[RKearney]

A domain name is much more than storing an entry in a database. The root name servers are not cheap to operate. Domain names can also have glue records which mean more records in the root name server.

Also the more expensive a domain name is, the less spammy domains you see. If domains were $1 all the time, there would hardly be any domains left since everyone would register anything they can think of. Adding a price point reduces the number of unused domains.

[belorn]

Now days, you also have to include a legal cost of operating a DNS registrar.