NFTs trip up Uniregistry’s top level domain auctions

A marketing stunt gone horribly awry?

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 winning bidder for .hiphop, 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 NTS 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.

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