I was working on an article that explains the differences (and similarities) between domain names versus bitcoins or other cryptocurrencies. At one point, the article reached 2,000 words, and I decided that probably you do not need such a lengthy article to get the main points:
1. LIQUIDITY
BITCOINS: highly liquid.
DOMAINS: ranging from fairly liquid (for liquid domain categories) to highly illiquid (i.e. a brandable domain or a 2-word domain).
2. UNIT VALUE
BITCOINS: market value.
DOMAINS: some domain categories (liquid domains, premium one words .com and domains generating traffic) have an intrinsic underlying value because 1) companies are using and demanding them 2) there is a large pool of investors ready to purchase them 3) if they have direct traffic, they can be monetized and generate revenue. Other categories have no intrinsic value unless they are demanded (i.e. a random 6 number .com string, a random 5 number .top or a random 6 letter brandable domain) but have been occasionally treated as stock during the market peak of 2015, similarly to other cryptocurrencies.
3. MARKET SIZE
BITCOINS: as of today, $69B, with $1.9B in daily turnover (source: coinmarketcap.com)
DOMAINS: hard to calculate, however the Estibot market cap for liquid .com domains stands at around $8B, with Escrow.com reporting $17M in transaction per quarter. If we were to extend our analysis also to non-liquid domain names, Escrow.com historically reports up to $100M per quarter in turnover (source: Freelancer.com report)
4. OWNERSHIP
BITCOINS: semi-anonymous.
DOMAINS: semi-anonymous.
5. HOLDING COSTS
BITCOINS: practically free.
DOMAINS: generally up to $10/year, depending on the extension.
6. TRANSACTION FEES
BITCOINS: negligible fees.
DOMAINS: up to 20%, depending on intermediary and escrow costs.
7. VALUE CHANGE
BITCOINS: on average, it has been in constant growth since inception.
DOMAINS: each domain is unique and has different valuations. For the individual “performances” of specific categories, please refer to our LXDO report.
8. AVAILABILITY
BITCOINS: limited to 21,000,000 BitCoins
DOMAINS: liquid .com domain names are limited to 614,928 units, however, the total number of combinations of domains is practically infinite.
To recap, both bitcoins and liquid domains have the following characteristics:
- Semi-Anonymous
- Highly Liquid
- Growth Potential
Which might be the reason why wealthy Chinese have invested in both categories heavily. As the new capital controls within China kick in, and bitcoins exchanges are being closed across the country, what is going to be the effect on the value of these assets? We shall wait and see.