Domain Name Registry as Infrastructure Investment

Abstract

This article examines the emerging trend of domain name registries as a potential target for digital infrastructure investment. It analyzes the unique characteristics of domain registries, including their irreplaceability, monopolistic nature, and position as a foundational layer of internet architecture. The paper also explores alternative investment structures and discusses the challenges and opportunities in this evolving sector.

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1. Introduction

Digital infrastructure investment has traditionally focused on physical assets such as data centers, fiber networks, and cell towers. However, as these markets mature, investors are increasingly looking towards more fundamental layers of internet architecture. Domain name registries, which manage top-level domains (TLDs), represent a critical component of the internet's addressing system and possess several attributes that align with infrastructure investment criteria.

Here are some definitions and characeristics of domain registries:

• Domain Registry: Central database managing records for all domain names within specific TLDs (.com, .org, .net).
• Authoritative Source: Functions like a "phone directory" for the internet, providing authoritative domain information.
• Collaboration with Registrars: Works with accredited domain registrars that sell domain names to the public.
• Roles and Responsibilities: Registrars handle customer-facing aspects; registries maintain the master database and set registration rules.
• System of Checks and Balances: Separation of roles ensures a balanced domain name industry.
• Monopolistic Position: Domain registries hold monopolies over specific TLDs, making them essential to internet infrastructure.
• Example - Verisign: Manages .com and .net registries; 56% of global DNS hosts depend on their infrastructure.
• Attractive Investment: Due to their critical role, recurring revenue from renewals, and high profit margins from scalable operations.

2. Characteristics of Domain Name Registries as Digital Infrastructure

2.1 Irreplaceability

Domain name registries, especially for major generic TLDs (gTLDs) and country code TLDs (ccTLDs), are essentially irreplaceable assets. The Domain Name System (DNS) is a core protocol of the internet, and TLDs form the highest level of this hierarchical system. Changing this fundamental structure would require a massive overhaul of internet architecture, making these assets highly resistant to technological disruption.