What Is Namecoin (NMC)?
Namecoin is "a peer-to-peer naming system based on Bitcoin" created in 2011 from a fork of the Bitcoin blockchain. It is designed to act as a blockchain and token for a decentralized domain name system (DNS), where token holders can claim a specific name for their websites.
The makers of Namecoin describe it as "an experimental open-source technology which improves decentralization, security, censorship resistance, privacy, and speed of certain components of the internet infrastructure such as DNS and identities."
Key Takeaways
- Namecoin is a blockchain with a token forked initially from the Bitcoin blockchain, used to represent ownership of a domain name.
- It was developed to decentralize the Internet infrastructure, reduce censorship, and increase privacy and security.
- Namecoin attempts to replace existing domain name server technology with blockchain technology.
History of Namecoin (NMC)
The idea for developing a tokenized domain name system was first introduced in 2010 in an Internet Relay Chat (IRC) room, #bitcoin-dev, where users discussed the merits of a bitcoin-like DNS system that came to be known as bitdns. Namecoin was then introduced in April 2011 by Vincent Durham (an anonymous name) on the same Bitcoin Forum used to announce Bitcoin.
DNS translates human-readable domain names (for example, www.investopedia.com) to machine-readable IP addresses (for example, 000.0.0.00). DNS is the mechanism by which domain identities are linked with numerical IP addresses worldwide. The decentralization of this system was intended to end internet censorship and enhance Internet-related security and privacy.
Namecoin has been continuously updated since its launch, with summaries posted on the Namecoin website by Jeremy Rand, one of the most publicly present developers, and Robert Nganga, a later addition to the team. Other team members include Daniel Kraft (Chief Scientist), Brandon Roberts (Engineer), Andrew Colosimo (Developer), and Joseph Bisch (Engineer). Many others have contributed to the project.
The project has received funding from the NLNet Foundation through the Net Generation Internet (NGI) Assure Fund since 2017. The Namecoin project has received five grants from the Foundation since 2017, the last of which started in 2023. This NGI Assure Fund receives financial support from the European Commission.
Namecoin has an active team of developers and support personnel who work to continue improving the blockchain, use cases, and appeal to users.
Concerns About Namecoin
Although it was the first Bitcoin fork, Namecoin hasn't accomplished much in attracting interest from investors. According to data from Coinmarketcap, it had a 24-hour trading volume of $7,604, and the supply of tokens was 14.7 million out of a total of 21 million. Interested investors should be wary of entering positions using Namecoin as there is very low liquidity.
For users who want to use Namecoin to create domain names, there is a 0.01 NMC fee for registering the name and a mining fee paid to miners. The mining fee is determined by the network at the time based on activity, much like Bitcoin's fees. The domain names must be renewed periodically (about every 222 days), or the user risks losing the domain, which can be claimed by anyone.
Namecoin vs. Bitcoin
Namecoin uses the concept of data name/value pairs attached to a coin. A name/value pair is a data value and a name used to identify the value in a database. In this case, the name/value pair is a computer-readable numeric address with a human-readable name. A token for the name/value pair is created, and the token holder owns the name/value pair. Thus, a Namecoin is used to establish ownership of a domain name.
Namecoin has several similarities with Bitcoin, currently the top digital currency by market capitalization. Its fork was initiated to create a new way to establish ownership of the human-readable addresses assigned to the machine-readable addresses used on the web—domain names.
The main difference between Bitcoin and Namecoin is the purpose of the technology. Bitcoin creators wanted a viable alternative currency; Namecoin creators wanted a domain naming system. Because of this, there are different consensus and protocol rules that exist within each project. Certain features are necessary when conducting financial transactions that are not necessary when completing name registrations for new internet domains.
How to Mine Namecoin
Because Namecoin utilizes the same proof-of-work (PoW) algorithm as Bitcoin, you can merge-mine Namecoins without additional hardware (and without any extra electricity) if you are already mining Bitcoin. Both Bitcoin and Namecoin are limited to a total of 21 million coins. The critical difference in Namecoin is that tokens are used up as domain names are registered. The cost of one domain name to Namecoin's usable supply is .01 NMC. This means there are 2.1 billion domain names (or other uses) available using Namecoin.
Goals of Namecoin
Namecoin's developers indicated several potential uses and applications for this experimental token. First and foremost, the developers hope to protect free speech rights online by making the web more resistant to censorship.
There are myriad ways that Namecoin attempts to do this. For example, it can be used to attach identifying information—such as email addresses, cryptocurrency public addresses, or specific keys—to various identities as determined by the user. It can also be used as a means of providing decentralized website certificate validation.
Namecoin can be used in Tor and other anonymizing web platforms to generate human-meaningful Tor .onion domains. In the future, the token and its underlying technology could also be used for file signatures, securing voting procedures, notary services, and establishing proof of existence for individuals and entities.
Because of their links with the Namecoin network, these names are difficult to censor or seize, meaning they are resistant to outside influence. Additionally, the makers of Namecoin specify that lookups do not generate network traffic. The result of this is that Namecoin offers improved privacy capabilities as well.
Does Namecoin Still Exist?
Namecoin is still a valid token. You can purchase NMC on some decentralized exchanges, but the token is best used for its intended purpose. The project itself is also still active.
Why Did Namecoin Fail?
Namecoin didn't receive much attention from investors as Bitcoin overshadowed it with its rapid value appreciation. Namecoin is also a niche product that combines networking protocols, blockchain, and cryptocurrency in a way many don't fully understand.
What Is Namecoin Worth?
Namecoin's developers recommend that you don't buy NMC for investing or currency purposes, as it is not intended to be used this way. However, NMC has ranged between $0.20 and $2.50 since 2017.
The Bottom Line
Namecoin is a blockchain project with a native token designed to decentralize and improve specific aspects of the Internet infrastructure. In a way, it is one of the early pioneers of the emerging and developing Web 3, the purported next generation of the background processes and procedures that make up the Internet.
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