Web3 domains | Revolution and challenges

In the ever-evolving digital landscape, a significant buzz surrounds the emergence of Web3 domains, positioning them as a revolution within the broader internet ecosystem. While traditional Web2 domains continue to dominate, Web3 domains are gaining traction by leveraging the innovative capabilities of blockchain technology. These domains harness the power of decentralization, offering enhanced security, transparency and user control that were previously unattainable.

By integrating with blockchain technology, Web3 domains open up new possibilities—from secure transactions to novel investment opportunities. However, while the excitement is palpable, it is essential to critically assess their practical applicability. Issues such as  scalability, regulation, interoperability and user adoption remain significant hurdles, casting doubt on their immediate impact.

As we navigate this exciting yet complex frontier, domain experts and investors must weigh the promise of Web3 domains against the practical challenges they present, staying informed and prepared in the digital domain landscape.

What are Web3 domains?

Web3 domains are a pivotal component of the decentralized web ecosystem, designed to function within the innovative framework established by blockchain technology. Unlike traditional Web2 domains, which rely on centralized servers and DNS providers, Web3 domains are registered and managed on decentralized networks, such as the Ethereum blockchain. This decentralization fosters a more secure and censorship-resistant internet, where domain ownership is verifiable and immutable.

A key feature of Web3 domains is their ability to be linked directly to blockchain addresses, enabling them to facilitate secure and straightforward transactions, including cryptocurrency payments. These domains can also serve as permanent, user-friendly identifiers for decentralized applications (dApps) and services, making interactions within the blockchain ecosystem more intuitive and accessible.

The integration with blockchain networks means that Web3 domains enjoy the inherent benefits of this technology, such as enhanced security and user control. Ownership records of these domains are stored on the blockchain, making them virtually tamper-proof and ensuring that domain owners have full control over their digital identities. Web3 domains represent a significant innovation towards a more decentralized, transparent and user-centric internet, aligning with the broader goals of the Web3 movement to democratize the web and reduce reliance on centralized entities.

What are Web1, Web2 and Web3?

Web1: The initial phase of the internet, Web1, or the “static web,” consisted primarily of read-only websites with minimal interactivity. Users could consume content but had limited ability to engage or contribute.

Web2: The “social web,” Web2 introduced dynamic, user-generated content, fostering greater interactivity through platforms like social media, blogs and wikis. However, this era is characterized by centralized control, with tech giants managing vast amounts of user data, often leading to privacy and security concerns.

Web3: In contrast, Web3, often referred to as the decentralized web, aims to return control to users by utilizing decentralized technologies. It emphasizes privacy, data ownership and trust through blockchain, enabling smart contracts and decentralized applications (dApps) that operate without intermediaries. It aims for a more secure and democratized internet experience.

How Web3 domains work

Web3 domains are different from traditional domains due to their reliance on blockchain technology. These domains are created and managed on decentralized networks such as Ethereum, using smart contracts to automate and enforce rules without the need for intermediaries. When you register a Web3 domain, a smart contract records the domain ownership on the blockchain, making it immutable and transparent. Decentralized registries, such as the Ethereum Name Service (ENS), Unstoppable Domains or Freename, handle the registration and resolution of these domains, ensuring that each domain is uniquely identifiable and securely managed.

Cryptographic wallets play a crucial role in the functionality of Web3 domains. These wallets, which are used to store private keys and manage digital assets, interact with Web3 domains. When a user wants to access or transfer ownership of a Web3 domain, they use their cryptographic wallet to sign transactions securely. This integration means that users have complete control over their domains, as the cryptographic keys stored in their wallets are required to authorize any changes or transfers. Additionally, blockhain domains can simplify cryptocurrency transactions, as they can be linked directly to wallet addresses, enabling straightforward, human-readable addresses for receiving payments. This makes the management of digital identities and assets both user-friendly and secure.

Use cases of blockchain domains

Web3 domains offer innovative applications that enhance the functionality and potential of blockchain and decentralized technologies. Here are some practical use cases:

1. Crypto wallet addresses: Web3 domains can simplify crypto wallet addresses by replacing complex alphanumeric strings with human-readable names. This makes it easier for users to send and receive cryptocurrencies.
2. Decentralized applications (dApps): Hosting dApps on Web3 domains ensures they remain accessible and censorship-resistant, as these domains are not controlled by central authorities.
3. Token swaps: Platforms can utilize Web3 domains to facilitate trustless and decentralized token swaps, enhancing security and user trust in peer-to-peer transactions.
4. Name registrations: Individuals and businesses can use Web3 domains for unique, non-fungible identifiers, similar to digital identities, across various blockchain platforms.
5. Virtual real estate: In metaverse environments, Web3 domains can represent and manage virtual properties, providing secure proof of ownership and transferability.

Currently, the use cases of Web3 domains are primarily confined to the Web3 environment and are mostly understood and utilized by tech experts in the blockchain and crypto space. These domains are not yet a central element of the new internet, but there are growing ideas of creating mirroring services to bridge Web2 and Web3 domains. However, widespread use is still a considerable distance away.

What is the blockchain?

The blockchain is a decentralized, distributed ledger technology that securely records transactions across multiple computers. Each block in the chain contains a list of transactions, a timestamp, and a unique cryptographic hash linking it to the previous block. This structure ensures data integrity and immutability, as altering any block would require changing all subsequent blocks on every participating computer. Blockchain’s transparency and security make it foundational for technologies like Web3, where it enables decentralized, tamper-proof domain management, giving users greater control over their digital identities and assets without relying on centralized authorities.

Web3 domains insights from the Global Domain Report 2025

In the Global Domain Report 2025, produced by InterNetX and Sedo, we captured the current state of the domain industry. In the 2025 edition a special focus was placed on the impact of Web3 domains. According to data sourced from Freename, the number of Web3 registered domains surged to 9.2 million in 2024, in contrast to the 364.3 million domains registered under the traditional Web2 system.

The most popular TLDs within the blockchain sphere are Web3-related, with TLDs like .eth, .nft, .crypto, and .wallet leading the charge. These TLDs highlight the strong association between blockchain and decentralized web ecosystems.

As the Global Domain Report 2025 illustrates, the momentum behind Web3 domains signifies a crucial evolution in the domain industry with promising potential transformation; however, it is too early for conclusions and we will see how the situation will evolve in the next few years.

DNS domains vs. blockchain domains

Web2 domains, or traditional domains, are centralized and managed by entities like ICANN and various domain registries. This centralization means that the ownership and control of a domain can be subject to intermediary policies. In contrast, Web3 domains operate on decentralized blockchain networks, offering a certain level of freedom in terms of ownership and control. Web3 domains are typically tokenized as NFTs, allowing for direct ownership verification and seamless transfer without intermediaries.

Web3 domains do not need to be renewed as they are often purchased with a one-time fee, unlike Web2 domains which require periodic renewal fees. Furthermore, ownership control in Web3 is enhanced through blockchain security features, reducing the risk of domain theft or unauthorized changes. Censorship resistance is another significant benefit; because Web3 domains are decentralized, they are less susceptible to takedown requests and censorship from centralized authorities.

Challenges of Web3 domains

Web3 domains present a range of challenges that differ significantly from traditional domain systems. One major issue is the decentralized nature itself, which disrupts the established structures and processes of the DNS.

Unlike conventional domains governed by centralized authorities, blockchain domains lack a unified regulatory framework, raising concerns about governance, security and accountability. Additionally, the integration of Web3 domains with existing internet infrastructure can be problematic, as they are not universally supported by all browsers and networking tools. This leads to accessibility and compatibility issues, making seamless user experience a challenge. Furthermore, the anonymity and immutability features inherent to blockchain poses risks related to privacy and misuse, as tracing and correcting fraudulent or malicious activities become more complex.

Blockchain domains require careful navigation of these technical, regulatory, and security challenges to achieve widespread adoption and functionality.

Name collisions

Name collisions occur when a name defined and used in one namespace appears in another, causing potential confusion and unexpected behavior. These collisions can be accidental or malicious, leading to a less stable and secure internet environment. The uncoordinated introduction of new namespaces, particularly within blockchain-based naming systems, exacerbates this issue. With at least four competing blockchain-based naming systems today, developers face challenges in deciding which to adopt, as there is no coordination mechanism. Consequently, supporting multiple alternative naming systems within a single application can result in unpredictable outcomes. This lack of coordination may force users to navigate between different systems, leading to isolated ecosystems for each naming system.

ICANN’s point of view

ICANN has not officially endorsed or recognized Web3 domains, but it has shown openness to discussions. To help the ICANN community better understand blockchains and their relationship to alternative naming systems, ICANN published two documents. They remain neutral, neither promoting nor criticizing the technologies and don’t include any policy or position statements. What ICANN does is highlight the importance of maintaining a stable and secure namespace structure, which contrasts with the decentralized nature of Web3 domains.

The rise of Web3 domains presents challenges for ICANN, including potential conflicts over internet governance and domain resolution. Since blockchain domains operate outside traditional DNS frameworks, they could lead to fragmented internet experiences. Managing the coexistence of centralized and decentralized domain systems poses significant regulatory and security challenges.

The revolution and challenges of Web3 domains

Web3 domains represent a groundbreaking shift in internet technology, However, the integration of Web3 domains also introduces significant challenges. They can create conflicts concerning internet governance and the stability of the traditional DNS framework. Maintaining a unified global system that continues to support a seamless internet experience is imperative and the decentralized nature of domains in the blockchain presents hurdles that must be carefully navigated.

To thrive in this evolving digital landscape, domain experts must stay informed and adaptive. We encourage you to delve deeper into Web3 domains and explore the upcoming insights in the Global Domain Report 2025. Staying ahead in the digital realm is essential for harnessing the full potential of these revolutionary technologies.