On the (Domain Name) Bank — A Run

Could a domain registrar face a “run on the bank”?

Shockwaves hits the financial world yesterday when an analyst stated financial institution Etrade (NASDAQ: ETFC) may go bankrupt. This creates a so-called run on the bank, in which people pull their money out of savings and brokerage accounts for fear of losing the money. Deposits and brokerage accounts are insured, but that doesn’t mean people will get their money immediately in case of failure. NetBank, one of the oldest internet banks, recently went belly-up. FDIC-insured accounts were transferred to ING direct.

But what if a domain registrar is rumored to go bankrupt? Would people start transferring their domains? This would precipitate the failure of the registrar.

There’s reason to be scared. Anyone who had their names locked up in the RegisterFly fiasco knows what I mean.

A few months ago rumors started flying that Dotster was in financial trouble. The rumors were quelled, but that didn’t stop me from at least considering which valuable domains I had there and if I ought to transfer them.

In theory, ICANN ‘insures’ domains. But that assumes the register that loses its accreditation had good record keeping. ICANN is taking steps to keep registrant data in escrow in case this happens.

In the meantime, owners of sizable domain portfolios ought to consider starting their own registrar.