Sorry [mike], it's time to rip your post apart:
It makes nobody happy.
The only people I've seen unhappy about doing domain name registration or other things with bitcoin are those that seem to have some sort of purist mentality in regards to which arbitrary uses of bitcoin are acceptable (according to their own subjective preferences, of course). Regardless, please don't make assumptions about how random people you don't know will feel if someone does X or Y, and then use your assumption as an argument against some use of bitcoin.
it's unfair to externalize the costs of unrelated schemes onto people who are interested only in payments
So merchants will be ok with supporting bitcoin transactions for drugs, porn, alpaca socks, and their competitors
, but not for domain names? What's the difference? If a domain name transaction can be done using practically the same amount of space and computational power as a normal transaction for any other good, then why does it matter? If the merchant is ok with processing bitcoin transactions that go to their competitors (and the blocks holding those transactions), then why would they care about processing transactions with a few bytes of extra data for domain name registrations? Either way from their perspective it's just bandwidth, processing power, and storage being used up for things that do not pertain to their business... Why would they single out domain name transactions as being unacceptable, but tolerate all the other millions of bitcoin transactions that provide no income to them but cost them resources?
Increasing the cost of accepting BitCoins for goods and services hurts everyone who uses the system by reducing the number of merchants or increasing their costs.
How can you decide who it does and does not hurt or if it will increase or reduce the number of merchants? Like I said, they're willing to tolerate transactions and blocks containing transactions to their competitors or businesses/people that aren't directly competing, so why would they single out domain name transactions? Perhaps registering domain names through bitcoin increases the security (more miners due to higher fees for domain name transactions) and value (by adding decentralized domain name registration as another use) of bitcoin...is it impossible, or even unlikely that some merchants won't find that increased value more than enough to offset the increase in transactions of similar size to any other transaction?
Verifying its integrity requires many slow (and thus expensive) operations like ECDSA verifications and disk seeks.
And this will have to be done for every bitcoin transaction that's buying a domain, whether or not the actual domain information is in the transaction or not. 10000 bitcoin transactions buying domains from some centralized domain name registrar, or 10000 bitcoin transactions containing perhaps a couple more opcodes and a 32-byte hash referencing the domain name the registering has no practical difference in computational cost (and I think some have presented ways to do it without increasing the size at all).
One final reason is that Satoshi was opposed to putting non-BitCoin related data into the main chain. As creator of the system, his opinion should carry a lot of weight with anyone serious about extending it.
I care about his technical opinions, but I don't recall him presenting any technical reasons for not putting non-bitcoin related data into the main chain. I think it's purely an economic issue (one I believe most people will view as a net gain), not a technical one. This means it is merely a matter of personal preference. Just because Satoshi's preference was to keep non-bitcoin related data out of the block chain does not mean that putting that data in there is not a good idea...it just means he doesn't want it in there. It's no different than you wanting or not wanting pineapple on your pizza.
A commonly cited reason for putting DNS related data into BitCoin is the desire to pay for names with BitCoins.
It's not because people want
to pay for domain names (I think most people, including myself, would much rather get them for free than pay for them). It's because there needs to be an incentive for people to work on the block chain.
Other schemes are possible, like pay to miner
So you leave out the one that actually gives people incentive to work on the DNS block chain... Obviously you're under no obligation to provide such a solution to us, but it's the most important part!
You went through all of this trouble making this post, but left out the most important piece. Without it, a decentralized domain name registration project will not become widely used.
If two different block chains were to be used while sharing work and providing an incentive for the miner to support the secondary block chain, the domain name block generated has to be synchronized with the bitcoin block that holds the transaction paying the miner. If they are not synchronized, the miner is not necessarily guaranteed to be paid for registering the domain name (requiring that registration to be considered invalid, and wasting work on the miner's part for including it, not to mention the block chain being wide open to spam due to not needing to pay to get transactions put into it). The person buying the domain name can't pay before the block is mined, because they don't know who will mine the block until after it happens. The simplest way to solve this is for the domain name registrations and fees paid to the miners be in the same transactions on the same block chain. This means either doing it in the bitcoin block chain, or creating a (probably more valuable) competitor to bitcoin that will provide a greater incentive for miners to stop mining bitcoin and start mining in the new system...not good for bitcoin.
I have to question whether or not you really understand the issue with domain name registrations and bitcoin. You're using personal preferences as reasons to not do domain name registration in bitcoin, while providing unnecessary technical alternatives (that do not provide the necessary incentives for it to work) just to meet your personal preferences. For you to even think that people "want to pay for domain names" and then going through the trouble of providing a technical way to do this proves your lack of understanding on this matter. You're willing to make modifications to bitcoin to accommodate alternative block chains, but are not willing to allow a few extra bytes in a fraction of the transactions, requiring no change to bitcoin and likely providing an economic benefit for most/all people using bitcoin through more mining incentive, thereby increasing network security, and also through more demand for bitcoins due to it's use for domain name registration.
The issue of using the bitcoin block chain for domain name registration is not technical. It's purely an economic matter, meaning it's entirely subject to personal preferences. Please don't hide behind Satoshi's opinions or use unnecessary (and unsatisfactory) technical alternatives as a way to suggest to us that your anti-DNS-in-bitcoin post is anything more than an expression of your personal preference. Also, please don't state your assumptions as to how it would affect others economically or emotionally as though it's some sort of provable fact.