Domains: Derivatives Contracts

[affordablehosting]

Just outta curiosity, would anyone ever be interested in purchasing a domain derivative contract? For example, you could buy a three letter .com, and the person who sold it would be required to deliver any three letter .com of his choice. Naturally, he'd try to find the cheapest three letter domain to deliver, as with T-Note contracts or nearly any other commodity.

I know it might not make much sense at first, but I think it would serve as a great hedge in certain circumstances.

Imagine, for example, that you own 8547.com. Somebody comes along and offers you twice its' value for a quick sale. You decide to sell, but still really like four number.coms, so you put some of the proceeds into those derivatives until you can find a four number .com to actually buy.

Alternatively, imagine that you think 5740.com is a great buy, and eventually plan to start up a website for your restaurant, "5740 E. Lake." However, you're not totally sure if the domain name feels right for the restaurant, so you decide to buy a put on a four number .com; this way, if you don't like the name, you're gauranteed to at least get a certain price for it later.

Three letter domains, of course, are just one example of a contract that could be traded. The point is: could anyone seeing themselves using this? The main advantage is that you could get a trade through on a cheaper domain that met certain specifications pretty fast.

 

[gariben]

would not work

the market is too small for these type of derivative products. there are not enough buyers/sellers

plus the products are not unique..domains can not be standardized/commoditized

 

[steven22]

I think it is brilliant!

I would love to write puts on .mobi.

Go Long on other TLD's

Small niche but would love to take part

 

[Duckinla]

One word: Regulation.

This industry already has so much trouble with buyers and sellers not fulfilling their obligations. The people most likely to speculate would be the people least likely to fulfill their obligation when they come out on the losing end.

A fun idea to ponder but that's probably about as far as it can go without regulation in the industry.

 

[hedgefund]

options.mobi should be great for this activity, the name which I own.

 

[affordablehosting]

would not work

the market is too small for these type of derivative products. there are not enough buyers/sellers

plus the products are not unique..domains can not be standardized/commoditized

I'm glad you brought that part up, because other exchanges ran into the same exact problem when they were getting started. When the CBOT and CME started trading agriculturals 150 years ago, they decided to establish minimum standards as to what to deliver. Today, you see this everywhere; even with Treasury Bills. WTI (West Texas Intermediate) Oil traded on the New York Mercantile Exchange is a great example. Even though there are millions of different qualities of oil that come out of the ground, the NYMEX is able to specify that deliverable oil must have a maximum weight, minimum energy content, and a maximum sulfur content.

What all of this means is that the price of WTI Oil on the NYMEX is the price of the cheapest available oil that meets the exchange's specifications.

Domains would be priced the same way; a three character .com would be priced as the cheapest three-character .com available; maybe X8Q.com.

We could go after the higher quality domains by putting certain objective specifications on them; that they don't contain the letters X or Q, for example.

One word: Regulation.

This industry already has so much trouble with buyers and sellers not fulfilling their obligations. The people most likely to speculate would be the people least likely to fulfill their obligation when they come out on the losing end.

A fun idea to ponder but that's probably about as far as it can go without regulation in the industry.

Duckinla,

You brought up a great point.

If there was a way to have the exchange retain control of both the deposits and the domains, there won't be any problems. Also, when the exchange gets liquid enough, we can move to daily settlement of futures contracts like we have with contracts at the Chicago Board of Trade and the New York Mercantile Exchange.

If domain names were to be regulated, they'd be regulated by the CFTC. However, at the same time, the US government has largely given up jurisdiction over most domain names. Domain derivatives might be as unregulated as currency; that would be excellent news, assuming we can self-regulate.

If anyone has experience keeping track of hundreds of accounts in a mission-critical setting, please PM me! I can probably do most of the work in setting up the exchange, but I'd be scared to death of being responsible for keeping track of potentially millions of dollars worth of domain names and deposits.

options.mobi should be great for this activity, the name which I own.

Hedgefund,

Thanks for volunteering. However, I also own a few .Com names for this purpose. That said, I'd love to make sure you get a stake in the exchange, somehow. If you're a competent programmer or you have an inventory of 3-char .coms or 4-number domains, I could really use your help.

That said, I hope you find a great use or great buyer for options.mobi. It sounds like a high-quality domain name; it's just that being a traditionalist, I prefer my .Com names.

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I've decided to begin offering puts on domain names as a bit of a trial run (See http://www.dnforum.com/showthread.php?t=205114). I believe that you can have this done by Lloyd's of London and some investment banks, but I've never seen anyone offer it to the general public on smaller domain names.

I'll let you know how it goes.