That's a fair point, and I don't have an answer. Presumably there would be enough TLDs to ensure a unique name is not as important, as it's just a short label anyway. Maybe there could be an expiration or some kind of override mechanism built into the protocol, though I'm not familiar with NFTs to know if this is feasible.
I'm not saying there wouldn't be challenges with this approach, but it seems worth a try if it means replacing an outdated and vulnerable system.
The ENS (Ethereum Name Service) technically loans out the domain names and they are put up again on the market if the owner of the domain doesn't renew it before expiry.
I'm not saying there wouldn't be challenges with this approach, but it seems worth a try if it means replacing an outdated and vulnerable system.