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What is Namecoin?
Namecoin began in 2011 as a fork of bitcoin and is a multipurpose cryptocurrency and a naming system. It can be mined alongside bitcoin as a “bonus” – a by-product of bitcoin in a merged-mining setting – and is actually the first cryptocurrency to use merged mining. It operates on the same code as bitcoin but has a blockchain separate from the main bitcoin chain.
While bitcoin is used as currency, Namecoin was developed as a distributed naming system based on bitcoin, used to register names in the blockchain. It improves certain aspects of Internet infrastructure, among them DNS, and identities and domains. It can be used to improve privacy and protect online free-speech rights by making web censorship more difficult.
Namecoin was designed to be a decentralised network that is highly impervious to attacks.
One of Namecoin’s features is allowing users to store identity information within its blocks, a feature absent in bitcoin. Information such as email addresses or website addresses can be stored in the form of key/value pairs.
It is one of hundreds of so-called “altcoins” – alternative cryptocurrencies that were launched after bitcoin’s success. While many of these altcoins have failed to replicate the success of bitcoin, Namecoin has remained one of the more important altcoins in circulation, although it’s certainly not one of the best performers.
Growth and value of Namecoin
Namecoin had a starting price of US$0.48 per unit when it was introduced; as of February 2018, it is worth about $4.97 per unit. Much like bitcoin, Namecoin’s trajectory has been erratic since its inception. At the beginning of 2014, Namecoin reached a value of $7.74 but declined to a low 41 cents by May 2015 and stayed below $1 for more than a year. As recently as November 2017, Namecoin’s value was pegged at just $1.47 but has grown to its current price in a span of two months.
The highest value of Namecoin was in January 2014. More recently, in mid-January 2018 it peaked at about $10.31, then dropped to $4.15 a few days later and has been fairly stable since then.
Because Namecoin is a relatively young cryptocurrency, the forecast for its value remains unpredictable, as with bitcoin and all other cryptocurrencies. It’s important to study the history of Namecoin, its uses, and its pros and cons to better appreciate its growth and track the changes it has undergone since 2011. Despite its volatility, Namecoin remains one of the most innovative altcoins.
In terms of supply, there are only 21 million Namecoins that can be mined. Currently, there are more than 14 million in circulation. They can be mined independently, in a similar way to bitcoins. However, merged mining with bitcoins is what most players prefer. Thus, the quantity of Namecoins that are mined will most likely be in proportion to the quantity of bitcoins mined. Mining Namecoins and bitcoins will slow down over time as the quantity to be mined becomes smaller.
As with all products, an unpredictable performance and uncertain future is a disadvantage for holders of Namecoin, which will in turn affect its present performance. Right now it is difficult to determine whether or not the theory that Namecoin’s value will increase because supply is finite will hold water.
Purchase opportunities for Namecoin
While Namecoin mining is usually tied to bitcoin mining, it does not necessarily follow that Namecoin’s profitability is dependent on the performance of bitcoin. In fact, an advantage of buying Namecoin is that if ever bitcoin mining becomes unprofitable, miners could still make some profit off Namecoin – provided, of course, that Namecoin’s performance remains in the positive.
Namecoin’s scarcity may be viewed as an advantage. Scarce resources are generally more valuable than abundant resources, all other things equal. This factor is to be viewed critically, as other cryptocurrencies may be developed in the future that can replace Namecoin.
Perhaps one of the most obvious advantages to buying Namecoins is the security it offers on the Internet. Namecoin was designed to have the utmost security, and it’s decentralised, which means that government control or hacking is improbable. Seizing control of the system will require one of two things: attacking the entire Namecoin system or closing down the operation of all Internet providers. The second option is obviously out of the question – only a massive global collapse would make it even possible for all Internet providers to shut down. Even then, a global collapse would likely also affect the hackers themselves.
The first option – attacking the Namecoin system – is likewise difficult. Hackers would need to attack each and every computer in the Namecoin network. This requires a huge capacity on the part of the hackers; the lack of a centralised administration means that hackers cannot target just one area in order to attack the whole system.
For this reason, Namecoin has the advantage of securing and storing important information for its users. The peer-to-peer domain system of Namecoin renders it safe from government control and seizure, and the user’s privacy and information remain intact.
The use of merged mining is also an advantage of Namecoin. Bitcoin miners can mine Namecoin using the same algorithm, getting a more predictable block generation time.
Finally, Namecoin’s versatile platform can also be used for unregulated domain name systems. Applications for this include messaging, voting, issuance of shares and stocks, and file signatures, among others.
According to Ben Isgur, Namecoins were undervalued even at their highest value in 2014. He compared the cost of registering domain names via the traditional route, i.e. through ICANN and their approved registrar entities such as GoDaddy. From his perspective, using Namecoins for DNS is way less expensive than what ICANN charges per year. However, the factor to consider is that .bit domains will be just as useful as .com domains.
On the other hand, the lack of web censorship which could mean good news for free speech and other activists can also lead to illegal online activities. Since the system is beyond government control, illegal websites and dangerous messages are free for others to view, without any kind of regulatory body.
Since cryptocurrencies are in essence mathematical algorithms, there’s no physical asset available. It technically does not exist in the physical world, so its value is more difficult to determine.
Namecoin’s low price for domain name registration is both an advantage and a disadvantage. Users can register domain names cheaply, but the low price also welcomes squatters – users who register names but never use them.
Moreover, because names registered with Namecoins are not part of the standard DNS, users will need .bit web proxy servers to handle .bit DNS requests in a browser. Namecoin.com currently offers Chrome and Firefox extensions to make the process easier.
In 2015, Onename founder Muneeb Ali announced that they were dropping Namecoin and migrating 32,000 users to bitcoin because of security issues. Ali and Onename co-founder Ryan Shea explained that China-based mining operation Discus Fish controlled 67% of the hashpower on Namecoin. This means that Namecoin is not actually decentralised and that security has been compromised.
Things to consider when purchasing Namecoin
Namecoin’s performance in the market over the next few years is subject to several factors. With an inconsistent performance history over the past several months, any forecast would have to be taken with a grain of salt. New and experimental technologies such as cryptocurrencies are expected to have unpredictable trends, as users are still learning.
Because supply is limited to 21 million, Namecoin isn’t subject to inflation. This is an important factor to consider; theoretically, Namecoin’s value should increase because demand will keep increasing while supply remains the same. However, the arrival of more cryptocurrencies or alternative technologies in the next few years will also affect the future value of Namecoin. The fast pace of technology should be considered both as a pro and a con for Namecoin’s future. Then add to this the possibility that the attitude of holders of cryptocurrencies might also change in the years to come.
As of February 2018, Namecoin is not performing as well as other altcoins like Litecoin or Monero.
Considering that Namecoin is one of the “oldest” altcoins, its value today is not as impressive as some other cryptocurrencies. The fluctuations in value for Namecoin are understandable given its nature; however, it will surely not help in either stabilising it or experiencing a sharp upward trajectory in the near future. But it is important to keep in mind that past performance is not a reliable measure of future performance so it is wise to tread carefully and consider the risks.
As more and more cryptocurrencies crop up, it is up to developers to keep up with the times. For example, Blockstack, a “new decentralised Internet”, offers improvements on Namecoin’s systems such as dynamic pricing models and incentives for miners. It’s not a cryptocurrency but it provides a decentralised domain name system like Namecoin, so it might affect how Namecoin is used.
George Tung, founder of Cryptos R Us, seems positive about the possibility that an altcoin may be able to outperform bitcoin in the next three to five years. But since cryptocurrencies are highly complex and speculative, it still remains to be seen whether or not Namecoin will be able to exceed expectations or fall by the wayside.
Market rate for common transfer amounts NMC to AUD
|Namecoin (NMC)||Australian Dollars (AUD)|
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