The “domain” that is not a domain – Is “brand.eth” the new “brand.com”?

With everyone talking about Web 3.0 and “.eth’s”, we thought we’d take a deeper look into “.eth” names and whether brands should be concerned.

Some thirty years ago, we saw brands rush to claim their “.com” domain names. 15 years later, the social media handle was the next hot asset. Fast-forward to today and with the arrival of Web 3.0, a “brand.eth” is reportedly the latest must-have property in the digital space.

To give you an example of just how big these are, the number of registered “.eth” names recently surpassed 1 million. Metrics indicate that the number of Ethereum-based names created in April 2022 saw a significant spike (162,978 names compared to 85,272 in March 2022). Moreover, during the last few days in May of this year, 71,563 names were registered¹⁾, which illustrates just how significant the growth has been.

But what is a “.eth”?

It looks like a domain name – but is it? Is it a gTLD / ccTLD?

The answer is no to all of the above! “brand.eth” is not any kind of TLD. In fact, it is not even in the domain name system – as it is not a domain name!

An “.eth”, or “Ethereum Domain” as it’s also known, is basically a human-readable name to the Ethereum ecosystem. Put simply, a “.eth” address designates ownership of a crypto wallet, which stores cryptocurrency and NFTs. Similar to domain names or social handles, it provides a short, specific and accurate name that best establishes a person’s account, much like the traditional DNS system does for the “.com” counterparts.

However, calling the “wallet” a “domain” is somewhat misleading and can easily cause confusion because it looks so similar to the existing domain name system. A more appropriate term would be “address”. Such “addresses” would then be the unique location of a person’s digital wallet that allows the transaction of crypto money between digital “address” holders.

What are the risks and opportunities for brands with “.eth” domains?

Firstly, it is important to highlight that unlike the current Web 2.0 space, crypto wallets/domains, and in fact the entire Web 3.0 environment, operate on a decentralised internet. Although there are ways to “identify” the “address” holder, due to the anonymity of Ether (the native cryptocurrency to its platform), it is likely that search results would only return a pseudonym rather than any details of the actual “address” holder.

Even if further in-depth investigations would lead to more useful information about the address owner, such as contact details, there is currently no “authority” where IP right holders can claim their rights to “retrieve” the address. Unlike DNS domains, for instance, blockchain-based web domains are not governed by the Internet Corporation for Assigned Names and Numbers (ICANN), and are therefore not subject to its procedures, such as the Uniform Domain-Name Dispute-Resolution Policy.

Blockchain-based “addresses” are considered more secure as they provide users with benefits, e.g., an easy-to-use alternative to a long, alphanumeric crypto wallet address and heightened security since they are created with blockchain-hosted smart contracts and the ownership thereof is traceable. However, they are also considerable concerns for brand owners as none of the usual options to protect their IP are enforceable in the view of their “addresses” (e.g., brand.eth).

From the point of view of trademark protection, should such addresses be of concern for brand owners? What should brand owners do or not do?

First of all, the very decentralised nature of blockchain-based “addresses” means that anyone can register an “address” composed by “brand.eth”. This could cause confusion among internet users.

There is a significant risk that the owner of such “addresses” claims to be the actual brand and either sells the brand’s “address” and/or enters into financial transactions, allegedly on behalf of the brand. This is particularly noteworthy in light of the growing number of brands that are beginning to embrace crypto as a form of payment for their goods/services. Even though there is a lot of press commenting on such behaviours at the moment, this doesn’t necessarily mean that cryptocurrency “address” holders won’t be duped into believing otherwise.

Currently such addresses are not recognised on internet browsers without using special gateways. However, with time, it is highly likely that this will evolve, and such “addresses” will co-exist with similar (if not exactly identical) domain names. This leaves the risk of further confusion and trademark misuse sky high.

Should brand owners register .eth or other similar addresses?

Before answering this question, it would be helpful to first answer whether brand owners will use “.eth” or similar addresses?

If brand owners do not register or use any “.eth” or similar addresses, it certainly makes it clearer and less misleading for the general public, which in turn can assume that any activity on these platforms is not associated to the brand/company. However, as we have seen, some companies have started to explore the possibilities of using these “addresses” to receive transactions.

Therefore, from a user perspective, BRANDIT recommends brand owners not to use these addresses.

However, we do recommend brand owners to register the most relevant address(es) for defensive purposes. This will help prevent:

• other companies using the “addresses” which may lead to user confusion
• third parties advertising the “addresses” or linking it with problematic websites

What are our key recommendations?

1. “.eth” is a digital address used as a wallet for cryptocurrency and it is NOT a domain name.
2. Due to the decentralised nature of these platforms, it is extremely hard to identify the “address” owner. If you are lucky to uncover the owner details, there is no litigation procedures in place to challenge ownership.
3. Confusion between “addresses” and domain names is real and the risk of confusion is likely to increase over time.
4. We recommend brand owners do not use the “addresses”.
5. We recommend brand owners to register the most relevant “addresses” for defensive purposes.

The bottom line is that blockchain-based names present both opportunities and risks for brand owners. Brands should approach “.eth” “addresses” similar to how social media and the internet were perceived in the early days. These new unregulated spaces need to be monitored very closely for opportunities and addressed proactively.  While early in development, a wait-and-see mindset could put brands at a disadvantage.

If you are interested in “.eth” “addresses” for your brand, please do contact us here.

Author: Yuan Zhang

Photo by Zoltan Tasi on Unsplash

Sources:

1) https://news.bitcoin.com/ethereum-name-service-domains-surpass-1-million-registered-names/

2) https://education.district0x.io/district0x-educational-specific-topics/ens-name-bazaar/what-are-ethereum-domains/#:~:text=Also%20known%20as%20Ethereum%20Domains,domain%20(TLD)%20available%20currently.

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