DEFINITION of Namecoin
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."
DNS, the domain naming system, is the mechanism by which domain identities are linked with numerical IP addresses around the world. In this sense, namecoin is a cryptocurrency based on the bitcoin protocol that also aims to enhance internet-related security and privacy.
BREAKING DOWN Namecoin
Namecoin's developers indicate a number of potential uses and applications for this experimental cryptocurrency. The first item listed on the coin's website is its capacity to "protect free speech rights online by making the web more resistant to censorship."
There are myriad ways that namecoin attempts to do this. It can be used to attach identifying information such as email addresses, bitcoin addresses, or specified keys to various identities as determined by the user. It can also be used as a means of providing decentralized TLS (HTTPS) certificate validation.
Namecoin can be used in Tor and dark web capacities to generate "human-meaningful Tor .onion domains." In the future, the cryptocurrency and its underlying technology could also be used for file signatures, securing voting procedures, for notary services, and even for establishing proof of existence for individuals and entities.
How Does Namecoin Work?
The cryptocurrency is "a key/value pair registration and transfer system based on the bitcoin technology." This means namecoin can be used to record and transfer arbitrary names or keys in a secure fashion. It can also attach data to these names.
Because of their links with the namecoin network, these names are difficult to censor or seize, meaning that 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.
Namecoin paved the way for various cryptocurrency protocols and features including merged mining and a decentralized DNS. It was also the first solution to "Zooko's Triangle, the long-standing problem of producing a naming system that is simultaneously secure, decentralized, and human-meaningful."
Similarities and Differences With Bitcoin
As a bitcoin fork, namecoin the cryptocurrency features a number of similarities with the top digital currency by market cap. It utilizes the same proof-of-work algorithm that has long dominated bitcoin's mining procedures. It is also limited to a total of 21 million coins.
However, it differs from bitcoin in crucial ways. First, namecoin is able to store data within the blockchain transaction database. It is linked with the top-level domain .bit, a domain that is independent of ICANN, the primary regulatory body which governs most domain names.
Namecoin can be traded for the U.S. dollar and for select other cryptocurrencies in various online digital currency exchanges. Transactions in namecoin are currently irreversible. The records in the network are made to addresses, which are encoded hashes of the public keys of namecoin users. A record consists of both a key and a data value, where the key is a path.
Namecoin developed out of a discussion in the earliest days of bitcoin. It was introduced by a developer named "Vinced" on April 18, 2011. The merged mining feature allowed bitcoin and namecoin to be mined simultaneously. Part of the reason for this feature was to incentivize miners to continue to mine both digital currencies at once, rather than switch back and forth to follow whichever became more profitable.
NameID, a service which links profile information with identities on the namecoin blockchain, followed in June of 2013. It was subsequently followed by numerous plug-ins for Firefox and other web browsers, designed to enhance the namecoin network and range of services.
As of March 2018, namecoin remains out of the spotlight when it comes to digital currencies ranked by market cap. The price of one NMC token reached as high as roughly $12, but remains below $3 as of that time. The total market cap of the currency is below $40 million, placing it outside of the top 200 cryptocurrencies by total market cap. Nonetheless, regardless of its financial success, namecoin will stand as one of the earliest ventures into the altcoin space and as one of the most pioneering of all altcoins released up to this point.
Namecoin retains many ardent supporters who believe that a decentralized DNS system could be crucial to long-term internet privacy and censorship reduction. While it's likely that most individuals will not have need for a .bit website or related service, namecoin could provide some with the tools to connect to an internet that is free from censorship and central control.