Namecoin (NMC) is a blockchain system and cryptocurrency which allows users to protect domain name servers (DNS) by embedding them on a distributed ledger.
The stated purpose of Namecoin is to protect free speech by making the Internet resistant to censorship. It accomplishes this by providing decentralized DNS domains (.bit) which are not controlled by any entity. It is promoted and developed by the Namecoin Foundation.
Because domains are hosted across numerous servers worldwide rather than a single server, it is difficult for a government or other entity to block access to these domains, and nearly impossible for an entity to take down a domain. This provides a decentralized alternative to the original, centralized structure of the Internet.
Standard DNS domains use top level domains (such as .com) which are controlled by central authorities. The central authority which controls a top-level domain is able to disable any website which uses their top-level domain if it so chooses, which enables censorship. The .bit top level domain provided by Namecoin is not controlled by a central authority and changes to websites which use .bit domains can only be performed using their corresponding private keys.
The Namecoin cryptocurrency primarily acts as a medium of payment of domain hosting fees. In this way, it is a utility token because it is required in order to access Namecoin services. It was one of the first altcoins to be developed, and has been circulated since 2011. It is based on the bitcoin source code.
Every time a .bit domain is created, its creator must pay a fee in Namecoin in order for a new block to be created which embeds the transaction in the Namecoin blockchain. This fee is transferred to the entity which creates the new Namecoin block (the miner). New Namecoins are mined when Namecoin transactions are executed, and these newly-generated Namecoins also go to the miner. Namecoin uses proof of work mining to process transactions and create blocks. As with bitcoin, a maximum of 21 million Namecoins can be mined in total.
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