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NFTs trip up Uniregistry’s top level domain auctions

A marketing stunt gone horribly awry?

Image of digital artwork with NFT letters standing for non-fungible token

Frank Schilling’s top level domain company UNR auctioned its 23 top level domain names at the end of April, grossing more than $40 million. To date, none of the TLDs have transferred to the winning bidders.

The holdup is due to what seemed like a marketing stunt to take advantage of the popularity of NFTs.

Prior to the sale, UNR created NFTs connected to Ethereum Name Service for each of the top level domains and said the winners of the auctions would also get an NFT. In a press release, it wrote:

As the exclusive operator of 25 ICANN-accredited domain extensions, including .LINK and .GAME, UNR holds the NFTs that control their namespaces in the Ethereum Name Service (“ENS”) on the Ethereum blockchain. UNR’s Top Level Domains are the first to be turned into ERC-721 NFTs on Ethereum.

23 of these Top Level Domains and their corresponding NFTs will be sold together in no-reserve public auctions on April 28, 2021

The auction winners of these rare internet assets not only collect subscription revenue by selling their domain names through ICANN-accredited registrars, but could also sell domains on ENS directly to Ethereum owners.

In response to a demand from a winning bidder to complete the TLD transfers, ICANN says it is still waiting for answers from UNR. In a Request for Reconsideration from the buyer for .hiphop (which was sold outside of the auction), ICANN includes a notice dated December 10 stating it continues to object to and withhold ICANN’s consent to all of UNR’s pending assignments. It says it has been trying to get additional information from UNR since May, but the answers have not been complete:

From our first request to UNR for additional information issued in May 2021, we sought to understand the impact of the transactions on the Domain Name System (“DNS”), including how Non-Fungible Tokens (NFTs) created on the Ethereum Name Service (ENS) were being used, and were involved in the transactions. ICANN repeatedly asked UNR for documentation or other information related to NFTs in the hopes that UNR would provide fulsome and complete responses. Only after ICANN’s repeated requests for the transaction and auction related documentation did UNR begin to provide such documentation in October 2021…

…As an example, it has been unclear how such public statements as “the winner of each TLD will receive ownership rights to the Top Level Domain asset…[and.]…the NFT representing their TLD on the ENS” so they could “control the entire TLD namespaces on DNS and ENS” were to be evaluated against the incomplete requests for assignment. As we have communicated to UNR, these statements may not be consistent with important ICANN community-developed policies and agreements that govern registry operations which clearly state any registry operator would have no property ownership rights or interest in a TLD. Further, the creation of such NFTs and potential operation of a suffix identical to the top-level domains in the DNS in an alternate name space may create risks to the security or stability of the TLDs in the DNS.

I suspect that few — if any — bidders care about the NFTs. But the NFT and ENS connection are keeping all of the transactions from completing. This is especially problematic given that the year is ending, and I suspect many applicants hoped to receive their TLDs by the end of the year for tax and business purposes.

It will be interesting to see how long it takes to resolve this and if TLD operators can get ICANN’s blessing by disowning the NFT part of the transactions.

[Note: the original version of this story said that .hiphop was acquired in the auction. This TLD was actually sold outside of the auction.]

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  1. Jeffrey J Neuman says

    FYI – the reconsideration request I filed was on behalf of an organization that DID NOT bid on the specific TLD. The assignment for the .hiphop TLD was through an arms length negotiation and NOT through the auctions and ICANN is perfectly aware of this despite its letter implying otherwise.

    Just wanted to clarify because this is a critical fact.

  2. Nuno says

    Reminds me of Uniregistry’s own crypto (“Topcoin is a blockchain-based digital rewards system”), that they had long before the hype but did nothing with it. Then when others were skyrocketing they thought about resurrecting it only to drop again 3 years ago. A missed opportunity, a better one this “NFT”.

  3. JOTHAN FRAKES says

    I think this has a bit of misunderstanding at play. There are a lot of altroot blockchain projects out there in the world, and many of them attempt to create namespace that amends or is in direct conflict with current or future ICANN/IANA TLDs.

    Other than .ETH, which cannot be applied for in a future round due to it being the ISO country code for Ethiopia, ENS is not an alternative TLD namespace or supporting Top Level Domains in conflict with ICANN’s ICP-3 Root. It will not conflict.

    ENS is the one project that has chosen to be ICP-3 Compatible. It appears that the Ethereum Name Service is viewed in the same light as the other projects that are not.

    What ENS does, is that they are a complimentary service that adds forward and reverse lookup capabilties to and from tokens, contracts and wallets to domain names once they have been validated in the DNS on DNSSEC domains that have added a txt record to them in the DNS.

    So, if I own cross.country and I want to make that my wallet address instead of 0x[longasshashstring] so that people can transmit things to me more reliably, they can use a human readable name, perhaps the one of their website or email.

    Once this txt record is present in a DNSSEC signed zone, and it matches the requestors’ wallet address, the requestor can claim and manage the ENS name(s) and put in place some additional blockchain features if they opt to.

    But it all starts with DNS and the ICP-3 root. And it promotes DNSSEC, as well.

    The way that the UNR auction ran, as I can see it, the NFTs were largely PR and to attract eyeballs from beyond the ICANN-centric treehouse for technologists that might have an aspiration to operate a top-level domain name, and this was a PR gimmick to drive more eyeballs to the actual In Real Life (IRL) interest,.

    The concern ICANN is presenting is that the issue here seems like the NFT “ownership” might be in conflict with the party to whom UNR would assign these TLDs through IRL.

    The way things were described to me, the NFT would be assigned to the party that prevailed in the IRL process(es). In fact, the way that the ENS _stuff_ works, it can be reclaimed with the DNSSEC signed zone to invalidate the prior one. So the TLD operator in the IANA/ICANN root could just add the new controlling wallet address and move title to themselves.

    Hope this helps…

    • Don says

      I will just use a handshake name for less than 20 bucks as a crypto address instead of being controlled by an old extension and having to pay high upfront costs and gas fees with others charging 3-6 figures for domain wallet extension. Makes no sense.

      • N says

        I support Handshake as well, but in my view, the functionality ENS offers today is superior. ETH gas fees vary wildly throughout the day, so lower prices can be had. Registering an .eth domain can cost less than $10/year if prepaying for additional years. Most names 5 characters or longer do not have premium fees. I received the ENS airdrop and am a voting member of the new DAO. My biggest issue with the ENS DAO is that one person does not equal one vote. Instead, one ENS token equals one vote, so disproportionate voting power can be purchased by monied institutions, which isn’t really democratic. Unstoppable Domains is a VC-backed for-profit fork of ENS and seems like a cash grab.

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