Namecoin is a decentralized naming system based on Bitcoin technology (a decentralized cryptocurrency).
It allows you to:
Securely register and transfer arbitrary names (keys), no possible censorship!
Attach values (data) to the names (up to 1023 bytes)
Trade and transact namecoins, the digital currency NMC
There are plenty of possible use cases. Some examples:
DNS: domain_name => domain_zone_configuration
Alias/Identity: user_name => user_public_identity (email, name, gpg key, BTC-adress, etc)
Timestamping: document_hash => document_infos (name, hash, owner, etc)
Broadcasting / Messaging
Web of trust
Bonds, shares
Voting
Torrent tracker
To register a name, you must own some namecoins (NMC, the internal cryptocurrency used by the software).
Namecoin is an alternative distributed Domain Name System (DNS) on the basis of Bitcoin software. It expands the software to support transactions for registering, updating, and transferring domains to serve.
Like Bitcoin, Namecoin is a peer-to-peer system, which, assuming an honest majority of participants, can not be controlled by a single state or a company. Changes to the namespace of the rightful owner of a domain with a public key signature are distributed to all peer-to-peer users. The inclusion in the block chain, as the everlasting logfile is used, verifies that the transactions are authentic. The block chain grows whenever new transactions are added by any of the participants. Through a fairly intense proof-of-work process, a matching result of a cryptographic hash function is found that may be verified by all other participants. Due to the computational effort, it is impractical for a counterfeit blockchain to be created.
Currently, the top-level domain .bit used in the official domain name system is not awarded. To resolve domain name you need either the current block chain or use a public name server that participates in the Namecoin system. Namecoin uses a separate block of Bitcoin chain. The software is open source and is hosted on GitHub.
It’s a new blockchain which uses namecoins for registering domain names. The namecoin DNS data is stored in blockchain and is shared by all p2p nodes.
How it is possible to mine together Bitcoins and Namecoins?
Mining involves a finding a solution for some hash. The hashed data contains: a coinbase (bytes that uniquely identify coins mined in current block, and usually is just a random string) and a merkle root (bytes that contain a history of all transactions). This data is mixed together to form a ‘midstate’ which is the input data for hashing algorithm. NMC mining is merged with BTC mining by taking the NMC ‘midstate’ and using it as coinbase for BTC. From BTC point of view the coinbase is still a random string, but from NMC point of view it’s the data that – once BTC is solved – will confirm an NMC block. The point here is that NMC usually has lower difficulty, so NMC blocks are solved more frequently with the same shares submitted than BTC blocks.
This basically means that NMC can be mined “for free” while mining BTC. The pool will mine NMC with full power, and mined NMC will be divided between users who filled in a valid NMC wallet.
This is important, if you don’t fill in a valid NMC wallet, you will NOT get any Namecoins, but instead people who filled in a correct wallet, will get some extra namecoins!
So now, please head on to your user profile page and fill in your NMC wallet 
How to use namecoins
You can improve your Bitcoin income by selling mined Namecoins for Bitcoins on the most popular BTC/NMC exchange: http://exchange.bitparking.com
Buy domains
Registering new domains is done here http://register.dot-bit.org/ or if you want to do it by yourself it’s explained here http://www.bluishcoder.co.nz/2011/05/12/namecoin-a-dns-alternative-based-on-bitcoin.html.
Namecoin dns server
To use the namecoin DNS on your computer you will need to use a namecoin registrar DNS server, a popular one is http://register.dot-bit.org/ just add its IP to your DNS config (e.g. resolv.conf in Linux). To make NMC DNS compatible with current DNS protocol it has to use some TLD (top level domain) and a .bit domain is currently used for that, but it’s configurable.
One digital currency that you might not have heard of is Namecoin. It is based on exactly the same code as Bitcoin. In fact, the two currencies are almost identical. However, in the same way that Bitcoin is a decentralised currency that cannot be shut down; Namecoin is the basis for a decentralised domain name system (DNS), i.e. web URLs, which could put a stop to Internet censorship.
What is the DNS system?
While we’re all used to typing text addresses into our browser and email programs, such as coindesk.com, the Internet doesn’t run on text. The Internet actually works on numerical addresses called IP addresses, just in the same way we dial telephone numbers. The problem is that numbers are not easy to remember. Therefore, an Internet wide address book, called the Domain Name System (DNS), was created to make navigation much easier.
Every time you type an address into your browser, your computer or mobile device is actually querying a DNS server. It has to ask for the IP address of the destination server before it can retrieve any data for you. For example, typing “google.com” into your browser will trigger your computer to check its DNS server for Google’s IP address. The DNS server will return a number like 173.194.70.113.
The very last part of a domain, e.g. .com, is called a top-level domain (TLD). TLDs are controlled by central authorities. For example, the .com TLD is controlled by ICANN in the United States. These central authorities allow third party companies, known as registrars, to deal with accepting domain name orders and customer service.
Whenever anyone has a complaint with a website, the central authority for its TLD has the ultimate say on what happens to it. In most real world cases, lawyers, copyright holders, etc., will simply contact the domain’s registrar. However, the potential for commands from a central authority should be of concern to groups who will suffer due to censorship.
How does decentralisation help?
A decentralised DNS system means that TLDs can exist which are not owned by anyone, and the DNS lookup tables are shared on a peer-to-peer system. As long as there are volunteers running the customised DNS server software for the rest of us, then we can always access any alternative domains. Short of seizing the physical servers, authorities cannot impose rules to affect the operation of a peer-to-peer top level domain.
What does this have to do with crypto-currency?
The model of Bitcoin involves a peer-to-peer system where participants are continuously validating a series of transactions without any central control. That model was directly applied to the domain name system by modifying the bitcoin protocol and the result was called Namecoin (NMC). In particular, a new genesis block was created, so that a whole new block chain would be created. This ensures that Namecoin and Bitcoin do not interact or interfere with each other. Secondly, the developers of Namecoin created several transaction types to reflect the needs of a new domain name system. Because of the shared heritage, there will only ever by 21 million Namecoins created, and 50 coins are generated for each solved block of crypto problems.
How to use Namecoins to register .bit domains
.bit is the first and only TLD of the so-called Domain 2.0 namespace. The actions necessary to register a new domain or to update an existing one are built into the Namecoin protocol by means of the new transaction types mentioned above.
There are three types of Namecoin transaction (source):
name_new – Registration cost 0.01 NMC. This constitutes a fixed cost pre-order of a domain.
name_firstupdate – Registration cost 0 NMC. Registers a domain making it publically visible, subject to variable costs (price calculator).
name_update – Registration cost 0 NMC. This is used for updating, renewing or transferring a domain.
All NMC transactions are subject to a 0.005NMC fee.
Even though the Namecoin system effectively makes you into your own domain registrar, there are some registration services out there, who offer to handle the registration for you and take payment in BTC. Additionally, they offer services such as an (easier) interface to modify domain details and to automatically renew.
http://register.dot-bit.org/
Namecoin.com
Dotbit.me
How to view .bit websites
Namecoin.com claims to have registered at least 450 domains. According to the Bitcoin Contact website, there is a grand total of 77,000 registered .bit domains (full list here). That’s all well and good, but because they are not part of the standard domain name system, you can’t just type, e.g., wikileaks.bit into your browser and expect to see a website.
Fortunately, there are .bit web proxy servers that will correctly handle your DNS requests in a browser. To make the process even easier, there are extensions, via Namecoin.com, for Firefox and Chrome.
How can Namecoin and Bitcoin complement each other?
While the two digital currencies do not interact, they do rely on exactly the same set of mathematical problems. Therefore, the same hardware used to mine bitcoins can be used to mine Namecoins. Furthermore, there is process called merged mining, in which a mining machine is configured to query both block chains whenever it comes up with a possible solution to the cryptographic problems. The Dot-bit wiki describes this as entering two lotteries with the same ticket to increase the odds of winning.
How does this affect you?
The chances are that 99% of the people reading this do not need to create a .bit website or service. However, information is power as the saying goes, and so it is important that you have the capability to access websites and email addresses on the .bit namespace.
Yes, this technology can be abused just like anything else, and so it’s even more imperative that we all have the capability to view the .bit namespace so that we’re aware of the good and the bad.
More important than anything else, however, is that the ability to view .bit websites means attempts to silence those with a legitimate message will have less of a chance of succeeding.
source: http://namecoin.info/ and https://en.bitcoin.it/wiki/Namecoin and http://mining.bitcoin.cz/what-is-namecoin and http://www.coindesk.com/what-are-namecoins-and-bit-domains/
What is NameCoin?
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