Harberger Tax Is a Hybrid Solution To Domain Names: Ethereum Co-Founder

Steve Anderrson
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain. Join the official channel of thecoinrepublic, For the latest news updates: https://t.me/thecoinrepublic

Harbinger Tax Is a Hybrid Solution To Domain Names: Ethereum Co-Founder

  • The thread began with American entrepreneur Scott Banister losing his NIST account.
  • Balaji Srinivasan replied that he loved the idea in theory but had doubts about its practicality in functioning.
  • This exchange is similar to the thread by Uniswaps Exchange Engineer Noah Zinsmeister.

One of the hottest topics in the crypto-market right now is the domain pricing on small character names. Ethereum Co-founder and famous crypto analyst Vitalik Buterin participated in a twitter thread on domain names talking about the importance of Harberger tax on them.


He believes that not doing so will encourage corruption in the long run. He further also spoke of Harber
ger Tax as partial ownership and explained his insights on how it can prevent a monopoly.

The thread began with American entrepreneur Scott Banister losing his NIST account. His wife and entrepreneur, Cyan Banister, announced that the report had been stolen and changed. She further said that they could not retrieve it due to the new rule on 4-character names. 

This intrigued Balaji S Srinivasan, the cofounder of Coin Centre, who believed that domain names and user names should be private property. He stated that in the medium term, the current regulations would lead to sites that create tradeable usernames.

“I believe new sites will create that use crypto domains and NFTs for tradeable usernames,” He said. This evoked a response from Vitalik, who spoke of Harberger tax as a means to counter first-mover privilege. 

 

 A user, marc, asked the Ethereum Co-founder to explain the functioning of the Harberger tax. In response to that, Vitalik said that it is a partial ownership system. “. The owner sets a price at which anyone can buy the asset from them, and they must pay a tax proportional to that price.” He added.

He also explained that the objective of the tax is to counter the monopoly in the system and obtain revenue that can use for funding.

Balaji Srinivasan replied that he loved the idea in theory but had doubts about its practicality in functioning. In such a system, setting the price too low will, and it brought out under, whereas setting it too high will lead to a substantial annual fee. He wondered how the everchanging rates of the crypto market would cope with the system.

He questioned if the system will house a 30 – day repricing policy. He also pointed out that this will disadvantage small start-ups. They will either forced to pay a large amount of tax or have their name bought by more prominent companies. 

To this, Vitalik Buterin recommended a limited price-capped version. He suggested a 250 USD per year annual fee for anyone who wanted to keep their name. To pay less than the amount, one must open his doors for anyone who wants to buy it at (the annual fee you pay) / (the tax rate).

He also proposed the function asymptotic: buy price = fee * 250 / tax rate / (250 – fee) to get rid of the sharp cliff. He stated that the goal is to tax the ‘squatter ecosystem’ and “force them to serve the public good more.”

Balaji Srinivasan agreed by pointing out that with a price for premium domain registrations, one can tax the squatters without harming the start-ups. 

Vitalik Buterin further added that the objective of the Harberger tax is to optimally impose the colonists and ensure that the resale value is proportionate to the actual amount. It also has the advantage of providing a standard interface for sales, he said.

This exchange is similar to the thread by Uniswaps Exchange Engineer Noah Zinsmeister, who complained that a $160/$640 price for a 4/3-character name was ridiculous, and ENS should look at a system where “yearly Harberger-style auctions with a hard max that give existing owners priority.”

With these multi-faceted views coming in, it is difficult to anticipate where the future of the domain names system and Harberger tax lays. 

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