NameCoin might just be the most perplexing Bitcoin derivative. On one hand it’s a cryptocurrency that functions much like Bitcoin. Computers are used to solve algorithms, NameCoins are created, and the miner finds themselves in possession of some shiny new NameCoins. Only thing, NameCoins themselves are not designed to be a currency at all.
NameCoin is based on a modified version of the software that underlies Bitcoin. Like Bitcoin, there are only 21 million NameCoins available to be mined and it is a cryptocurrency. What makes NameCoin different, however, is the fact that it has actually been designed as a domain registration system, not a virtual currency.
NameCoin creates domain name registrations ending with .bit and acts as a decentralized DNS. Instead of acting as a currency (which it can still be used as), NameCoin is designed to guard against internet censorship. People can pay for domain registrations with NameCoin’s, but must then maintain and update them regularly.
The primary motive behind NameCoin is to create top-level domains outside of ICANN’s control. In case you are not familiar with ICANN, it is the international non-profit authority used to oversee and monitor the functioning of the internet, including domain names. Some believe, however, that ICANN could eventually be used to censor websites by essentially banning them.
NameCoin is unique among AltCoins in that it is not a currency at all. This could help NameCoin estabilish its own identity and place in the online world. Once registered, NameCoin domains can only be transferred by the domain owner, so as long as said owner keeps up with the necessary maintenance, the domain will remain in their possession. This unique status could help NameCoin carve out its own place in the online world.
NameCoin does face its own challenges, however, which may ultimately derail the growth of the currency. For example, NameCoin has been plagued by cyber squatters who have essentially been buying up and registering domains. Further, ICANN or another authority might still figure out a way to interfere with or shut down NameCoin. For example, the United States government could order all internet service providers to block .bit addresses. How NameCoin would cope with such measures remains unknown.