Ready Or Not, Web 3 Is Coming And With It Comes Cybersquatting 2.0

Blockchain domains underpin brand presence in Web 3 and represent a core element of an integrated brand strategy. While the Web 3 namespace is still somewhat a ‘wild west’, with many unknowns yet to be established, brands must at the very least educate themselves on the opportunities and possibilities. Considering how and when to protect and secure brands on the blockchain must begin to feature in brand strategy discussions.

Records are already being broken as millions of brand names are being registered on the blockchain in the rush to stake a claim within Web 3. The first one million .eth registrations took at least five years, however, the next took only three and a half months. Despite record breaking numbers of brands moving to Web 3, the registrants may not all be doing so in good faith, sparking concerns of “cybersquatting”.

“Cybersquatting” is the practice of registering names, especially well-known company or brand names, as internet domains, in the hope of reselling them at a profit.

Cybersquatters have been executing this type of criminal activity long before Web 3. For example, back in 2019 TikTok became a target of cyber criminals who anticipated the brand’s popularity and purchased the domain <tiktoks.com>. This resulted in a large-scale legal battle, which came with a significant financial hit to the business. While TikTok’s fame made it more susceptible to cybersquatters, no industry is safe and almost every brand has the potential to be exploited.

As we enter the new dawn of the internet, the risks associated with cybersquatting do not disappear – enter cybersquatting 2.0. These cybercriminals prey on some businesses’ current lack of understanding of Web 3 by purchasing popular domain names to hold ransom in the hope of financial reward when they are in demand by the brand itself.  On top of this, with no formal reclaim process for domains in Web 3 and registrants remaining anonymous, brand and trademark issues become much trickier to resolve.

The benefits of having a brand presence in Web 3:

Web 3 is a relatively new space and many brands are still trying to figure out whether they should have a presence. That said, some such as Nike, Samsung and Louis Vuitton are amongst those brands who have already established their presence in this space of the internet.

Web 3 backed tech such as decentralised and virtual reality technologies allow for the boundaries between the physical and digital world to blur. Using these technologies reveals many benefits for brands, yet its relative infancy means that the space is still not widely recognised or understood. There is opportunity to capitalise on the ability to go where your customers are and be able to strengthen your business value proposition through visual storytelling, increasing consumer trust and brand value. A presence in the space ensures your brand is protected so that no one occupies your territory and provides a solid foundation for entry into the virtual world.

The risks of cybersquatting 2.0:

Blockchain domains can be registered on platforms such as the ENS and Unstoppable Domains. That means that instead of traditional .com, .net, or .uk domains, these new registrars host domains such as .eth or .crypto. In what is an already highly active marketplace for buying and selling blockchain domains – Adele.eth recently sold for $6,000 and boy.eth sold for $65,000 – the Web 3 namespace is rife for trading and does not exclude that done by cybercriminals.

Given the anonymous, decentralised and unregulated nature of the blockchain, there are currently few solutions available to stop third parties from registering and using blockchain domain names that reflect another party’s trademark. On the internet as we know it, legislation such as ICANN’s Uniform Domain Name-Dispute Resolution Policy (UDRP) is in place. This provides a mechanism for trademark owners to obtain domain names from cybersquatters.

Regulation has also not yet been developed in the same way that the usual IP world operates, creating an issue for trademarking in the space. Blockchain domain naming services do not provide any dispute resolution proceedings meaning a rights owner has no recourse to complain over an IP issue. This is unlike the DNS where ICANN’s policy ensures that disputes can be filed through a provider like WIPO. With this, the complexity of dealing with cybersquatters rises.

Getting prepared:

With no controlling entities and in the absence of help from ICANN, brands are left wondering how to negotiate with an owner. Often negotiations can only take place when the registrar who issued the domain can be located – a task that is too complex for most businesses without additional expert support.

Organisations need to be aware and proactive to take targeted action should their brand be hijacked by these cyber criminals. They must create a strategy for managing their brand presence in Web 3 and take steps to avoid cybercriminals sitting on their domain. Brands must decide first what they want to achieve in Web 3 and what infringers are most likely to do if they do not act. They do have the option to act purely defensively until they fully understand their direction in Web 3.

For those brands who are not ready to establish their presence or have not fallen victim to cybersquatters, they must at the least form a plan – even if that plan is do nothing but monitor developments for the moment. Working with a domain name specialist will ensure organisations have a trusted partner with the experience to guide them through a world that is complex and constantly evolving.