Author Topic: Alternative DNS White Paper  (Read 10845 times)

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Offline GaltReport

I have only 1 question.  Is their anything in either approach to stop someone from using their greater wealth to silence someone or some opinion by outbidding them for their current well know website name and putting up some crap/contrary site?  That's my concern with the situation where you already have a .com site and want to have the same name in the new system.



Offline xman

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As a webmaster, I will hesitate to use a domain name that will be out of my control. that is, might be taken away by competiter, or a richer person.

Offline xfund

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Domain holder must choose one from  the 123?

Quote
At this point the current domain holder may:

1)   Extend their lease at the higher market rate (this relinquishes the deposit back to the bidder)
2)   Hold the lease until the expiration date.  At this point the domain is relinquished to the higher bidder and the bidder takes over the lease with an initial term equal to the lease they bought out.
3)   "Sublease" the domain to the higher bidder at any time before the lease expiration.  Subleasing gives a profit to the original domain holder by the formula (higher_rate - rate_paid) * time_remaining_on_original_lease.  The new holder always takes over the domain with a lease term equal to the length of the lease they bought out.
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Offline Method-X

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Quote from: gamey
Why won't companies just buy domains off-chain?  How often will auction system actually be used ?

This. Squatting is not a problem that needs solving. If I want a domain badly enough, I'll buy it off the squatter for market value.

Offline gamey

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So much about this I don't get.  I wrote up a long list of concerns and somehow (my fault) lost them.

Why won't companies just buy domains off-chain?  How often will auction system actually be used ? 

The domain tax system is strange, because when you build an online brand so much is tied around the domain itself.  Having to pay the value for it every year is not anything anyone would voluntarily want to do. 

For large existing companies, the only real business need I see is as a security system.  But the secure domain doesn't usually have the same need as the customer directed domain.  ICANN has a legal framework and every existing company has their own domain.  Last i checked it was accepted wisdom that is makes little sense to have multiple domains point to the new one.  What is the reasoning that existing companies will ever want to switch ?

Agent86's system protects property rights of established brands with capital at the expense of the under capitalized, the original way protects the under capitalized.  This is the opposite of how decentralization has been used before.  It is a neat idea, but seems very experimental and I question what real world use it will see since all the centralized systems protect these entities as it is.

As an experiment I find it quite interesting to see how it plays out, but it also concerns me that we are muddying up the project with confusion.   2 chains (1 chain, 2 tlds?) sounds great, but it'd be nice to see someone explain why people will ever use this model.  Squatting sucks, but squatters have their price and it is a one time fixed cost.  So it seems to me that people will just revert to the original model first and approach the squatters.  There is no guarantee that the owner in agent86's model is legitimate, so what are you really selling ?
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Offline arhag

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Your proposed additional function f(n) = 0.0025 + 0.125/n only complicates things and is not useful.  It exacerbates the squatting problem that is already present.

I think I might I agree. I have to think about it more, but it may just make things more complicated without really improving anything. Let me continue with the domain tax model assuming a fixed 1% annual tax on the market price of the domain.

How would this sound to you:  Beginning with the initial auction, everyone is forced to pay up front for a 100 year lease and maintain it.  They are forced to extend this lease every 3 months at the current market rate or else they lose their domain.

In case you missed it, this is equivalent to your core proposal.

Sure. They're equivalent as long as losing their domain to someone else means that they automatically get the 100 year lease deposit that the new owner paid. If someone has to deal with the threat of losing their brand name on a regular basis, at least they are compensated with a significant value transfer from the person taking their name away from them. This also acts as a barrier to prevent nefarious people from just outbidding a domain holder with a high lease paid only once for a short lease period, not for the purpose of holding the domain for long, but only to cause a disruption in previous holder's website access in order to damage their brand.

In your model, if a domain holder wants a short 1-year lease length to allow them the flexibility to readjust the lease rate if they think it is too high, then they need to worry about losing the name every year with no financial benefit to them if that happens. If they finally earn the privilege to get long multiple year lease length, they have to now deal with the risk that they may have overpaid if the market rate value of leasing the domain drops.

I think doing 100 year leases incentivizes squatting behavior too much. 

There is certainly a trade off between disincentivizing squatting and reducing the cost to domain holders to maintain their established name. The domain tax model chooses a different point of balancing these two concerns than your leasing model. In fact, I think of the domain tax model as a generalization of your leasing model (as long as you assume only fixed 3 month leases are allowed). If the tax were 100%, then the domain holder would essentially be leasing the domain at the fair market rate. If the tax were 0%, this would be nearly identical to the guaranteed-ownership model originally proposed for .p2p. My claim is that the sweet spot is somewhere in between these two extremes.

I also don't like that there is no flexibility for domain holders in lease length and they have to make payments every 3 months that might rise unexpectedly.  If they ever are priced out of their lease they have only 3 months to plan for it and move (Granted they get a big payment in doing so).  Under my plan they have the entire length of their lease to plan for a move or decide what they want to do.

Would setting the renewal period to 1 year help? Do they really need more than a year to make the transition?


Offline Agent86

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Arhag,
How would this sound to you:  Beginning with the initial auction, everyone is forced to pay up front for a 100 year lease and maintain it.  They are forced to extend this lease every 3 months at the current market rate or else they lose their domain.

In case you missed it, this is equivalent to your core proposal.

Your proposed additional function f(n) = 0.0025 + 0.125/n only complicates things and is not useful.  It exacerbates the squatting problem that is already present.

I think doing 100 year leases incentivizes squatting behavior too much.  I also don't like that there is no flexibility for domain holders in lease length and they have to make payments every 3 months that might rise unexpectedly.  If they ever are priced out of their lease they have only 3 months to plan for it and move (Granted they get a big payment in doing so).  Under my plan they have the entire length of their lease to plan for a move or decide what they want to do.

It's probably an improvement on Empirical's original idea or maybe it's just more specific, and I like that both of you are acknowledging the need for market based carrying cost.  But in the end I think it incentivizes squatting behavior too much and has other problems such as flexibility.  It would also be possible to use my idea with a longer initial lease or tweak it, but I don't currently see a reason to.

Offline arhag

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I finally got around to reading this. As other people have already mentioned, I am also concerned with the fact that you do not own the name but are only leasing it. This could lead to certain issues like a big, rich company bidding up the lease rate of a small start-up competitor's website to take it over before it has the chance to get big or even taking over an individual's website to censor the individual who may be writing bad things about the company on his popular blog. I think it is best to have both this model and the original .p2p model. This provides an option to those who really want to own their domain (even if the pool of available good names is smaller because of squatting). Also, it allows us to see what the squatting differences between the two models actually are in practice.

I also want to get some clarification on the lease length formula. Does it mean the maximum lease length can grow exponentially? At least that is how I understand the following:
After acquiring a lease, a domain holder may extend the lease at any time up to the max lease length.  The max lease length is defined by the formula: initial_lease_length +  time_domain_held = max_lease_length.  Domains acquired from the auction process have an initial lease length of 1 year.
This means I can win the auction at time t = t0 for leasing a domain for 1 year, then six months later at t = t0 + 0.5 years extend the lease by 1.5 years (0.5 + 1) to a new expiration time at t= t0 + 2 years, then at t = t0 + 1.5 years extend it again by 2.5 years (1.5 + 1) to a new expiration time at t = t0 + 4 years, then at t = t0 + 3.5 years extend it again by 4.5 years (3.5 + 1) to a new expiration time at t = t0 + 8 years, and so and so forth. Did I understand that correctly? I assume that is what you mean when you say:
Domain name holders who establish long term ownership interest in their domain are rewarded with very long lease options to have the certainty of future ownership.

If so, I do like that property of the system. People and companies who are serious about owning their name can quickly get to the point where they can lease for very long periods without worrying about others outbidding them for a while. It is a gamble though. If you end up with a really long lease length at a certain lease rate, but the market rate is actually less than that, you are forced to pay the inflated rate for the rest of the very long lease until you finally get the chance to put it up for auction. What if instead of paying upfront for the full term of the lease, a lessee pays every year for one year chucks of their total lease length at their current lease price? That way if they thought the rate was too high they could stop paying and let the domain go up for auction. Would this break the economic disincentives for squatting? They would still be forced to readjust their lease rate at the end of their lease which would only be a long time in the future after they already owned the domain for a long time.  And anytime the domain is sold to another party, the max lease length could be reset back to the initial lease length. The point is I would like to reward long-time domain holders with the ability to keep a lease price below market rate for a long time.

I also like Empirical1's suggestion. It makes it more like buying a home and paying a property tax than renting an apartment. So how about the following model. The initial auction for the domain would be to buy the domain not lease it. That would set the initial market price of the domain.  Every 3 months (a quarter) after the initial sale of the domain a new renewal auction opens up. The auction starts at the beginning of every quarter and the current domain holder would keep control of the domain throughout that quarter. The auction parameters could be the same as the ones in your whitepaper (30 day minimum, ends after 24 hours of no bids, bids must be 10% above previous bid, upfront deposit of bid value needed, and being outbid returns your deposit). The deposit of the highest bidder determines the new market price of the domain. After the end of the auction (the auction automatically ends one week before the end of the quarter if 24 hour inactivity period hasn't ended the auction already), the domain owner has until the end of the quarter to pay a domain tax based on the new market price of the domain (say 0.25% of the market price) in order to keep the domain for another quarter. If the domain owner pays the tax, the highest bidder gets his deposit back. If the domain owner fails to pay this tax, the domain is transferred to the highest bidder and the highest bidder's deposit goes to the previous domain owner. This way there is still the carrying cost (the domain tax) that disincentivizes squatters who do not have a legitimate use for the domain. The tax does scale with the market value of the domain, but since it is only 1% per year, it is not too high. A domain owner who is willing to pay no more than X per year to renew a domain annually would force a buyer to pay the owner more than 100*X to take the domain away from the owner. But we can make things even better in order to strike an appropriate balance between disincentivizing squatters and not punishing legitimate domain holders too much. The tax rate could be a function of the length of time the domain holder has held onto the domain. Instead of the tax rate being fixed at 0.25% (0.0025) per quarter, it can be set to the following function of the number of quarters (n) that the owner held the domain: f(n) = 0.0025 + 0.125/n (y-axis of plot is in annual percent of domain tax, x-axis of plot is in years). In the first 5 years of owning a domain, assuming the market price of the domain remains the same as the initial auction price during this period, the owner will have to pay nearly 50% of the initial price in domain taxes. After 5 years, the annual tax rate is less than 3.5% (and decreasing). This makes it so that long time domain holders pay a low rate, and speculators won't find it profitable to squat on a domain if they believe they cannot make more than 50% return on investment from the initial auction price after 5 years.


By the way, great job on this section:
A major barrier to adoption of a system such as Namecoin is the lack of resources and financial incentives for those who are promoting and developing the system.  All current systems of decentralized ownership tracking, often grouped under the term "crypto-currencies" (which includes Bitcoin) suffer from a problem of "group trap."  Group trap can be defined by the observation that working as a group toward a common goal may dilute the incentive for individual effort.  Essentially, these decentralized systems have no mechanism to effectively centralize the resources needed to incentivize developers and promoters of the system.  While those with stake in a particular currency have some motivation to promote it, the value of the work performed is diluted across all shareholders.  A developer or promoter working hard for such a system personally incurs the cost of that labor while other shareholders do not.  The shareholders who do not incur these extra costs derive comparatively better returns from their investment.

Many such systems begin with large stakeholders who work hard to promote and develop the system.  As they begin to sell stake to cover costs it becomes apparent that the work is not adequately rewarded.  Many of these projects leave investors holding stake in abandoned and underdeveloped projects.  Some projects raise initial capital from investors who are then granted stake.  This money is used on the honor system to develop the project.  This starting capital is inherently limited, it is not controlled and directed by shareholders proportional to stake, and it is not a sustainable funding method for long term project costs.

The solution to this "group trap" is shareholder directed reinvestment or distribution.  Following the BitShares analogy of shares in a profitable company we can see that shareholders can be given voting rights to direct capital.  These systems can be structured in a way that generates profit for shareholders.  For instance, a domain holder can pay a certain amount of stake to the network to lease a domain.  This stake is destroyed, increasing the percent ownership of all stakeholders.  The stakeholders can then sell that additional stake back to customers who use it to pay to lease domains on the network and the stake is again destroyed.  Destroyed stake is essentially "income" to the shareholders.  While destroyed shares are income, shareholders can pay expenses via creation of new shares.

A method to accomplish this is the election by popular vote of "workers" who are paid via the issuance of new shares.  Workers can be elected by a method called "approval voting."  Approval voting allows any stakeholder to approve or not approve of any candidate worker.  These approvals are weighted by ownership stake.  Workers with over 50% approval by stake become active and are paid a salary in newly issued shares.  This salary could be specified by the worker as part of their candidacy.  It is also possible to allow shareholders additional control of salary by approving a percentage of the requested salary during voting.  This percentage could be above or below the requested salary and a median can be taken to determine the actual paid salary.  This system allows shareholders to hire executives, developers, and promoters and appropriately incentivize them to work in the interests of the system.

A domain registration system is the type of system that requires a large network effect.  Utility of the system and adoption of the system are interdependent and each is reinforced by the other.  Promoting the system to the point that a network effect is established may require a large initial investment.  It is quite likely that expenses for development and promotion would outweigh income in the early stages of the system.  For this reason the system may create more shares than it destroys in early stages.  The system would grow in value by increasing adoption and attracting new investment capital to buy the newly created shares.
It clearly explains the profitable company analogy and why BitShares DACs have a better chance of future survival than other systems. The mechanisms of selecting the workers and their pay described in the penultimate paragraph of that section is something that I think still needs further debate and discussion. I agree that workers should be separate from delegates and that there should be more flexibility in deciding their pay rate than the current method. But this is something for further discussion in another topic.




Offline gamey

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I also wonder if it would be possible to blackmail (for lack of better word) someone.  Say I value a domain at $1k which is currently costing the owner $100.  I could try to bid for it, or I could send an email telling the person to pay me $X amount or have the domain bid up.   Now they say no and I bid at $1k, knowing I  can make my money back - or they pay me.  People learn to go the easy route.

I haven't looked at the underlying equations, but could a blackmail approach work ?  Why not ?

Shaking people down is a time honored business model....
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Offline Empirical1

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Edit - With the above being said, I don't care much since there is still the original approach.  As long as DNS has the option for both approaches then I have no concerns.  Just as Agent stated, no one is being forced to lease the domain to utilize this technology.

 +5%  (I still think the original approach doesn't solve the problem of getting some relative value from specific domains long term though but I'll look at the original one more now.)

Offline Empirical1

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Hi Agent86, yes I've since read that thread. https://bitsharestalk.org/index.php?topic=5357.0

For me, I see the fault more clearly now. You've undervalued a domain name. You've viewed it more as a business 'location' that has limited value as it can be moved. This is wrong, imo, with most online businesses you're not, for example,  just asking Hotels.com to move their hotel sales to another location, you're asking them to give up their brand name too.

Domain names are intimately tied with the brand itself & NO business in the real world would EVER 'rent' it's brand imo.

To have no ownership over your own online brand and to pay rent commiserate with the total value of the brand you built by competitors, shareholders and vultures is a fatal flaw still for me. (Even my model of charging them a small ground rent is pushing the boundaries.)

If BitShares shareholders didn't own the tlds that Toast is creating and were instead subject to your model of lease agreements from ICANN.... Would we want to build BitShares DNS?

(I disagree with your Ethereum response too, a competitor being able to (anonymously if they like) close/take control of your site/online brand for any length of time even with a notice period is hugely valuable. Your rent would be decided by competitors/vultures on a cold equation of how much the lost business would damage you and/or benefit them.)

 

Offline gamey

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This means you will be punished the more successful your domain is.
There's nothing wrong with shareholders getting a decent payment from someone making a ton of money using our domain service.  No one is forcing them to lease it from us.  Also, companies that perform a useful service or provide useful content for a website have success and value.  Domains are generally a convenient way of accessing that specific company or service.

These types of things were discussed to some degree in parts of this thread: https://bitsharestalk.org/index.php?topic=5357.0

It isn't just a matter of shareholders getting a decent payment from someone making a ton of money.  You have look at both sides, not just the one benefiting from the injustice.

It is analagous to the postal office allowing others to buy up addresses in order to receive future business from the previous owner.   And the only way to keep your address is to outbid them for what you have built up by your own labor.

Why do I want this unknown cost when I could just get a domain and know the annual cost going forward.  I do not see any rational reason why a startup would choose a domain off of Agent86's model.

Edit - With the above being said, I don't care much since there is still the original approach.  As long as DNS has the option for both approaches then I have no concerns.  Just as Agent stated, no one is being forced to lease the domain to utilize this technology. 
« Last Edit: August 05, 2014, 09:10:29 pm by gamey »
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Offline Agent86

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I want to add a tweak; I think using a "standardized rate tier pattern" for all domains could reduce transaction sizes and database bloat.

Offline Agent86

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Why will domains in your proposal find a fair market rate at the initial auction if bidders aren't incentivised to participate?
Getting the domain is all the incentive needed.  If no one else has tried to register the domain and no one else bid, perhaps that is the "market rate"

The model has a flat registration fee to start an auction but we already have an idea from existing domain systems which names may or are likely to be more popular or valuable so wouldn't it make sense to reference existing domain name valuation systems to derive a fee to register a TOAST domain and start an auction? (I.e. The registration fee for Nike.Tld should be more than Ilovelamp.Tld imo.)
No; this is a ton of unnecessary work.  If Nike.Tld really has value, we will soon find out because people will bid accordingly.

In your model you're really only 'renting' the domain for X period. Then there is a new auction and you have to pay rent for the next rental period at a new rate based on that auction, someone can even force you into a new rental contract at any time? 
Leases can be extended before they near expiration.  If it expires and a new auction happens it means the current holder decided they would rather risk giving up their domain than continue to pay the rate they were paying.  No one can "force you" to lease a domain.

Examples:

Say Bitshares.org is valued at $10 000, I should be able to put in a bid of $5000 knowing that BitShares will more than happily pay the $50 annual rental fee. ($25 to me and $25 to delegates.)

I could bid of $200 000 for a $1 million website 'Y', knowing 'Y' will be happy to pay $2000 rent for the year. (1k easy money to bidder and 1k to shareholders via delegates)
Why should you get paid for harassing people?

But in your model Ethereum can force BitShares to pay $5000-20 000 rent for the next rental period. BitShares will be forced to pay a ridiculous amount for that period & be unfairly punished or lose their site.
It would hurt Ethereum way more to pay bitshares some ridiculous amount to take over our domain name for some period of time.  It would be such a dumb thing to do on their part that they wouldn't do it.  We would take the big payday for a nice profit, redirect traffic for a while, and then end up getting our domain back once Ethereum realizes they can't pay an astronomical price to rent a domain forever that they don't use.  Also, everyone would wonder (including their investors) why they spend their funds this way to be be dumb A-holes who have to resort to such things.

This means you will be punished the more successful your domain is.
There's nothing wrong with shareholders getting a decent payment from someone making a ton of money using our domain service.  No one is forcing them to lease it from us.  Also, companies that perform a useful service or provide useful content for a website have success and value.  Domains are generally a convenient way of accessing that specific company or service.

These types of things were discussed to some degree in parts of this thread: https://bitsharestalk.org/index.php?topic=5357.0

Offline Empirical1

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Hi Agent86,

Why will domains in your proposal find a fair market rate at the initial auction if bidders aren't incentivised to participate?

Thoughts

1. Registration Fee

The model has a flat registration fee to start an auction but we already have an idea from existing domain systems which names may or are likely to be more popular or valuable so wouldn't it make sense to reference existing domain name valuation systems to derive a fee to register a TOAST domain and start an auction? (I.e. The registration fee for Nike.Tld should be more than Ilovelamp.Tld imo.)


FATAL FLAW IMO (At first glance, maybe I misunderstood.) 

In your model you're really only 'renting' the domain for X period. Then there is a new auction and you have to pay rent for the next rental period at a new rate based on that auction, someone can even force you into a new rental contract at any time? 

Problem: 

This means you will be punished the more successful your domain is. You could have to pay a huge new rental fee because of your success, (Someone will want the domain you have built) or  a competitor will want to force you to pay a lot to increase your running costs.
 
What kind of person wants to buy a piece of property on a vacant piece of land, build a fantastic house and furnish it.  Only to have to pay a rent the following year that reflects the improvements he has made to the property?

That's why renters don't upgrade properties because they don't own the results.

Your solution makes domain name holders renters.

Solution: IMO the solution is a form of leasing not this. Push people to pay a fair price at auction like the initial model and then have an annual ground rent that discourages squatters or at least extracts value from them for shareholders but doesn't punish people who have put in hard work to build successful sites too much. 

My kind of model the % and time can be tweaked but that achieve the result

Quote
Every year/two, each domain is automatically auctioned again. The current owner has 30 days in which he has the option to either sell the domain to the winning bidder or keep his domain for another year by paying 1% of the winning bids price. (1/2 of it may go to final bidder and 1/2 to the network, maybe even a bit to a maintenance and development fund. Thus ensuring BitsharesDNS has long term value and can extract a little bit of value from Domains that go on to be very succesful.)

Examples:

Say Bitshares.org is valued at $10 000, I should be able to put in a bid of $5000 knowing that BitShares will more than happily pay the $50 annual rental fee. ($25 to me and $25 to delegates.)

I could bid of $200 000 for a $1 million website 'Y', knowing 'Y' will be happy to pay $2000 rent for the year. (1k easy money to bidder and 1k to shareholders via delegates)

But in your model Ethereum can force BitShares to pay $5000-20 000 rent for the next rental period. BitShares will be forced to pay a ridiculous amount for that period & be unfairly punished or lose their site. Or a Coinmarketcap can build a good site, but have little cash flow and be forced to sell to some competitor with funds that just steals their hard work.
(But by only having to pay 1% of the bid on an annual auction of a site you already own competitors and shareholders can't punish you too much and just extract a small fair annual ground rent.) 
« Last Edit: August 05, 2014, 06:47:45 pm by Empirical1 »