What is a Domain?

Every computer connected to the internet is assigned an IP address for unique identification. The Domain Name System (DNS) makes it possible to assign easy-to-remember generic names to these cryptic number combinations. A domain name is the unique and globally distinctive address of a website that users can directly access through their browser.

How is a domain structured?

A domain is divided into different parts. To understand the exact structure, we first need to define what a domain name is. In the context of internet addresses, two terms, URL and FQDN, play an important role.

Uniform Resource Locator (URL)

The URL is a precise identification label that includes both a resource and the access method used. The most well-known form is, for example, .. This represents a webpage accessed through a browser. The actual domain name is just the second part of the URL. The first part, https://, represents the access method, in this case, the Hypertext Transfer Protocol (HTTP) used to display webpage content in the browser. Another well-known access method is the File Transfer Protocol (FTP) used for data transfer in networks.

Fully Qualified Domain Name (FQDN)

The term FQDN is used for the complete name of a domain. In our example, this would be www.hosttest.de. The individual parts are composed as follows:

3rd-Level-Domain . 2nd-Level-Domain . Top-Level-Domain . Root-Label

Let's take a closer look at the individual parts, starting from the right:

Root-Label

The Root Label is always empty and only explicitly appears in the FQDN. It plays a crucial role when domains are registered on the nameservers by the hosting provider, but for regular internet users, it is mostly invisible as browsers do not display the Root Label.

Top-Level-Domain

The Top-Level Domain (TLD) is the highest level of name resolution. Each TLD is managed by a specific organisation, known as the Domain Name Registry. They are responsible for the allocation and management of all domains registered under the respective TLD. There are two types of Top-Level Domains: generic TLDs and country-code TLDs.

Well-known generic domains include the so-called CNOBI domains:

• .com Domain: Abbreviation for commercial
• .net Domain: Abbreviation for network
• .org Domain: Abbreviation for organization
• .biz Domain: Abbreviation for business
• .info Domain: Abbreviation for information

Well-known country code top-level domains (ccTLDs) include those of German-speaking countries:

• .de Domain: Country code top-level domain for Germany
• .at Domain: Country code top-level domain for Austria
• .ch Domain: Country code top-level domain for Switzerland
• .email Domain: Domain extension for email services
• .berlin Domain: Domain extension for Berlin

2nd-Level Domain

The 2nd-level domain represents the actual generic name, also known as the hostname. This can be freely chosen when registering the domain. Depending on the top-level domain (TLD) under which the name is registered, the allocation policies may vary slightly. Some special characters are not allowed in all TLDs.

3rd-Level Domain

The 3rd-level domain, also known as a subdomain, allows for further categorisation. Subdomains can usually be created by the customer themselves using the hosting provider's management software and do not need to be separately ordered from the domain name registry. However, they behave like an independent domain and can have completely different content from the main domain. Even the well-known 3rd-level domain www. is actually just a normal subdomain, which, unlike ftp.domain.de or mail.domain.de, addresses the web server to display the content in the browser. This is why websites are usually accessible with and without www.

How Does the Domain Name System Work

The Domain Name System functions as a translation service between the user and the computer. It ensures that we can enter an easy-to-remember domain name into the browser and then be redirected to the desired website. In the background, the entered domain name is converted into a numerical format understandable by the computer, allowing the computer to determine which content is stored where on the internet. The Domain Name System was developed in 1983 by Dr. Paul Mockapetris and is one of the most important international standards that ensures the functioning of the internet.

A domain name entered in text form is converted by DNS and the request is routed through various servers on the internet until the desired content is displayed in the user's browser. As the Domain Name System is primarily designed for efficiency, the entire process takes only a fraction of a second.

Trading with Domain Names

Domains are a fundamental part of the internet, and since each name can only be registered once, the domain business has steadily grown over the years. Since the registration of the first domain in 1985, the number has increased to over 200 million domains worldwide.

Whoever owns a specific domain has full control over what content appears when the address is accessed on the internet and can freely manage the domain. Domain owners have the following options:

• They can purchase web hosting from a provider and link the domain to the hosting account. This way, they can set up their own website such as a blog, forum, or online shop on the domain.
• The domain can also be parked, meaning that no content will initially be found on it, and the domain is reserved for a later purpose. A placeholder page can be set up, a brief message like "a website is coming soon" or simply a blank page can be displayed.
• Many domains are registered to subsequently resell or rent them to a potential buyer or existing customer.

Domain registration is handled either through web hosting providers or directly through the relevant administrative bodies. The Internet Corporation for Assigned Names and Numbers (ICANN) oversees all domain-related operations worldwide and regulates the allocation of TLD domains. These are then managed by individual registries, which take care of the organization of the individual 2nd level domains.

Lucrative Domain Trading

As individual domains can develop significant value, domain trading has become a lucrative business. Domain trading is in some ways comparable to real estate trading, except that it does not involve physical properties but rather digital ones. Just like in real estate, where certain areas and addresses hold great value, the same applies to internet addresses. Good names can develop incredibly high value, as in any business, the price is determined by supply and demand. While maxmüller123.de may not attract much interest, the situation is quite different for gold.de. Not only private individuals but also companies operating in this sector may be interested. Similar to real estate transactions, domain owners can engage in trading directly or enlist the services of a broker or agency to handle the matter. Entire online trading platforms have emerged, specialising in the buying and selling of domains.

To give an idea of the sums involved, here are some particularly valuable domains that have changed hands in recent years:

• In 2006, a Russian billionaire acquired the domain vodka.com for $3 million.
• The domain toys.com was sold to Toys'R'Us in 2009 for $5.1 million.
• In the gambling sector, slots.com changed hands for $5.5 million in 2010.
• The domain diamond.com was sold for $7.5 million in 2006.
• In 2008, a New York company acquired the address fund.com for just under $10 million.
• Still holding the record as the most expensive domain of all time, sex.com changed hands for $13 million in 2010.
• While such high prices are mainly achieved by internationally used COM domains, the German DE domain also holds its own. In 2008, Unister GmbH acquired the domain name kredit.de for a substantial €900,000 from the former Abacho AG.