While much attention has been focused on ICANN’s new gTLD program and the transfer of IANA function to ICANN, a new domain structure positioned outside ICANN’s purview is being developed with the possibility to significantly impact brands and businesses.

The ‘.bit’ domain, a new decentralized domain structure, has secured a small but loyal following, and could one day change the way brands operate online. .bit registrations are not associated with a name, address, or phone number, but are linked to a cryptographic identity, preserving anonymity. Unlike customary domains – such as ‘.com’ – ‘.bit’ cannot be accessed from traditional web browsers or registered using traditional currency. Instead, individuals attempting to gain access to these domains must first download specialized software that allows access to the sites using Windows browsers, and pay for the registration with a crypto currency called Namecoin.

However, the importance of ‘.bit’ comes not from its use of crypto currencies or special software, but rather from the decentralized nature of the programming. Likening itself to a peer-to-peer ICANN, .bit sites are free from oversight or control by a central regulatory entity. Namecoin can be used as a currency, but its main purpose is to manage information access rather than money – on its website, Namecoin describes itself as a “decentralized open source information registration and transfer system based on the Bitcoin cryptocurrency” (see www.namecoin.info).

The .bit domain is both praised and vilified for its ability to operate outside of the internet’s established regulatory and governing apparatuses. The system only became publicly known in 2011 after it was endorsed by WikiLeaks, and one of the stated goals of the effort is to protect free speech rights online by making the web more resistant to censorship. The .bit effort was also established in response to a mounting concern (in some quarters) over the potential impact of the Stop Online Piracy Act (SOPA), by a group looking to circumvent the threat of domain name blocking and censorship by creating a new Internet top-level domain outside of ICANN control. The effort currently uses proxies, cryptography, and a small collection of DNS servers to create a section of the Internet’s domain address space where domains can exist and be traded anonymously.

Proponents of this technology highlight the security benefits of a system where the location of individual sites remains fluid, thus making the sites resistant to hijackings and shutdowns. The decentralized nature of ‘.bit’ makes it nearly impossible for anyone to compromise a website, whether they be criminals, corporations, or even governments. Enthusiasts expect these features to entice brand owners seeking to establish sites where security against cloning and hijacking are paramount. Other possible legitimate uses include storing identity information or for voting.

While the increased security may seem welcomed in the current online environment, there are significant areas of concern for intellectual property owners.

First, Namecoin’s approach heavily favors early adopters. This facet, although lauded by some, has worrying implications for trademark owners and anyone seeking intellectual property protection. Without regulatory entities such as ICANN or the Uniform Domain Name Dispute Resolution Policy (UDRP) protecting marks and shutting down infringing sites, traditional brand protections become unenforceable in the ‘.bit’ space. In the absence of a vehicle for domain name dispute resolution and with low entry costs, cybersquatting may flourish within the ‘.bit’ domain registry. The current cost to register a .bit domain is very low, under ten cents. So far, over 13,000 names have been registered (a list can be viewed here: namecoin.bitcoin-contact.org/domains.php), a review of the list suggests that cybersquatting may already be rampant.

Fortunately for those seeking brand and trademark protection defensive registrations will be equally budget friendly. Currently the number of domain registrations for ‘.bit’ is extremely low compared to the more traditional new gTLDs controlled by ICANN, but should it take off brand owners may be left defenseless.

Second, as .bit was established – at least in part – to circumvent SOPA, it follows that at least a portion of the information shared in this platform will include pirated content.

Just how effective this new virtual top-level domain will be in preventing censorship by ISP’s and governments remains to be seen. For now, companies should at least be aware of and monitor developments in this next Wild West of the Internet.