Q&A: How can blockchain work with DNS?

Tim Favia of Donuts Inc. talks about investing at the intersection of blockchain and DNS

Blockchain is getting widely talked about in regards to a lot of things, but one place which is probably getting less attention is how it can work with Domain Name System (DNS). This is exactly what Tim Favia, SVP of Corporate Development at Donuts Inc., is focused on. He explains more in the lightly edited Q&A below.


Can you explain the unique correlation between blockchain and DNS?

The unique correlation between the blockchain and DNS is that each has complementary attributes and functions. I love the Domain Name System (DNS). It’s awesome, in part because there’s no way it could be built again in today’s world. The DNS is global, reliable, distributed, highly scalable and it’s basically free for any / all to use. At its heart, blockchain facilitates contracts (transactions) between entities; often, the best way to characterize or describe those contracts is through use of a name (e.g., a domain name), or by leveraging an address-based distributed network (e.g., the DNS).

If a hyper-growth blockchain company is seeking to develop breakout new apps or services in record time, with a very tiny talent pool of engineers (I’ve just described 90% of all blockchain startups), then the DNS can be a critical infrastructure to pair with the blockchain.

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What will this bring to businesses?

Some innovative blockchain startups, such as Netki and GeoNetwork, have recognized the value of the DNS and are putting it to excellent use. The real-world value for businesses includes leverage, simplicity and time to market.

As Justin Newton, co-founder and CEO of Netki says, “We built our wallet naming service on top of DNSSEC, because it’s simple and based on real words. Wallet addresses for blockchains are like IP addresses for the internet, only worse.  A wallet address is a 32-character, case-sensitive, alpha-numeric string.  Basically the world’s worst password. Even worse, if you type it incorrectly, instead of trying again, you may irretrievably lose your funds forever. The DNS seemed like an obvious choice for Netki. Just as important, because of the DNS, I don’t have to waste one minute of engineering time trying to figure out how I will scale or grow - regardless of what my growth trajectory is. I’m relying on a global infrastructure that gets better all the time, and that’s been proven at scale around the world. What’s not to love about that?” 


What will it take for this to happen in reality?

It’s already happening in reality. Crypto is really Chapter One of blockchain innovation, but we believe that there are many other exciting blockchain applications that are just emerging. For example, GeoNetwork has created the first global platform for the registry, delivery and management of data-enabled geofences. GeoNetwork can map the entire earth, including our atmosphere, down to the cubic centimeter. These ‘SmartFences’ - essentially contracts which are stored in a blockchain - allow the owners or regulators of space to define two or three-dimensional space and encode it with rules and permissions. The geometry and entitlements are encoded into an IPv6 address, which is delivered over DNS and cached locally, just as web content is delivered. Smart devices and mobile applications can then consume the information and behave accordingly, based on the rules of space. Key applications for SmartFences include drones for retail or military, property entitlements and zoning, and a zillion other 3D-spaced based applications.


Can you explain more about the types of companies Donuts is investing in?

We think that Netki and GeoNetwork are at the forefront of myriad possibilities for blockchain and DNS. It’s why we founded Donuts.Ventures: we felt that the DNS had tremendous potential to get rediscovered by today’s innovators. Donuts Inc. holds the largest portfolio of new top-level domains; we own 239 names that include: .agency, .life, .live, .money., .market, .zone and hundreds of others. So we want to foster the growth in use of these top-level domains. Traditionally, a person or a business built a website and obtained one domain name (usually .com). Today, they’re using many new top-level domains for redirects to their social platforms, for links to jobs/recruiting or other special landing pages, for links to online communities, blogs, and for online marketing and advertising campaigns.

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That’s exciting and it means great things for Donuts, but we also want to foster innovation in entirely new areas and new use cases for new top-level domains. That’s why Donuts.Ventures was formed: by investing directly in breakout ideas, we discover exciting new uses for our names and for the DNS. We are really excited about deal flow for Donuts.Ventures and will continue to invest in new uses of blockchain and DNS.


What made Netki and GeoNetwork stand out?

While very, very different companies, both Netki and GeoNetwork fit beautifully in the Donuts.Ventures investment thesis. They’re relying on the DNS and new uses for domain names as a core part of their solutions. They are hyper-growth companies with exciting technologies and new services which present entirely new uses for new top-level domains. In fact, their growth depends on leveraging our top-level domains as an integral part of their solution. Just as important, and perhaps what stood out to Donuts, is that their founders are proven entrepreneurs; they’ve each built and scaled other high-profile, highly successful tech companies. So we have high confidence in their ability to execute.


Do you think ICOs (Initial Coin Offerings) will become as common as VC funding for blockchain companies?

It’s really interesting what’s happening with ICOs. They seem to be the chosen path to finance blockchain startups. Among other things, we’ll need to see what regulatory pressures come to bear and how liquidity affects their long-term viability. Meanwhile, it’s pretty fascinating to watch what’s happening.

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This is an extremely new space – and massively hyped – what other companies do you think are doing interesting work at the cutting edge of blockchain-type technologies?

John Doerr of Kleiner Perkins famously said, 20 years ago at the beginning of the dot-com boom, that we were actually under-hyping that hype-cycle. While that boom had its own correction, I think his predictions have largely come true. What we all envisioned back in 1998 about the internet has more than come true; in fact, we likely underestimated its impact on our society by orders of magnitude. I actually believe the same can be said for blockchain. To be clear, I’m not talking about valuations: I’m talking about the lasting impact of blockchain on our lives as we currently know them. Blockchain has the capability to radically change entire industries - from real estate, to financial services, to commerce, and so much more. I’d love to cite more specific examples of interesting companies, but because we’re currently evaluating potential investments, you’ll just have to wait and see what we announce in the coming months. The good news: there’s a lot of exciting stuff happening; and the businesses we’re looking at have more to do with the blockchain as distributed infrastructure than with cryptocurrencies.