Determining a fair rent model


#32

The basis and beauty of Ethereum is the micropayments are embedded in the protocols so it will never be “free” by nature of the system. I have no problem with a rent based model for top level domains because the subdomains can all be free if the top level owner/renter chooses to provide them for free for example joe.citywide.eth maria.citywide.eth …

Comparing Yahoo and Google as a “free” alternative is not the right examples. The models only worked because the users privacy and personal algorithms had secondary market implications. The actual value to Google and Yahoo was selling the data and attention of all the users personal and purchasing habits; a very high price to pay in my opinion.


#33

This should never be overlooked. If all goes well with web 3 - then users would capture some of the value of their online data and attention. Income from that could fund their ENS name rent. Their net “cost” would, hopefully, actually be lower than the current system.

If this were not the case, I would also take issue with affordability…


#34

that’s precisely why we have the gas fee, it should be more expensive the collective transactions cost in comparison with the discount he gets from the rental fee, but you’re right about tx count the .eth names has many uses and tx only one.

Okay, I understand, but how do you propagate your MEW transaction! If using one of their nodes and if that node address MEW.eth (or sub) can’t we quantify the usage?

The question I’ve for you and maybe @nickjohnson can enlighten us on this matter, is what can be quantifiable in relation to usage?

the traditional internet domains and from DNS resolver (or DNS root zone servers) you can get a reasonable statistic of usage, ISP has these data, and I assume Alex ranking work in similar fashion, at ENS level is there some metrics in relation to access/usage can be observed and hardly manipulated?

If yes we can use those metrics to offer a certain discount as percentage of the rental fee, that shall 1) incentivize usage -instead of me giving you my 0x address I would give myaddress.eth 2) could potentially play an important role in cases like MEW, and indirect TM protection


#35

Let me try to break down the points I’ve observed from your feedback(s), building pros and cons for each. starting from a high level, then we add items of details as needed


  • New ENS Release vickery auction
    pros: currently active // well documented // incentivize fair bidding
    cons: multisteps

  • New ENS Release dutch auction
    pros: one-step
    cons: FoMO bidding // required being online

  • Rental Model Flat Fee
    pros: simple registration // imitate current .TLDs // first come first served //
    cons: monopoly // squatting // intervention setting-up price or change

  • Rental Model Allocative Efficiency - harberger as self-declared valuation LOCKED, n % Rental fee
    pros: self-declared valuation // self-assessed rental price // economic productivity ENS passes to the hands of whom best able to put in use //
    cons: learning curve // instability of ownership //

  • Rental Currency USD or DAI:
    pros:
    cons: inherit DAI stability if MakerDAO go south ENS will follow // imply USD as an international unit, not necessarily in 10, 20 or 50 years// technically harder to implement

  • Rental Currency ETH:
    pros: native to Ethererum universe //
    cons: ENS barriers to entry correlated to ETH price (only w/ Flat Fee model)

  • Trademark Protection On
    pros: Corporate Friendly
    cons: required third-party intervention and arbitration // state territory limited - similar TM on different states etc // TM Class limited

  • ENS Usage subsidy rental discount based on usage -assuming can be quantified-
    pros: incentivize resolvers configuration and ENS productivity
    cons: Can be manipulated??


Kindly copy-past the post adding/removing your Pros/Cons and/or new items, the idea to start from general topics as we agree on these high-level we start adding items for details like a rental period (year/month/day) rental $ or rental % (3, 5 or 7%) etc


#36

The problem is you need to find something that is not gameable, which is really hard. If you try to track “how often do people lookup this ENS address” then (ignoring the fact that that is a local lookup) people will just spoof lookups.


#37

I was thinking about economic model / incentives.

There will be some popular, heavily contested domains.

It’s not practical for me to search the forum / github / everything for the current state of the discussion - I believe that admins and community who are more invested in the ENS will know better.

At any point in time, BIDDER who wants to obtain an already registered domain can bid 150% (or more) of the current rent amount.

The existing OWNER has 1 month to counter offer, at 25% premium of the current price. That will increase the cost of the domain.

After another 1 month, let’s call it “grace period”, the OWNER can pay 50% premium to keep the domain.

The BIDDER loses 5-10% it is to avoid frivolous bets.

In case an OWNER does not pay 25% or 50% extra, some of the money from 150% bid is coming to them.

I think that 1 month or notice should be sensible. Another month of grace period. Maybe adding some minimal timeouts - so that no new BIDDERS immediately after a previous one, say 6 months of no new bidders

•••••••

The goal of such design:

  1. ability to resolve the most popular domains
  2. setting correct incentives
  3. no “pain in the ass” with constant bidders

#38

That suggestion exists to achieve goal #3. It’s not meant for the purpose of making money hence why the algorithmic has a logarithmic curve to actively discourage people from profiting & making lots of money. Some will, that’s okay. Just like some will squat.

You could just make a flat fee for rent but I think that’s worse then letting the market decide how important something is.

I am going to write a 1.1 proposal soon after having read these comments. I do think I need clear direction on the goals. I am not sure what we’ve converged on & need some direction @nickjohnson.


#39

As I’ve said elsewhere in the thread, I’m very wary of any system that can deprive someone of their domain unexpectedly due to inaction, because in a system like this, especially where names can be used as payment handles, stable names are absolutely crucial.


#40

I had to create an account just to agree with nickjohnson here. Rent seems like a minefield, there are security, adoption, governance, and a full can of worms lurking behind a rental model. Unfortunately there is no good way to coerce the market.

I don’t think there is a real problem rental is addressing. Or one that’s worth opening the can of worms. ENS already has subdomains - this is the solution. Since it is a trustless smart contract, owning a subdomain can be just as secure as owning a top level domain.

I think rent creates problems and attempts to solve a problem that does not exist.


#41

Was chatting with @decanus this afternoon about rent models for ENS and figured I’d add my relatively simple proposal to the discussion. The key point is to modify the existing process such that by default registrations are subject to a renewal auction each year. Users can bypass this by paying a renewal fee based on a percentage registration auction’s value.

Goals:

  • Create a deterrent against mass registration and squatting domains from speculators.
  • Minimize impact of that deterrent on legitimate users.

Proposal
Vickrey style auction (eg current implementation) with the following additions:

  • By default duration is limited to one year and then a new auction process is started (using their deposit as a starting bid) to renew the domain
  • User has the option to pay a percent of the auction price as renewal fee (rent) which would allow them to automatically renew with no risk of price increases

Pros

  • First movers are not subject to hostile takeovers so long as they pay rent
  • Rent price does not ever increase so long as domain is persistently owned by the same owner. If owner acquires an uncontested domain rent would be minimal.
  • Rent is optional and really only necessary for domains that are likely to be contested.

Additional Thoughts:

  • If a squatter gets to a domain first, but does not face competition from other squatters, then renewal fee they would be charged may be too small of a deterrent. Adding a price floor for renewal could resolve this as it would have minimal impact on regular users targeting a specific domain but would significantly increase costs of mass registration/squatting uncontested domains.

#42

Interesting thought. Wouldn’t the default of being able to pay a fixed renewal effectively ensure that the only time names go to auction is when someone’s ready to let go of them, though?


#43

Wouldn’t the default of being able to pay a fixed renewal effectively ensure that the only time names go to auction is when someone’s ready to let go of them, though?

I think this is a desirable property don’t you? It gives certainty to people who build a brand around a name.

I think the main challenge is to deter people from mass registration and squatting domains, in this scenario they could do that but would have to pay renewal fees on all of them if they want to lock them up beyond a year. For a single legitimate user interested in one or handful of names that have high value to them personally that is not an issue, but would be a significant deterrent against squatters/mass registration.

Its probably also worth comparing this to simply charging a fixed registration + renewal fee, perhaps with some algorithm for price setting (eg Registration duration as a price signal). Such an approach could be used with something like this to set the renewal price floor, so the key comparison is charging rent by default, or only optionally to secure renewal privileges.

I think the advantage of keeping the auction mechanism for initial registration is that users who want to use ENS but don’t place strong value on maintaining control of a specific name indefinitely can do so with very minimal cost. Whereas if all registration are set by a global price algorithm, even if its an excellent algorithm, it will be more expensive than necessary for those users, and probably not expensive enough to deter squatters from speculating on high value names anyways.


#44

I agree, it’s definitely a desirable property. But, it seems to render the auctions much less useful. Our experience shows that most auctions after the initial landrush period get only a single bid, so auctions are mostly just extra complexity with no real gain at this point.


Auction and Permanent Registrar Update
#45

Hmm I think there is definitely a gain, but I suppose the question is that benefit worth the extra UX complexity.

To help wrap my head around that I sort of broke up the possible usecases as follows:

A. Names which are unlikely to ever be contested.
B. Names which have value to only a single legitimate owner, but may also attract squatters or scammers.
C. Names which may have intrinsically higher values, eg short names, common public names (johndoe), but which don’t have a single legitimate owner. These are likely to attract squatters/speculators.

With this in mind the auction process certainly has value as it allows for A to be priced very cheaply (perhaps a negligible deposit to use the name for a year). With a flat fee for all names most of these users would be significantly over charged. B is the most problematic, but (I think) fundamentally requires some sort of arbitration to resolve and isn’t made worse by this proposal. This proposal wouldn’t be significantly worse than other proposals that use a flat price registration for this category, the main downside being the UX of the initial auction process. C is where the auction and renewal fee really shine because most of these names will be held by speculators/squatters and the auction mechanism would ensure that they are valued appropriately and the renewal fee as a percentage of valuation (much like a harberger tax) ensures that these turn over to their more valuable uses more efficiently.


#46
  1. If someone can just make a higher bid for a name that you already own, do you really even own it? Does that mean, ‘He who has the gold makes the rules’? Only the government can push me off of my land, in the US anyhow, and even then they have to pay me fair market value.

  2. I understand what you mean about not wanting people to ‘Squat’ names. What about someone that is just creative or has foresight and has registered names that they believe people will want to rent from them? What if this creative person has registered names for the purpose of reselling them? You guys admit that names have a value, so what is wrong with buying a penny stock and it’s value going up? I feel like in a similar way someone could argue that it was unfair for early adopters of ‘ETH’ tokens to buy at such a low price. They are squatting all of my cheap Ethers, right? I will use an example of a name that I recently registered, ‘WalletClub.eth’ , I believe that this name would be popular to rent to others, (i.e. yourName.walletclub.eth) and if I start to invest my time into creating the ‘wallet club’, is it fair that someone that is better funded can just take it from me? I will be perfectly honest, if I come up with a good idea first (a good name) why am I pushed out of the market because a bunch of guys want to own CarInsurance.eth and everything like it. Not only that, but my current investment for names is at least a couple hundred dollars in Gas alone. That is a whole lot of money for me and it was an investment in an open market where my creativity could shine. I would rather it wasn’t taken away.


#47

Throwing these comments in the conversation:

I think we have to leverage the existing internet domain system. For example someone verifying that he owns the same domain in .com would be able to claim a name that’s already registered.

The problem of allowing to take over domains is that someone could steal funds from customers unaware of the change, I believe we should protect active domains so they cannot be outbid/claimed by an attacker. For example if someone is actively running a casino on mycasino.eth, there would be incentive for an attacker to claim/outbid it.

  • Tie the amount of the takeover bid to total amount ever sent to mycasino.eth (eg. amount^2)
  • Take into account how much is currently held in mycasino.eth
  • Take into account when was the last transaction
  • Take into account the frequency of the transactions

Also we need to protect from typosquatters.
For example someone trying to register my-casino.eth could then setup a phishing dapp/website and lure customers into sending to this new address. By using the same technique described above to take activity into account, variations of the domains could be more expensive to buy/rent.


#48

I mostly agree with these thoughts. I think there should be goals of usability and preventing squatting but that it should be noted that usability is a much more important goal than preventing squatting. Preventing squatting is not a small innovation and my understanding is it hasn’t been solved yet. I think there is an instinct to solve problems with governance when often times the market should just play out.

Is the argument here that any .eth domain name could allow for its own auction system for its subdomains with rents and whatever enforcement process desired, and if done well, other domains may follow and adopt that model to distribute their subdomains?


#49

I don’t like the idea of paying rent. I’d like to feel like I own the domain and not have to worry about losing it if I don’t pay ‘the man’. Could some fee be added to things like transferring the domain or setting a resolver instead of having rent?


#50

One problem rent is designed to solve is lost domains; if someone loses the key to the domain and there’s no expiration, the domain will end up ‘lost’ forever.

Another is squatting, which requires imposing a cost on domain holders to prevent them buying up an unlimited number of them and just sitting on them.


#51

the lost forever if you lose your key is most certainly bad. i would assume most people buying these in the future would have some sort of backup or multisig ownership hopefully. If there were ever another release of a new registry and registrar maybe have some time limit for people to upgrade or lose being able to persist ownership?

This is major weak point, especially if the suggested fees were flat rate, squatting domains would cost almost nothing after purchase. Maybe making the fee to transfer the domain grow at some exponential rate based on things like: price bought from registrar, number of competing bidders, how long this domain had been available for purchase. Also would want a way to release ownership back to the some of the initial sale price.

One problem with this might be people buying domains with a contract so they could ‘transfer’ ownership to anyone within the context of the contract without paying a fee.
Also I am assuming squatters goals are to eventually sell their domains for a profit, doesnt really do anything against people buying domains and then doing nothing with them.
Another really big issue with this is users possibly having large fees to transfer domains to another account or sell them so deciding fee rates seems like the heart, also maybe they could be estimated for the user before purchase.