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Legal Aspects of Blockchain Domains in Web3.

Legal Aspects of Blockchain Domains in Web3 .


1. Introduction .

I wanted to write this article because, although I commented on the topic for the first time, perhaps somewhere around 2010, and at the present moment, I do not see that a law has appeared in Bulgarian law to resolve disputes between trademarks and domains. Illegal arbitration in "" EOOD continues to exist, and the Supreme Court of Justice has ruled on this topic many times, and the case law created on the topic by the Supreme Court of Cassation is of the opinion that this arbitration is not such and its decisions have no legal force strength.

Despite the mentioned legal absurdities, nothing has changed in Bulgaria, but the world moved to a new speed in the so-called "Web3" [1] and numerous projects in the public sphere, finance, law, services and entertainment are being developed through blockchain technologies.

Given the lack of any internal regulatory framework and the Supreme Court's opinion in a strange case to say the least, that "domains are not objects of commercial activity, and therefore do not constitute a violation of a trademark" [2] (interestingly, what are Yahoo, Gmail, Facebook , Instagram), I will once again have to discuss what is happening "over there" and give recommendations for the development of Bulgarian law, which I hope someday, someone will first read and then consider, given the fact that trademarks are very they are often about something happening online in the 21st century. "Something" that is the subject of law all over the world, but not in Bulgaria - domains.


2. What happens in Web3 , who administers and how disputes with blockchain domains are resolved.

As I already explained, this article will not deal with the disputes between trademarks and standard domains, because this was a topic that I examined about 13 years ago, and apparently in Bulgaria the topic has not undergone much development . As a counterpoint to the above, this presentation aims to clarify what is happening with blockchain domains in the Internet space today.

It is logical to say that, as always, the topic begins its development from the USA. The two largest US online services for selling blockchain domains are Ethereum Name Service (ENS), which offers domains with the top-level domain ".eth", and the service "Unstoppable Domains", which offers top-level domains such as " .crypto", ".nft" and ".bitcoin". In this line of thought, I would like to analyze the legal implications and potential challenges that the new type of blockchain domains may pose.


2.1. Does ICANN have any authority over blockchain domains ?

ICANN is a non-profit organization and its authority to exercise its functions derives from a contract with the National Telecommunications and Information Administration (NTIA) of the US Department of Commerce. The last annex to this contract was re-signed with ICANN in July 2012 for a period of 7 years and officially expired in 2019.

According to the discussed contract with NTIA, ICANN as an organization is placed at the head of the traditional global system for the administration and sale of top-level domains and is responsible for the distribution and coordination of the Domain Name System (DNS) and their IP addresses.

On the topic at hand, I should correctly point out that blockchain domains are not recognized by ICANN, as they are not part of the DNS system hierarchy. Blockchain domains do not fall under the purview of ICANN and according to the latest contract with NTIA. Moreover, on the ENS and Unstoppable Domains websites, the documentation regarding blockchain domain management also states that the respective blockchain domain systems are not part of the current DNS [3] . Furthermore, ICANN does not have the technical ability to influence blockchain domains. Therefore, it is important to note that none of the Internet-related regulatory bodies have authority over blockchain domains.


3. Are blockchain domains recognized as domain names under existing legislation ?

The definition of the term "domain name" is given in the American Anticybersquatting Consumer Protection Act - ACPA: a domain name is "an alphanumeric designation that is registered or assigned by and is a domain name registrar, domain name registry or other authority for registering domain names as part of an Internet electronic address".

I would like to take a detailed look at the meaning of these terms in the definition to understand whether the definition of "domain name" is applicable to Web3 domains. So what are domains by definition:

- first - they are an alphanumeric designation;

- second - they are created/generated by a domain name registrar, in a domain registry or other domain name registration authority as part of an email address on the Internet; and

- third - they are part of the Internet.

Both DNS domains (these are the domains in the ICANN system) and ENS domain names (these are the domains in the "Ethereum Name Service") are alphanumeric designations. In addition, they are subdivided into two more technological groups - TLD (from the English "Top level domain") and 2LD (from the English "second-level  domain " - SLD or 2LD ). 

Regarding the hierarchy of names in DNS, ICANN defines in the "Dictionary" section of its website, TLDs as the names at the top of the hierarchy. They appear in domain names as a series of letters after the last ".", for example "net" in "". The DNS second-level domain is the string of letters before the last ".", such as "example" in "".

On the other hand, regarding the Ethereum Name Service (ENS) naming hierarchy, the ENS website states that the organization in question manages "ENS-specific TLDs" which are limited to only ".eth" and ". test", plus all special purpose TLDs.

Thus, an ENS domain name or other blockchain domain name appears to meet the definition of a domain name, and the TLD and 2LD definitions are also applicable with the proviso that these terms apply to two different infrastructures: the Internet and the blockchain.

In the ACPA (Anticybersquatting Consumer Protection Act) these terms are not described. However, the commented concepts can be found in the DNS regulations. Thus, ICANN in the Glossary section of its website provides the following definitions:

- Domain name registrar - a company that registers domains and is included in the directory of accredited registrars, for example GoDaddy;

-Registry of domain names - directory of domain names, e.g. registry of "root zones" (from the English "Root zone") or registry of second-level domains .com; and

-Another domain name registration authority - obviously this could be any other organization involved in the operation of the "Internet", such as an organization maintaining an email address service, or any other ancillary resource/server.

In practice, the ENS domain name registrar is a type of smart contract responsible for allocating subdomains, and the registry is the main contract of the ENS, which maintains a mapping from a domain name to an owner, a resolver [4] and lifetime of the domain.

Again, both ENS and DNS domain name services have a domain name registrar, registry, or other registration authority. The difference is that the domains in the two ecosystems of ICANN and ENS are managed and generated in a different way - in the first case by a company (firm) in the second case by a smart contract.


4. Substantive legal problems in the opposition "Internet" against blockchain .

When discussing the above terms, we can easily make an analogy from ENS to DNS, but breaking them through the concept of "Internet" creates additional difficulties. The ACPA, as a regulatory act, comments on the domain name as an alphanumeric designation on the Internet, while the ENS domain is clearly an electronic address in the blockchain ecosystem.

The ACPA regulatory act describes the term "Internet" as "the international computer network of federal and non-federal interoperable networks for the transmission of packet-switched data." Obviously, the blockchain ecosystem doesn't really fall into that category.

However, there are two interpretations of the domain, in the context of ENS:

- The ENS domain is an identifier that is only used in the blockchain; or

- The ENS domain is not only an identifier of a wallet (meaning a crypto-based one online) in the blockchain, but also an Internet address, because access to the blockchain is not possible without the Internet.

In addition, the ENS domain name can be associated not only with a wallet, but also with social networks or a website. Therefore, in the first approach, ACPA clearly cannot be applied to ENS domains and other web3 domains. However, when we consider these domains under the second approach, ACPA appears to be applicable to them. Let's look at these concepts in more detail. 


4.1. First approach to the concept of blockchain domain .

As stated above, under the ACPA - the "Internet" is an international computer network of federal and non-federal interoperable networks for the transmission of packets of interconnected data.

Therefore, not every computer network is the "Internet", just an interoperable data transmission network. This clarification is crucial, for example the Ethereum blockchain network is a peer-to-peer network. Therefore, the Ethereum network is technically not a packet data network (although this is debatable). This means that:

- the "Ethereum" network cannot be equated to a network that is part of the "Internet";

- the "Ethereum" network cannot be equated to the "Internet" because, as the term is defined by the ACPA, the "Internet" is a network of many networks, and the "Ethereum" network is a single network - a network of blocks, which is managed by smart contracts; and

- respectively, the domain under ENS is an address in the blockchain, not in the Internet.


4.2. Second approach to the concept of blockchain domain .

Notwithstanding the foregoing, access to the Blockchain Network and to the Blockchain itself is only possible through the use of the "Internet". Having access to the "Internet", anyone can get information from a given blockchain, because it is 100% public and visible - this is the very idea of ​​​​a blockchain as software, i.e. it provides total transparency of every operation, of every statement of will.

The blockchain network itself can be compared to an application that operates in a decentralized manner, with copies of all data available in each independent block of the network, rather than on a single server (as in the ICCAN system). Therefore, by referring to the blockchain wallet with its domain name, we are actually referring to a decentralized application based on the "Internet".

Therefore, the "Internet" and the blockchain ecosystem relate as general to particular (specifically at the technological level). Therefore, it is precisely in this second, expanded interpretation of the concept of "blockchain domain" that we find ourselves using the ENS domain to access an address on the "Internet" that is located in one of the applications (blockchain such) that function using "Internet". By this logic, the second interpretation of the term "blockchain domain", as the address of an application accessible via the "Internet", corresponds to the term "domain name" under the ACPA. In this approach, we can also say that any identifier, nickname or login in any online application, wallet or game is a domain name because it matches the user's number in the database with their login.

However, these identifiers have a different nature, purpose and meaning on the Internet. Perhaps it is not so obvious now, but blockchain with its financial and other tools is more important and interoperable than "logs" (inclusion) in an online game. In addition, using Web3 domain, we can access a decentralized IPFS website [5] , and then the boundary between the traditional domain and the blockchain domain is completely blurred. For example "Opera" already supports some web3 domains associated with IPFS.

Initially, no legal entity could have imagined that domain names would become so valuable on the "Internet" and would become business identifiers, i.e. trademark objects behind multi-million dollar (in many cases multi-billion dollar) businesses. but the "Internet" itself was definitely not taken seriously in the 1990s, which changed in a flash in the new century. It is likely that the role of Web3 domains will be the same as that of DNS domains, and I personally expect new regulation in both the US and Europe (the MICA Regulation is now a fact) to complement the regulatory framework.

From a legal perspective, the introduction of blockchain domains at a time when DNS has been in operation for decades and multiple DAOs [6] (from the English " decentralized autonomous organization "  ( DAO ) are simultaneously launching their own TLDs) creates the potential for two legal problems: "cybersquatting" [7] (from English “cybersquatting”) and name collisions. Since the ACPA does not bind the concept of "domain name" only to DNS, blockchain domain name violations should be dealt with under existing "cybersquatting" laws and regulations for name collision.


5. Protection from cybusquoting for Web3 ( blockchain) domains .

There is no legislation regarding "cybersquatting" and other related Web3 domain name disputes. But even if there were laws, there is no way to force the return of "stolen" (ill-gotten) domains, because everything in the Web3 world is built on the basis of smart contracts. From a technical point of view, however, a smart contract can provide the ability to force the return of a fraudulently acquired domain under certain conditions.

ICANN also has no authority over domain names in the blockchain ecosystem, and any standard arbitration dispute between a trademark and a blockchain domain would (in my opinion) fail for lack of jurisdiction.

Since there are no laws for the registration and use of blockchain domains, I would like to focus on the regulations and policies developed by the two most popular blockchain domain registration services: "Unstoppable Domains" and ENS.


5.1. Unstoppable Domains Regulations on Cybersquatting . _

Compared to ENS, this service for selling and buying blockchain domains is legally more favorable to real trademark owners .

The service has developed a "Protected Marks Policy" (called "Sunrise" from the English "sunrise"), which defines a "sunrise period" - a procedure similar to the ICANN mechanism of the same name. Unstoppable Domains guarantees protection for trademarks registered with the United States Patent and Trademark Office (USPTO) and provides a period ("grace period") during which the trademarked domains of the most famous brands cannot be registered by none other than their owners.

A distinctive feature of the service is that the domain is purchased once and does not need to be renewed. Therefore, the rising period is particularly important. The latest policy update states that the grace period for currently available TLDs has ended on April 19, 2022.

The "Unstoppable Domains" service also uses the term "protected domains" in this context. Protected domains are domains that the service has determined are associated with a brand, organization, or notable person. For example, if you search for "apple.crypto", the service will show that the domain is "Protected". In this context, if you are the owner of a trademark that represents a well-known blockchain project subject to protection in the protected domain hypothesis, there is an option to file a form with "Unstoppable Domains" for a protected domain, even after the end of the "sunrise period" , as the Unstoppable Domains terms and conditions state that the customer must not infringe or violate the rights of others, including intellectual property rights or other proprietary rights.

Unstoppable Domains reserves the right to refuse to sell any specified blockchain domain at its sole discretion, and to cancel purchased domains with a full refund in the event of trademark infringement, phishing or other abuse. It is important to mention that the domain registration can only be canceled if the user has not yet used the domain ie. has not yet created an NFT with it (this is done through the service interface after purchase).


5.2. Ethereum Terms of Service ( ENS on Cybersquatting .

There are specific rules regarding the rights of trademark owners and their collision with blockchain domains in the Ethereum ecosystem . In this context, the ENS website publishes the following legal framework:

  • first of all, it says that ENS will never become and/or merge with ICANN, as this will break the technological blockchain logic of decentralized online applications;
  • second - many of the ENS comments on the topic emphasize that precisely because ENS is a decentralized system, anyone has the right to purchase any blockchain domain. There are even numerous cases claiming that registering a domain in the ENS ecosystem that is a foreign brand is not an infringement of intellectual property;
  • third - it gets to the point that according to Ethereum ", even the blockchain name ".eth" can be released for purchase by the "rightful owner" (which is obviously Ethereum ") , if the domain owner wishes to release that name, for example, because he believes that ENS is the cornerstone of Web3, the future of the "Internet" and freeing up the domain helps growth, and accepting this fact should be seen as something altruistic.


6. The problem of cybersquatting and NFT .

First of all, I should say that ENS and “Unstoppable Domains” allow anyone to keep a unique blockchain domain name as NFT (from English “Non fungible tokens”). These NFTs can be traded, often using the popular "OpenSea" platform.

At the request of the beneficial owner of the trademark rights, the OpenSea platform may withdraw the token(NFT) from sale in case of alleged violation of trademark rights or other intellectual property rights. It is assumed that due to this policy, the cybersquatter will not be able to benefit from the block domain and will only incur losses related to domain renewal. I remind you that this legal effect is achieved by the fact that in ENS domains must be renewed, and in "Unstoppable Domains" blockchain domains do not need to be renewed. It turns out that many blockchain users do not agree with the policy of "OpenSea ” on “cybersquatting” protection, saying that the idea of ​​a decentralized exchange for selling NFTs should be preserved. In my opinion this objection is untenable as it will lead to many illegal abuses of domain name trading as NFT which will damage many legal entities and from that point of view this thesis is untenable to say the least.


7. The problem dispute between ICANN and ENS domains .

If in the two ecosystems that trade and administer domains a user wishes to buy the ".wallet" domain, real legal no-sense will occur. Why?

It stands to reason that ICANN is concerned about blockchain-based systems and non-DNS names. In 2022 in ICANN, discussions on the subject of blockchain-based domains have been sparked. The concern is that a lack of namespace coordination between alternate name systems and DNS could lead to name collisions. ICANN defines a name collision as "a situation in which a domain that is defined and used in one namespace also appears in another, identical domain". Users and applications that intend to use a given name in one namespace , may try to use it in another namespace, and unexpected behavior may result when the purpose of the name is not the same in the two namespaces. In this context, ICANN concludes that "circumstances that lead to a collision of domains may be accidental or malicious."

However, alternative non-blockchain-based naming systems are already in use, such as the "Handle" system and the "Onion" system, which have been around for a long time but have remained, shall we say, more inconspicuous. The "Onion" system (Tor project) was introduced in 2004. In 2015, the Internet Engineering Task Force (IETF) defined ".onion" domains as "domain names with special purpose", which gave the system official status.

The Internet Engineering Task Force is a not-for-profit regulatory body related to the Internet that develops a wide range of Internet standards, particularly related to technical documents that affect the way people design, use, and manage the Internet. . The IETF has not added ".eth" or ".crypto" to lists of special purpose domain names, and it is possible that their status could be defined differently, i.e. free to trade without collisions.

On the other hand, "Unstoppable Domains" top-level domains may also be challenged in the next round of applications when ICANN starts a new supply of top-level domain names. As provided by ICANN, any established public or private organization that meets the eligibility requirements anywhere in the world may apply to establish and manage a new gTLD registry.


8. In conclusion :

I would like to make a final note that, in general, none of the Internet-related regulatory bodies have authority over blockchain domains. Nowadays, it seems that different options are looking for domain sales and generation services - whether blockchain-based or DNS domains find their way together. This is because blockchain-based domain name services are run by a Decentralized Autonomous Organization (DAO), a member-owned system with no centralized leadership, and it is unclear who the contracting parties are. However, the increasing number of domain collisions in the two ecosystems will rather accelerate the development of new legislative visions and the imposition of a logical and public interest (and that of business) enforcement in the US and EU, which may one day reach (I hope) and as a technological and legislative framework to Bulgaria, on the basis of some EU Regulation on the subject, since my personal opinion as a lawyer in this field is that focus and understanding of the problems commented in this article in Bulgaria , there won't be any soon. This personal opinion is supported (to my great regret) by the last 13 years of "legislative" and "judicial practice" on the subject of "disputes between domains and trademarks" in Bulgaria.

To the new reality of Web3 and the blockchain domain, we are unlikely to reach here soon as a law enforcement and regulatory framework. I hope this happens before another 13 years have passed.



Author: Mr. Atanas Kostov - attorney at law


[1] The term "Web3", according to some authors from Harvard University, is a concept that explains the way the Internet works, using blockchain to change the known ways in which information is stored, shared and owned. Defenders of this notion argue that Web3 will create new economies, new product classes, and new services online; that it will bring democracy back to the web and that it will define the next era of the Internet.

[2] According to Decision No. 53/06.04.2009 in case No. 605/2008 of the Supreme Court, TC, II so-called "a domain, by its very nature, is an Internet address containing certain information about Internet users. Therefore, the registration by the registrar of a domain with a certain name, identical or similar to an already registered trademark, this legal action  does not constitute a commercial activity, respectively illegal use of a trademark  within the meaning of Art. 13, Para. 2 of the ZMGO in conjunction with Art. .13, paragraph 1, item 2 of the ZMGO. This decision of the Supreme Court makes me understand that if I register the domain,, and because " I will not carry out commercial activity" , then this legal action will not be a violation of the identical trademarks with the extension " . com” and I will register said trademarks (if I claim them as such) – “legally”! Interesting isn't it?

[3] Domain Name System (from the English  DNS )  is a distributed database of computers, services or other resources connected to the Internet or private networks, with the help of which the conversion of the domain names of the hosts into IP addresses is carried out. This makes it easier for users of Internet services. Instead of entering an IP address (a combination of numbers) to reach a resource on the network, the user can simply enter its name (domain).

[4] "Resolver" means the computers that are used by ISPs to respond to a user's request to "resolve a domain name". The process of "Domain Name Resolution" refers to the conversion of a domain name to an IP address.

[5] The InterPlanetary File System (IPFS) is a protocol, hypermedia, and peer-to-peer file exchange network for storing and exchanging data in a distributed file system. IPFS uses content addressing to uniquely identify each file in a global namespace connecting IPFS hosts. IPFS can, among other things, replace the location-based hypermedia server protocols http and https for World Wide Web distribution;

[6] The term DAO comes from the blockchain ecosystem and stands for “decentralized autonomous organization, which is a system designed to distribute decision-making, governance, and ownership of entities.

[7] The term “cybersquatting” refers to the unauthorized registration and use of Internet domain names that are identical or similar to trademarks, service marks, company names, or personal names.