If you currently generate 50 BTC per week, now you could get 50 BTC and some domain names too.
In nanotube's+theymos's proposal, the real cost making a BitDNS is _automatically_ paid by the transaction fee, their is no need to create a second market. As many or as little domains names will be included in the chain, and the generators will be compensated in bitcoins for providing that service.
The thing is that the miner receiving the transaction fee is just getting that as a sort of free lunch. The fee may be in place to cut out spammers, but they aren't doing any work so far as anything to do with the DNS system. Those computers which are processing and authenticating the raw data are not getting any sort of fee at all and the generators are not being compensated in Bitcions. All that is happening is that the miners are getting paid essentially as a data storage service entirely, and that is of marginal utility in my opinion.
This is also why there are some huge complaints about using the Bitcion blockchain as a generic data storage system... rightfully so I might add.
Suppose you have a separate block chain for domain name registrations, and you want people to pay in Bitcoins.
Let's assume for a minute we have another block chain which contains just domain data which is cryptographically hashed, but may or may not have proof of work (let's ignore that for now, which I'll address below). The purpose of the block chain is for the authentication of the data primarily where the "network" of domain servers can "certify" that the data fits the network rules and that domain data within that chain is valid in terms of who "owns" what domain. As a public block chain, it also shows what the majority of the "network" agrees ought to be in that chain too. Improperly formatted data that is not agreed to by the majority of the network is rejected from this block. Since it is a chain it also verifies against tampering and does a timestamp, and more importantly by being outside of the main Bitcoin chain it reduces the data payload for what is admittedly a specialized service which not all Bitcion users are necessarily interested in. These are the features of the Bitcoin transaction database that are being desired to be applied to other sets of data.
So far that is the easy stuff. We also want to set up some system where the "registrar" putting data into this chain is going to be "paid" for the registration and authentication of this system. I emphasize this as this is both going to be a reason to be a registrar as to even exist as a registrar has a strong financial stake in maintaining the database to receive more registrations, and provides a reason to have fees to cut down on spamming domain names or abusing the public commons. The fees are being paid to maintain the database, which is the important thing here. Without this fee, at best this database is being authenticated and supplied to the world at large strictly as a public service for free. Some people like that but I hope that those involved with the Bitcoin project can appreciate how being paid for such a service can be very useful and motivating. The Theymos/Nanotube proposal and for that matter all registrations into the Bitcoin database through extra data in a transaction sidestep this issue entirely by ignoring authentication and only using the timestamp ability of Bitcoin, where this database would have to be built anyway but derived from Bitcoin and thus provided as a public service for free.
Here is the real issue, however: Since there is no central server, the registrant wants to make sure their registration is put in by whatever registrar happens to be in line to put in the next record onto the block chain, however that is decided (by proof of work or some other agreed upon system). They want to send out some sort of generic transaction that can be received by the "authenticator" of their registration application who puts this registration into that block chain. Only if their registration is accepted into the block chain should that authenticator be paid.
A problem arises here: A bitcoin miner may know that a fee is available from a registrant, but how do you decide where those coins properly belong? Keep in mind that once a fee is processed in Bitcoin, it is irreversible. If there is a chain split on the domain records due to a formatting/authentication dispute (it likely will happen just like it is happening with Bitcoin even now) those Bitcoin transactions may be going to an authenticator who in fact never did get the registration done because the majority of the network has ignored that domain registration block. Some other registrar may pick up the registration and simply out of the kindness of their heart decide to include it in another block, but they won't be receiving any fee at all for that service. Some system could be perhaps set up where after a block is down to a given depth in the block chain that the fee can be "released". Still, regardless of how you set this up there will be some trolls who will be collecting fees, pretending to put stuff into the domain registry but not really caring about the domain registry protocols and siphoning off the fees for themselves, perhaps in collaboration with a Bitcoin miner. Since this represents serious money, there will always be some trolls doing this. Even an "honest" registrar is still going to make some mistakes due to a bug or something similar which may on occasion capture fees when they are deserved under this system.
I believe the fee system is critical to the success of this domain registration system. That ensures selfish behavior on the part of the registrars which puts it into their self-interest to maintain the databases, computer equipment, and everything else which makes this work. Yes, there are other ways that a domain name server can earn some coins, and perhaps that ought to be done too, but registration fees are already a part of the marketplace and something which this system is trying to capture as well.
In short, I am trying to demonstrate here that the authentication simply must happen with an entirely different currency, or that authentication of the data (not merely the time stamping) must happen within the Bitcoin client and that data at least in some fashion or another included more directly into the Bitcion block chain with the data authenticated by the miner itself. A Bitcoin miner may choose not to process domain data, but some system must be set up that can certify that a given block
including the domain data meets some sort of authentication standard to be accepted into the block chain to "earn" those registration fees. Otherwise the system falls apart and any talk of fees other than as a pure transaction fee to a Bitcoin miner alone is meaningless, with that transaction only to be used to preserve the transaction database.
I am also suggesting that to ensure promptness of registration, that it may also have to be a separate currency simply because not all miners are going to want to bother with domain registration authentication and over time the latency of even getting a domain registration into the system may be intolerably long (on the order of days or weeks) depending on the setup of the Bitcoin network and other priorities of the miners. I'm not suggesting an alternate currency to drive this project out of Bitcoin as useless data, but to point out that it is unworkable even from the perspective of the goals of the peer to peer domain server concept too. Putting the data into transactions isn't authentication and is also losing much of the power of what Bitcoin offers in terms of the authentication too. The proof of work system as used by Bitcion is also the only reasonable way to ensure that the system stays decentralized in terms of deciding who gets to put in the next block. Certainly some sort of common protocol for finding the next proof of work hash can be set up through a common mining pool between multiple currencies like this, but that is a completely separate issue from if it is to be a separate currency or not which I don't think has been decided on this thread.
The only other solution would be for Bitcoin to fully embrace this and other similar concepts that might come along and provide hooks and some sort of standard protocol to authenticate data of this nature on the main Bitcoin network. I think in theory that could be done and may be done in the more distant future in terms of "unifying" the proliferation of currencies that may result if it isn't done. I just don't see how that is going to get into the main Bitcoin chain anytime soon and even that has a whole bunch of drawbacks which I haven't fully explored either.
