One of those in the domain industry whose opinion I greatly respect, Alan Dunn, has made a lot of inroads in equating the value of domain names to commodities at least when it come to those “Chinese Domains”; ultra short domains with single, double and triple characters .
According to many in the domain space, “Chinese Domains” equate their value to a commodities like Gold, Platinum, Silver, Oil, & Copper.
But Comparisons to domain names, to other commodities carry some good, but a lot of bad.
When you look at domain names, which if they were traded on just on their intrinsic value a few years ago, are now being traded on a speculative value based on what domain investor are willing to sell a domain to another domain investor.
So what is 6955.com inherently worth? (it’s a domain we used to own)
The issue as I see it is the traditional “Chinese domains”, letters, numbers or a mixture thereof, which are not selling enough to end users.
To have a “value” there must be an underlying value to end users
Just my opinion.
Otherwise domains are being traded like baseball cards, like green stamps for those as old as I am or other “things” that a value if placed on for the sake of transferring money between buyers and sellers.
These “Chinese” domains are being traded between domain investors creating a market more like a Bitcoins and less like Domains.
So what is a Bitcoin worth and why is it worth it?
What says Bitcoin is worth a certain amount on any given day?
What is the underlying value of a Bitcoin?
Nothing.
Absolutely nothing
If you have love for the group War (good god Yeah what is it worth for , absolutely nothing, (say it again)
The right answer is that Bitcoin’s value on any given day is the cost of production Vs. the perceived value.
I got one Bitcoin for free a few years ago and saw the value go from $300 to $1250 in days.
Perceived value not supported by any reality
If you look at some of SalesForce.com domain acquisitions:
Data.com, Social.com, Database.com, Force.com, Work.com, Desk.com, Community
All great domains.
Each of those domain are worth 7 figures, each arguable, but only to a company like Salesforce.
If we are just moving money between domainers, be they in the US or in China or otherwise around the world, domain names which are just a series of letters, numbers or combinations thereof, seem to have an artificial value, that can change daily, and not supported by any underlying fundamentals, and are troubling.
We see thousands or tens of thousands of domains registered in new extensions each day.
99% of these domain registrations have nothing to do with the left of the dot vs. the right of the dot, they are just letters and/or numbers or keywords or a combination thereof on the left combined with the right. with those registrants trying to make a return.
God Bless
I just said to a fellow domainer that the Chinese are using domains like currency. All of extensions will see sales. There is no sense to it all these days. In the past 6-months people told me .club was a dead extension. Now a major domain player in China is building 10,000 .club sites. It is number three in regs. All the old rules are out the window at this point.
Excellent post, Michael. One of your best,
Spot on
Thanks for sharing your thoughts
What’s the value of a dollar when they are printed out of thin air? There are a limited number of bitcoins compared to an unlimited it seems amount of dollars. Same as domains there are a limited amount of short relevant words and number domains. It appears the shorter the better most likely because they are easier to remember. Also you can move domains and bitcoin across borders effortlessly compared to gold and dollars. They can also be made fairly private. With new blockchain technologies like etherium and lisk it appears the blockchain may be in everyone’s fuure. Unless of course the electricity goes out. Then bullets will be the new gold.
You can mine bitcoins on paper, so it doesn’t matter if the electricity goes out 🙂
http://www.righto.com/2014/09/mining-bitcoin-with-pencil-and-paper.html
Nice but if the power goes out bullets will be the new coins.
Fuure=future
Damn thumbs 😉
I think you make a good point that money is coming into domains from the capital flight out of China.
But actually I have been thinking that Bitcoin (or other cryptocurrencies, like Ethereum) are the new domains. The Internet changed the world and disrupted a lot of industries, and I think cryptocurrencies will do the same. They may even uproot domain names – decentralized applications could make it so that domain names aren’t needed as much. Because of this it may be wise for domainers to hedge their domain portfolios with some bitcoin or ether or other cryptocurrencies.
I think people and business’s will always need easy to remember monikers so people can find their product or service. Domains will probably be around for a long time and .com is burnt into everyone’s brain due to a 20+ year head start.
As for Bitcoin, Ethereum and Lisk (prefer Lisk to Ethereum due to ease of use) these technologies are scaring the hell out of the “establishment”. Did you read there is a shortage of safes in Japan. Negative interest rates have caused a run on personal safes at hardware stores. Crazy times ahead.
You should look at CounterParty.io and counterpartychain.io to see a Bitcoin Asset Name Platform that is relevant here.
This means something extra coming from you, Mike, because your sales of “CHIP” and numerical domains have been so substantial. Thanks for speaking your mind.
Most of us who’ve voiced concerns about this trading model, which is associated with China, tend to engage in that Chinese market sector very little. This is only natural, since those who trade liquid domains more actively would be undercutting their own position if they suggested this market might be built on shaky foundations. Investors in CHIPs and numerics tend either to be resolute defenders of the new model, or else they express doubts quietly in private.
So it has been easy to dismiss critics. Anybody who finds this “domains-as-currency” market troubling must not understand it, must have missed the boat, must be jealous of others’ success, must lack first-hand knowledge, must be a latecomer.
That argument, plausible as it may sound, was never accurate. Ironically, one of the first people to explain this non-usage currency model (7 April 2015) was one of the critics – little old me. Domains are being traded as “tokens” in a “token market”. Recently the Chinese sector has been functioning that way; some of us just don’t think it’s stable or sustainable.
Now that Michael Berkens has used the word “troubling”, these concerns aren’t by any means proven; but they can’t be dismissed in that way. Certainly you didn’t miss the China boat, and whose financial success could you possibly envy?
It must be said that many smart, honest people see merit in the “token market”. Alan Dunn, whom you cited, is worth hearing out. So is Raymond Hackney, who is always objective and evenhanded. Many savvy investors – like Braden Pollock – are agnostic, placing faith in the ROI … metaphysics be damned! We won’t know until later whether these concerns are valid. Maybe it will turn out that the Emperor had clothes on after all.
in a bubble there is always a lot of rationalizing trying to explain what can be simple explained by human behavior. people go from an irrational extreme to another and taking price with them.
in every boom and bust cycle prices rises to upper stages, in a large part because of inflation, in another part because of the increase in people/demand and on a minor part because of the increase in rarity of the good with the passage of time.
what we haven’t experienced for a long time is a global deflation where it seems we are trapped in today. this will have a toll on prices of almost every good. domains including.
it is essential to have an user base moving the price, base that we lost 2 years ago. since then the price has been driven more than 90% by domainers. this is not a sound market.
bitcoins have value like any other fiduciary system. but they have the advantage of having a defined supply limit that theoretically cannot be manipulated by any force, specially governments. the intrinsic value for a bitcoin nobody knows. we are on the value discovering phase. but it is not 0 for sure. like the value for a short domain is not 0 for sure.
the problem with domains as we stand today is the notion of a short domain. 4 letters with more than 400k combos is short and rare? I don’t think so. and what about numeric domains with 6 digits (or even 5 digits)? definitely not.
when the demand dries out, and it will probably very soon, we will be left with no base to support prices.
will it be the end of domains? hell no. but we are going for a heck of a ride on the opposite direction.
Well – “yes” and “no”. Domains in and of themselves are an ethereal good. They are (as Michael Berkens notes), intrinsically worth nothing. “What’s in a name”? The more salient point is: “how are those domains in a given aggregation organized”. For example, dot this or that for a TLD owner is a function of what the TLD becomes when the owner sells the TLD itself. The aggregation might a jumbled mess of names authored by various person who pay to register them. The organizational scheme in that instance is what is irrelevant. The key variable is how many names are collectively sold. One can readily see why the dot-com name space is worth more than any other name space: its called adoption.
In CONTRAST, any aggregation of names which is unified and coherent in terms of the organizing structure of the names, like a bicycle wheel, is intrinsically worth more than the sum of its parts, like the spokes in the bicycle wheel. Looking at it that way, any aggregation of names which has been built around a recognizable naming or organizing CONVENTION will have serious value. Thus, and depending on the marketplace, say, for new gTLDs, the organizing principal is key. This is true even if the utility of the name is in the mind of the beholder, and nowhere else. It is a given that a dot-com domain name, comparatively speaking,, is worth more than any other equivalent name in a gTLD other than the dot-com gTLD. The organizing principal in that instance is the dot-com suffix at the back of the name.
That key organizing principle has already been used. For example: myname.uk.com. In terms of utility the value of the name is in the mind of the beholder. All resolvable names are equal in terms of connectivity. All one has to do is accept a level-three name.
However, and what the various NEW gTLD owners do not seem to have realized, is that their entire particular gTLD, like the myname.uk.com example, can in MANY instances be replicated in the dot-com name space, way beyond what the company that uses the myname.uk.com convention has shown. That’s right! Entire new gTLDs can be replicated. In that particular instance the organizing principle is uniformity and coherence, like myname.uk.com where the “uk” part of the name is the coherent variable, except on a much grander scale.
My guess is that as many as, perhaps, 500 of the new gTLDs can be entirely replicated in the dot-com name space by using a simple ONE WORD organizing principle where the dot-com name has been kept and that one single word has been used to replicate new gTLDs with level three names. In other words, where the name of the new gTLD has been substituted for “uk” in the myname.uk.com example. That is provable! The DIFFERENCE is that unlike myname.uk.com, which required the purchase of very expensive two-letter dot-com domains, a single word with about 500 variations on that single word can actually replicate (give or take a few) about 500 of the new gTLDs. That makes the organizing principle (in that particular instance) 500 times as powerful as the myname.uk.com example.
Of course, telling the new gTLD owners that in many instances their expensive purchase from ICANN is actually worth nothing other than in the mind of a beholder, and can be proved to be worth nothing, so long as people are willing to accept level-three names, is going to be hard for them to take. Harder still , and they don’t know it yet, is when those 500 or so new gTLDs go bankrupt, that single word in the dot-con name space could be used to replicate their new/old/bankrupt gTLD name spaces, name for name. Their ultimate problem is that they don’t yet know the name of the organizing dot-com word.
4 letter.com will be over $10,000 each within 2 years. The bubble is in early stages.
Mike and Rick and so many others who’s names shall not be mentioned bought hundreds of names years ago, and they have all made a fortune in what they saw what was coming.
Now take today we’re in the same situation. Someone will have started in this business from nothing today and will most likely end up like very rich 10 years from now. Possibly worth more than Rick and Mike put together.
So many opportunities to go after. Could bitcoins be like domains?, it’s very possible. But even it does become so, how are individuals going to know what to buy and what to put down the toilet. This will be the difference.
It will interesting to see who get’s it right because everything leaves a foot print in our comments.
I have been following ETH price last several weeks.
why is it so special as a crypto compared to BTC or LTC?
thx,…trying to learn.
Because it is turing complete and you can run applications in the blockchain. You can read more here: https://www.ethereum.org/
ETH is the token that goes with the Etherium system. Etherium has much greater scripting capabilities. It is “turing complete” which essentially means it has programming loops. Bitcoin scripting does not have loops because you can have loops that run forever. In etherium you can have loops but they need ETH as “fuel” so when your ETH set aside for that transaction runs out the loop stops. With turing complete scripts you can do all sorts of “smart contracts” that you can’t so with Bitcoin.
However, someone is working on a turing complete Bitcoin system.
Doubting this market is a healthy thing. I can see why anyone would think its going to collapse. The backbone behind prices is purely based on perceived value. Yes like bitcoin. Bitcoin has no backbone and is purely a perceived value. Built on rarity that is being hyped by less and less output. This is no different and like bitcoin, all depends on how long people will continue to perceive value. Once they don’t it’s over and all we have left is value based on what end users are willing to pay for the advantage of owning a particular domain.
The unfortunate part is that there is no short. No betting against it. All you get for believing in the collapse is the “told you so” . I wish there was, to protect the down side. Its what I love about the stock market. You get to make money on the way up and the way down. It also puts the squeeze on people that are wrong about calling a down market. But we don’t so we all just have to do our best and manage our money and our portfolio based on our own homework. We’ll have to come back in a year and see the grade we all got on our homework.
I agree that right now all the old rules are out the window, at least for the time being. How long it will last is anyone’s guess. Because China has the population of the US, Europe and Canada combined, and what seems to be an endless budget for domain buying, when they set the rules they can move markets by their rules, like they moved commodity prices through the 2000’s. The sheer size and wealth in one single country is the difference.
Add to that, domains really are a finite resource, at least for short combinations and top keywords. Take a look at the math.
Take the top 100 domain extensions, whatever they are (.com, .net, .org, .de, .biz, .info, etc) and the total number of L, N, LL, and NN in these top 100 extensions isn’t a lot of domains.
Now take all the NNN combinations in the top 100, that’s only 100,000 domains (or 51,200 domains if you only count Chips – no 4 or 0). Still not a lot of domains from a global perspective. Some single domain investors own more domains than that.
Now take NNNN combinations in the top 100, that’s 1 million domains, or 409,000 domains if you just count Chips. Again, not a lot of domains for a global population, and again some single domain investors own more than 400,000 domains alone.
Even getting into LLL, that’s 1.7 million domains across the top 100 extensions, or 800,000 domains if only counting Chips (no a, e, i, o, u, v).
So with under 2 million domains you can cover the N, NN, NNN, NNNN, L, L, LLL Chip combinations in the top 100 existing domain extensions. 2 million in a world of 7 billion people isn’t a lot to go around, and many of those 2 million are already taken or being used (not even available to buy). With around 3 million domains that’s everything (Chips and non Chips). And if you consider say the top 50 domain extensions are a lot more desirable than the next 50, that even lowers the ‘in demand’ or quality supply further.
When you jump to the 4L (45 million domains across top 100 extensions) and 5N (10 million domains across top 100 extensions) categories, now you are talking about a big domain supply, and the quality of the extension and the exact numbers or letters will matter more in this type of market. I think we will at least see the market pull back or deflate from where it is now for longer strings and less popular extensions where bulk buying probably shouldn’t be happening.
Some people talk about a pump and dump. In a true pump and dump, the value at the end drops to zero because there was never any ‘story’ to begin with. There are also situations where stocks/companies start small and build up value, sometimes quickly or sometimes over more time. Maybe a junior mining company discovers a big gold deposit and the share price goes from 50 cents to $20 overnight. Or you get a company like Apple or Microsoft that builds incredible value over time. There are other explanations for quick increases in value other than ‘pump and dump’, and because we don’t fully understand it doesn’t mean there isn’t some reality to it.
The other argument about end users, I don’t know about most people reading this, but I don’t visit a lot of Chinese language websites, so I can’t comment on trends. But when I was checking numeric .co and .cc last year, I found a lot of Chinese websites using these domains. I honestly couldn’t tell you what domain extensions are used in China, except the obvious .com, .cn, .net, and so on. I’ve seen Chinese sites on .sh domains and .cx domains. Now you hear there will be more .club Chinese sites and a short .club domain auction on 4.cn. .top and .wang seem to have caught on over there. With a population of 1.3 billion there are probably a lot of websites going up daily, and many of us here will never know anything about it because we aren’t living in that culture or language.
Are the Chinese just looking longer term and betting on the future value in short domains in old and new extensions? Part of what is happening here might just be that the domain market has changed so quickly, and some old rules and beliefs have been shattered especially in the area of what has value, so it is hard to rationalize. And I’m the last person who knows where it will all end up, but it’s a fascinating story so far.
Bitcoin’s value comes from the “network effect.” This is the number of people mining, running nodes, merchants acceptance, consumer use, etc. There are hundreds of these crytocurrencies now (I like “Hobo Nickels”) and they all use essentially the same technology but they all have different values.
Etherium and Ripple are a little different because they are ‘fuel” to run transactions. The companies who run these systems cannot take transaction fees or they would be regulated so they create “fuel” tokens to fund their operations. it is sort of a roundabout way of collecting transaction fees.
Succinct and timely article,do not own it oin but I believe it and the blo kchain are the Internet of finance,that’s where I invested In domains all dot com.
Sorry big thumbs,small keyboard.Bitcoin Blockchain and it seems the Chinese market dictates this pri e also.
How about Domain Chains and a Name Ledger? Who said all the .com’s were gone? 🙂
Domain chain technology can be used to provide the secure issuance and distribution of digital assets, including listing and registration of domain names for its owners and helping provide more transparency and efficiency to all market participants. This would help clarify ownership if a theft occurs and reduce costs. No confirmed transaction and it’s not your domain. Working on it!
@ Steve @Shane there are companies already working on domain registries on the blockchain,get on it,great name.
Steve,
Talk to me I own DomanChain.com but I bought it as a type in for my Spanish speaking readers 🙂
I noticed that.:)) Let’s start a name ledger based on domain chains that validate and prove ownership of all domains in all extensions. ??? Fun times.
I’ve just published a post at Linkedin about chinese domain rush:
https://www.linkedin.com/pulse/porqué-china-invierte-en-dominios-jordi-gasull
It’s in spanish, no problem for you Joseph Peterson 🙂
Your article is in English too now, Jordi, in case anybody here might like to read it. I posted a translation.
wow! thanks Joseph!
How do you see what % of china domain registrations are being used for actual websites?
Ben
You can see it on the New gTLD’s
.TOP
https://ntldstats.com/tld/top
87.5% are “parked” as defined by ntldstats.com
.WIN
https://ntldstats.com/tld/win
87%
You can look it up by each gTLD
Enjoyable read.
As we know, many vintage Baseball cards hold value, and their collectable. Maybe there are trend values in modern ones too.
I think there has been a form of collecting going on in China with many varients of short .com and not com; The reason it’s not seen as investing all of the time is because the domains are seen as personal assets.
But, it’s not to say collectors sell.
I have always been one contrary to the term domain collecting, but in China, it could be different.
Bloody dyslexia…(their)
Mike, Bitcoin’s value comes from the ability to fungibly transfer value, and the amount of mining that secures the chain in a proof of work model. A domain name is not exactly fungible.
Regarding tokens, as a protocol running currently on the strongest chain (Bitcoin), there is Counterparty, with near 50,000 asset names already registered. The primary asset holder can issue tokens with this name.
They are sent/received to Bitcoin addresses. Attach/peg any value you want to them since you are the issuer. Once issued, like Bitcoin they are controlled by the receiver (the holder of the private key to that Bitcoin address).
It’s what TOPCOIN is at Uniregistry, you can request your ‘coin’ and the guys behind TOPCOIN are actually going to a bitcoin wallet and issuing (as the asset holder of the Counterparty asset TOPCOIN) some of that token to your Bitcoin address. That is just one use for this protocol layer secured by Bitcoin mining.
Here’s where you check what assets are taken:
http://blockscan.com/asset
This is a sales platform serving the protocol users:
https://coindaddy.io/
Sterling post Matt, in your opinion what’s the best way to exchange Topcoin for Bitcoin?
Are there any exchanges where you can change Topcoin for BTC or other altcoins?
Hi Anne, thanks for saying.
Am not aware of any exchanges such as Poloniex that have TOPCOIN listed. That may happen if the token has value for redemption of a service and a market for that springs up, such as say a month hosting for a number of coins. It’s up to the guys behind that token to put together deals for holders that make it compelling. The technology is ready, but the issuers of that token seem to slow to put it all together unless I’m missing something.
Cheers Matt, be great to see Topcoin listed at some of the US and European crypto exchanges and also Chinese exchanges such as bter.com, so trading in and out of different crypto currencies would be easy.
I have been skipping over them on buys and glad my opinion are in line with this post… Thanks for the read Mike.
You leave out some key points.
The domains in fact do have inherent value.
If there are 4,000 startups a day in China, and the Chinese economy is going digital just like every industry in the US,
then the demand pressure for short domains will be relentless for a long time to come.
When a domain like JD.com sells for $5 million, yet becomes the brand for a $45 billion dollar company,
it demonstrates proof of concept for the successful use of short domains for ecommerce in the Chinese market.
Forget the bitcoin analogy.
Short domains are monetizable to the Chinese, because they use them for navigation to websites.
Instead of building a business as an app, which Apple and android have a great measure of control over your marketing visibility,
use a mobile friendly website built with HTML5, which functions on all formats, iphone, android, ipad, and web, and isn’t lost
forever in a sea of millions of apps in an app store.
THAT is why short domains have value.
They’re great for business in a world where every business is forced to have a digital strategy.
It’s not a pure bitcoin parallel.
Mark
I’m not talking about domains like JD.com those domains always had value, the value has changed (increased) but they always had significant value.
However domain names like NNNNN.com I owned 50+ of them had really no value, until last year.
I registered them years ago when Marchex was making a move on Zip Codes so I followed, but once Marchex gave up the Zip Code play those domains names became pretty much unsaleable.
So now we are seeing not only 5N .com but 4,5,6N in every many extensions .xyz, .top, .win, .net . etc etc
That is a different deal.
If domain names are just a way for those in Chinese to transfer cash between themselves with no end users, then it is more like Bitcoin in my opinion
completely agree, if they are only useful for transferring cash, ala bitcoin,
then at some point the currency value use crashes, as all currencies eventually do at some point.
BUT you can’t build a website on a bitcoin,
so even a NNNNN domain is useful for a business,
if it’s an easy way to find a business on your mobile phone.
even if it only sells diapers.
btw, diapers.com sold for $550m, so
given the lack of jobs in our world that pay anything
the drive to build a business is the only path to wealth for most,
and as such even if a NNNNN only has speculative value for building a website,
that alone is actually real value.
all that matters is if its easy to type in on a mobile phone.
if it is. then it has value.
now then WHAT the value is, is another matter.
but its not zero.
@mark,
Yes, CHIPs and numerical domains CAN be used to build Chinese websites. So their end-user value is non-zero in some cases. And that can lead to wholesale value for domainers – as a fraction of what end users pay.
But these categories are being valued for other reasons – as tokens or cash receptacles. They’ve been registered at a pace far beyond the ability of web designers to absorb them. (140,000 .SITE sites per day, anyone?) And they’re trading at prices far above that usage-based wholesale value. Sometimes the liquid value as “currency” is higher even than the retail price an end user would pay.
The Chinese liquid market actually acts as a deterrent to web development, as I said last April. China is sitting on its best domains. Put it this way: A gold brick CAN be used to build a mailbox.
Michael
You told (However domain names like NNNNN.com I owned 50+ of them had really no value, until last year.
I registered them years ago when Marchex was making a move on Zip Codes so I followed, but once Marchex gave up the Zip Code play those domains names became pretty much unsaleable.)
My simple question to you based on your experience why you was holding that 5N.com till last year even you was not seeing any value in that? Why don’t you let all of them expire and not pay again for renewal and used that money to renew new names.(Honest answer Please)
I think new investors are following your foot print Michael and holding whatever they can hold till they see bigger return. I feel like all this NNNN and LLLL names going to hold value for long run. If they are betting that means , something shaping up in their own country or they are trying to invest in different platform by seeing western success.
Biggest fact is age difference most of the Asian domain investors are very young compare to western domineers and new generation always do something new so lets wait for future.
most decent domains are owned by investors trying to make a profit.end user take up is really slow. who knows where this wild ride is going but one thing is certain google made it really hard to own a large portfolio without sales.
I like Uniregistry’s Topcoin innovation, it’s a nice way to get discounts on domains
However, Is there anyway to swap topcoin for bitcoin, I don’t see Top listed on coinmarketcap?
Nile
You answered your own question; “holding whatever they can hold till they see bigger return.”
It was like a $400 annual renewal fee on 50 domains and when your holding on to 77K domains they only one’s I generally dropped were domains that used to have traffic and didn’t any longer, adult domains without traffic, and some very long tail keyword domains that lost much of any chance selling thanks to our friends at google