Alt-root blockchain domains depend on resale value to survive. That’s a recipe for failure.
The group behind .tez names recently made a proposal that I think encapsulates the problem with alt-root blockchain “domain” names.
Tezos Domains are like many of these so-called domain names. Despite promises of lots of functionality, they currently function in one way: acting as easy-to-remember cryptocurrency wallet addresses.
And the reality is that few people have purchased these names because they want to use them for crypto wallets; instead, they’ve purchased them because they think they will have value and they can make money from them. If people no longer believe they can cash in with these names, they have little reason to register them.
Tezos prices .tez names in its own coin based on length. Three-letter names cost 100 Tezos (XTZ) per year, four-letter names cost 25 XTZ, and five-and-longer names cost 1 XTZ.
Like many cryptocurrencies, the price of XTZ has been on a roller coaster. It peaked at about $8.00 in 2021 and is now worth about $.75.
You can see how this would create an issue for Tezos.
A recent proposal states:
We need a price structure change to better theoretically be able to address bull and bear market scenarios. For example: currently in a bull scenario (XTZ = 10USD) it would cost 1000 USD/yr to keep up with a 3D name; conversely in a bear scenario (XTZ = 0.7 USD), the inactivity of the market causes the velocity of the 3D/4D registrations and renewals to drop by not being low enough.
If XTZ is pricey, it’s too expensive to register and maintain names. But in a bear market like today, people still don’t want to register short names despite the low cost because they don’t think they have much value. (Because they don’t want to use the names; they want to resell them to someone else.)
The proposal notes that Tezos is “slowly bleeding domains”, down from a peak of 130,000 to just 62,000 today.
To compensate, the proposal was to reduce pricing significantly, offering three letter domains for either 1 or 3 XTZ. The initiative stated:
To keep the Tezos Domains project going we have to fund the Tezos Domains project. This is where market existence and velocity come into play. By pricing down our premium domains we ensure that there develops an independent secondary market of dedicated Tezos Domains supporters (i.e. sellers)
This seems to admit that, much like any cryptocurrency, the only way for .tez to survive is if people think they can make money from it. And for that to happen, people need to see more people interested in Tezos names.
That’s a shaky thing to base a namespace on.
It’s also why, short of some actual utility beyond wallet addresses, these alt-root namespaces are destined to fail. If the primary market only exists because of the secondary market, then both markets will fail.
Tezos Domains will have to keep trying to find a solution; the initiative failed (with just 13 votes but representing 61% of XYZ supply), and pricing will remain the same.
Leave a Comment