Bitcoin wallet addresses have long strings that can be hard to remember, similar to the IP address for a website. It stands to reason that bitcoin needs it's own Domain Naming System (DNS) that allows us to use short, memorable, but unique names to pay people more easily.
The internet's DNS system is so useful and ever-present that we almost couldn't have the internet without it. That is the assumption underneath the open source, nonprofit, completely decentralized Bitcoin Naming System called BitAlias. By registering a BitAlias, or a ‘username for Bitcoin,’ you would make it as easy for people to send you money as it is for people to see your website.
BitAliases can also be used like a web identification name for authentication to third-party web services. Most conveniently, this can be done with a browser wallet extension, which supports the BitID or Trezor Connect protocol.
Within a few years we could all be carrying around some kind of gadget or program that allows us to present our private keys for signing all kinds of transactions, such as sending bitcoins and proving, cryptographically, that we are who we say we are. Trezor, Ledger, and KeepKey bitcoin wallets can actually do this today, as can a few bitcoin wallets on Android smartphones as well.
BitID and the Trezor connect protocol both facilitate this rapidly-approaching future by acting as the framework for these key signings. Since BitAliases support these protocols, your BitAlias could theoretically become a very important form of Identification, even allowing you to enter a building or start the engine on a car.
To register and renew your BitAliases, the price is currently set at 0.0001 bitcoin for one year, with free transfers. So for one year at a time you have to pay about a nickel's worth of non-refundable fees to rent it out, and it becomes instantly available to others if you fail to pay the renewal.
All fees go to unspendable addresses, that no one will ever be able to retrieve, essentially burning the coins forever. As the creator of BitAlias, Yanislav Malahov, argues “Burning the fee is the most fair and decentralized way.”
This process of 'burning coins' is nothing new, although many people's first reaction is horror at the waste of a limited supply of money. However, since bitcoins are divisible down to at least 100 million places, (0.00000001) this waste only serves to make all the rest of the bitcoin holders a tiny fraction richer. To prove that point, the BTCBurns website tracks the number of all known 'burn addresses' and they report that so far there have been 2,673 bitcoins burned, out of the 14.6 Million in circulation.
The registration process for a BitAlias is technical but quick, and involves sending two tiny bitcoin payments in a specific order, with specific data attached to them. The first spend requires your signed signature to be attached, and the second needs the BitAlias being registered, along with the 0.0001 BTC fee. Both go in the OP_RETURN field of their respective bitcoin transactions, and both get sent to the bitcoin 'burn' address.
Transferring BitAliases is a 1-step process, which doesn't even require a fee as long as it's signed with the proper owner's private key. To make this process easy enough for anyone, open source software is being developed to make the process form based.
In much the same way domain names are traded through marketplaces like Sedo and Snapnames, BitAliases would be tradeable across various marketplaces as well, most likely in some kind of auction. Having fewer parties involved in the transaction makes it faster and more secure than legacy domain name auctions, as does paying in the same currency that you use to secure the name with. The Domain speculation market is huge business today, with some domain names fetching prices of over $10 million on occasion.
BitAlias is the brainchild of Yanislav Malahov, a bitcoin developer from Germany with several wallet projects under his belt, including the first Dogecoin browser wallet, a colored coin wallet, and he was also a founding member of Dark Wallet.
Malahov admits that the BitAlias protocol was inspired by the Namecoin protocol, but changed to use only the Bitcoin blockchain, which has the largest mining network and is the most likely to survive in the long run. He also says that he has tweaked it to make his protocol more simple and more secure.
A few other challengers for Blockchain Identity tools do exist, although they don't offer the same DNS-type of solution that BitAlias is centered around. Onename and Blockstore both offer benefits that BitAlias looks spartan next to, however, both have their downfalls as well.
Onename is the most developed of all blockchain identity projects, having launched their complimentary PassCard service this year, attracting 32,000+ members including many of the bitcoin core developers and Venture Capitalists as customers. More recently, the protocol has been integrated into OpenBazaar.
While Onename offers lots of nice features, like a place to include your GPG key, Avatar, and link your social media accounts for further proof, it is more centralized than BitAlias, depending heavily on the Onename.com website. It also does not have any mechanism for a DNS-type browser resolution, and therefore, it doesn't leave any room to create a marketplace for it's names.
Blockstore looked to be the solution to Onename's centralization problem, but is highly technical in nature, requiring command-line access to install and run. However, it is completely distributed, like bitcoin and BitAlias. The major difference is that the open source software behind blockstore relies on a Distributed Hash Table to share data between users, meaning that users will host copies of each others' data. For the purpose of decentralization this is highly desirable, but the project needs much more development to make it user friendly enough for a non-coder to use.
For both projects there is an additional problem that Malahov points out, however. Their names aren't fully scarce like bitcoins, BitAliases, and Domain names all are. “These systems are unfortunately currently broken, because miners can register names for free. This is known to the developers but they have not fixed it yet,” states Malahov.
Malahov specifically made his system to 'burn coins,' and requires all BitAliases to pay a fee. Onename doesn't charge a fee at all and Blockstore has the miner's loophole, allowing some people to pay a fee while others can register their names for free. That leaves only Namecoin as a competitor of scarce blockchain identity solutions.
The question remains if scarcity matters for blockchain identity in the same way that it does for domain names or cryptocurrency. If we learn that it does, BitAlias will be in the best position of all blockchain identity platforms.