The greatest domain-name-appreciation era started only a couple of years ago and is in full swing today, with China as the place everyone has to thank. Getty Images Dot-Com Millionaires. Almost everyone has heard this term.

Imagine registering mortgage.com twenty years ago. If you did, you can bet you probably wouldn’t need a mortgage today.

But that was twenty years ago. So, what if we told you that the greatest domain-name-appreciation era really started only a couple of years ago and is in full swing today, with China as the place everyone has to thank?

Well, it did and it is.

China is home to some of the greatest wealth in the world, but converting that wealth to investment (especially overseas) has long been a challenge to its citizens. This obstacle has fueled the growth of many alternative investments in the past. Some investments turned out quite well, while others (like Bitcoin) were too young to maintain such growth.

So, what happens when you have an asset that comes along and is digital, tax-free, rare, portable and has a proven wholesale market? An unprecedented rise in value is what happens.

When wealthy people decide to invest in something, it’s usually something rare in nature. It’s also usually something the general public typically knows little about. When the odd mainstream article mentions a painting selling for $100 million or a rare coin fetching $245,000 at auction, the real story is often underneath. And that real story typically contains an established wholesale market, an ever-growing demand over time and a verifiable sales history.

Domain names have long been a core alternative investment for those in the know. Monthly reported sales are often over $20 million and unreported sales are estimated to be much higher. This isn’t something new either. DNJournal first started reporting domain name sales fourteen years ago. In the past few years alone, brands have been paying high dollars for important domain names. Witness Facebook acquiring FB.com for $8.5 million and the Texas Rangers’ purchase of Rangers.com for $375,000.

By almost all measures, the aftermarket industry for domain names has grown by leaps and bounds over the past decade. The industry conference, NamesCon, is even expected to draw well over 1,000 attendees from all over the world this January in Las Vegas.

However, the real story today is not a single domain sale that fetched millions. The real story is the adoption of rare domain names by Chinese investors as an alternative investment. Domain names that fit the Chinese buying criteria are traded like commodities now, based on the rarity of the domain. Tens of millions of dollars are being put into domain name investment and the train doesn’t look like it's stopping any time soon.

What’s happening in the domain name industry is far different than what happened with Bitcoin. As Tracy Fogarty of eNaming points out, “Domain name sales is an established trade going back over two decades now. Regulators are probably not looking at domain names with a jaundiced eye because they do not have the same potential to disrupt traditional banking systems.”

And it makes sense. Domain names act a lot like Bitcoin in terms of storage and portability, but domain names are different in three areas that matter.

Rarity

The domain name industry historically reports weekly sales of keyword and brand domains that are among its top earners. Domains like HomeCare.com, Timeless.com and Whisky.com.

Today is different, with numeric and short domains (often unpronounceable to the Western world) defying all traditional domain-name investment logic and shattering record charts. For example, according to DNJournal:

989.com was just sold for $818,181.

899.com changed hands for $801,000.

588.com grabbed $1,000,000.

While these type of domain names have always had value, the explosion has also led to five-number domains (like 87899.com), six-number domains and even longer combinations attracting thousands of dollars in bids.

China, after all, is a numbers culture.

And the demand doesn’t stop there.

For non-Chinese investors, domains like mzqy.com and yybw.com were traditionally of lower demand since they never passed the radio test. Today, however, four-letter combinations are bringing in ever-increasing prices. Take one look at leading auction house NameJet’s home page and you will see a vast number of four-letter dot coms or visit LLLLsales.com to view market sales activity for only four-letter domains.

On the surface, this may seem to make little sense.

But it certainly does.

For many domain-name buyers, the Chinese alphabet is unknown. That’s because there is none. Numbers and symbols have the most meaning in Chinese, with certain letters representing many possible combinations of meaning. The one big difference is that there are no vowels represented. Any domain name with an A, E, I, O or U, or with the letter V, is considered second tier. Domains without these letters are considered premium.

Going back to the rarity of things. Every type of dot-com domain has a defined supply. There are only 100 Number Number (NN) dot-com domains – standing for two-digit numbers, such as 51.com or 86.com. Additionally, there are only 1,000 three-number (NNN) dot coms and 676 two-letter dot coms (like AA.com, MC.com and other well-defined sets of domain names).

Investors even break these small groups into more valuable groups. Only so many contain an 8, only so many have repeating numbers, only so many have premium Chinese characters, etc. While it may sound like millions of domain names, the reality is that the number of dot coms defined as premium is relatively small.

Bitcoin didn’t have this. There are more than 12 million Bitcoins available today and each one is worth the same value. Bitcoin was built as a currency model; domains were not. As the old expression goes: “They’re not making any good dot coms anymore.” It’s true. The best dot coms were taken long ago and the ones that expire today are typically bid on by many investors.

Liquidity (Established Wholesale Market)

People have been buying and collecting domain names for years, with millions sold every week. Public companies like GoDaddy, Web.com and Marchex earn millions from domain name auctions and sales every year.

Having an extremely liquid market with thousands of wholesale buyers is something Bitcoin didn’t have relative to its scale. Bitcoins were hard to convert to cash. Companies like Coinbase only entered the market a couple of years ago, and for people outside of North America the options for liquidity were even fewer. Sure, you could own a million dollars in Bitcoins but cashing out was not an easy thing to do. This has certainly improved, but Bitcoins (or almost any crypto currency) don’t have the long history of an established market. Domain names do.

Portability

No customs declaration. No property taxes. No annual fees (outside of a $10 registration fee). Domestic and international escrow services. Ownership privacy. If there was ever an asset made to handle Chinese wealth, it was domain names.

Will it last?

Who knows. But even if values do back down a little, there seems to be a pool of investors willing to buy in. If there’s any good time to learn Chinese and the importance of numbers and characters in the Chinese culture, it’s today.