non-fungible token – or NFT as it’s more commonly known – is a way of tracking and attaching value to a unique piece of digital media. An NFT is essentially a digital version of a tangible collector’s item and is typically stored in a digital wallet or blockchain. In the same way you’d collect physical art, a buyer might collect the requisite digital files of online content.
Non-fungible simply means it’s one of a kind. For example, money is inherently fungible. You can exchange money in different forms and mediums and still maintain the same value. Alternatively, limited-time items and collectibles – as well as NFTs themselves – are non-fungible as there is only a given number in circulation. Despite being a booming marketplace, there’s an increase in risk for content creators that now have to be extra wary of licensing and terms and conditions.
NFTs and domain names
The concept of NFT trading on the blockchain to transfer custody of digital art is starting to gain a foothold in other areas of digital life. Domain names are seemingly considered of high value and are rapidly becoming commodities found on the NFT marketplace. For example, the domain win.crypto was announced as the most expensive sale of a domain name NFT – selling for $100,000.
Because domain names are the digital foundation of a business – and a clean, more professional-looking domain inherently boosts reputability from the get-go – they can sell for a lot of money. Websites are the gateway to content that billions of internet users can access at the click of a button, so the invention of memorable and relevant domain names on the NFT market will no doubt spur long-term growth.
Blockchain domains
The sudden growth in value of the blockchain market gives rise to some new issues regarding websites and might fundamentally shift the way we approach website building.
There’s a growing concern that blockchain domains and the development of decentralized websites pose threats to personal and business security. Blockchain domains are inherently anonymity and censorship-resistant by design. Because of how water-tight decentralized networks can be, they’re the perfect launch sites for large-scale criminal activity – like disseminating malware. Because NFTs and Blockchain domains and their URLs all operate through the blockchain, it could mean that NFTs become the de facto way to engage in domain-related transactions.
NFT cybercrime
Because a domain name or a blockchain domain name are proven to have long-standing value, there are always opportunists and cybercriminals looking to get their hands on anything with value. Domain names commonly fall victim to a phenomenon known as “drop catching”. This is where people (either manually or with software) track the desired domain names and buy them at the exact moment the license renewal ends – effectively denying the company access to its own material.
Although not technically a crime in certain circumstances, drop catching has the potential to damage some companies. For smaller businesses without cash assets to buy back a domain or the legal wherewithal to counteract a URL hijacking, the results can be devastating. Businesses need to be vigilant by keeping tabs on their URL licencing dates. Most domain providers monitor the state of your URL and automatically reminds you to renew. However, always check with your provider to make sure there’s no chance of your domain name being taken.
Has the NFT bubble already burst?
Proponents of the emerging trend suggest that it has scope to be widened for broader purposes, while critics slam it for being another fad and that the bubble will inevitably burst. Data suggests that the bubble is already collapsing. Activity in the NFT sphere has suffered a marked decline. Transaction volume on NFT markets was down 95 percent since early May – collapsing from a staggering $170 million to a comparatively paltry $19.4 million.
One of the emerging questions regarding NFTs and their survival is whether they can hold their long-term value.
Limited to the artistic and creative spheres, NFTs appear to only hold their value if the buzz around the NFT remains high as the valuation of NFTs is driven by speculation and the perception of low supply. Although some argue that dictating the price of an NFT based on speculation undermines market traditions and that you’re essentially owning an asset that you have no control over.
Despite having potential for dramatically changing how we make digital transactions, the performance of the NFTs in the market signifies that it may be more of a bubble than a concrete investment strategy.
About the author
Mark Franks is Head of User Interface & Experience for names.co.uk. With more than 13 years at names.co.uk and over 20 years of experience in the industry, Mark’s area of expertise lies firmly within creating, refining and maintaining the excellent user experience for which names.co.uk is known.
