Right at the top of the pyramid is ICANN which claims to be a non-profit organization. This organization distributes IP addresses, which are in the form xxx.xxx.xxx.xxx though this form may have changed with the change from IPv4 to IPv6 sometime in 2013. These are basically numbers and a domain name for example SidSnot.Net will be one of those numbers. As an example, Microsoft.net has an IP address of 18.104.22.168. There are other rules involved but that's the basis of it.
IP addresses are just numbers. There's nothing special about them. All ICANN does is sell blocks of numbers in the range 000.000.000.000 to 254.254.254.254 to anybody that want them. That's the first key - the numbers are sold yet they are just numbers. They are not manufactured. They could be given away free. There is no processing involved. They are sold though and this is the beginning of the fraud scheme. By the way, ICANN has assets of $98,000,000 and pays no tax whatsoever despite being a private company and not a government body. The head of ICANN makes $730,000 a year. I know a lot of people that could live on just 2% of that quite happily. ICANN income for the year is rather obscure. Their Annual Report makes it look as though they make no money yet if this was so then the CEO would not receive $730,000 a year. This is the guy at the head of the pyramid.
At the next level there are Domain Name registries that pay money to ICANN for the free numbers and who then sell these domain names to the public and to business. These are sold along with the illusion that to be anybody online, you need a domain name. Thus, domain names have been sold and resold and indeed oversold. Now that it has become hard for anybody to find a domain name since a new breed of criminal - the domain pirate - has appeared, a new layer of domain names has been introduced.
Originally a domain name was very simple. It was XX.TLD where TLD was the top level domain, for example a country code or .com for commercial. Because Domain Piracy is so rampant and because ICANN etc smile upon the activities of Domain Pirates, ICANN introduced a whole new range of TLDs. Now, a Domain Pirate is also known as a Domain Squatter - somebody that buys a domain name and then registers it to a bogus website then tries to sell the domain name. For example, a company called DigglyWibblit would want a domain name DigglyWibblit.com but because the Domain Squatter has already paid for the IP address associated with the domain name (which should have been free anyway), they can charge what they like to DigglyWibblit for the domain. It's akin to copyrighting the name Barrack Obama and then charging the US President for the use of his own name. So, now we have a whole load of new TLDs that are going to be pirated by the domain pirates.
By now, you're probably a bit confused so I'll simplify it.
- ICANN sells numbers that have no cost to ICANN and no intrinsic value to Domain Name Registrars.
- Domain Name Registrars re-sell the "free" numbers to Joe Public and to Domain Pirates.
- Domain Pirates re-sell the "free" numbers to business for extortionate sums.
So, where is the money going? Largely, everybody has leapt on the Domain Name bandwagon, selling things they do not actually own to everybody else. It's very much akin to selling Brooklyn Bridge.
The key point these days is nobody needs a domain name. If I want to find an architect in Bilbao, Spain, I type in "Architect, Bilbao, Spain" and up comes imbarquitectos.es which seems to be an architect. Indeed, if the fellow was just advertising on a second level domain such as architect.somedomain.com then I would still have found him because I used a search engine to look for him.
The key to a pyramid scheme is selling and continuing to sell garbage that nobody needs and convincing them they do and that it will help them to make money. Look at the number of domain name registrars that have sprouted (some less honest than others) and the domain pirates.
Add photography into the pyramid and it becomes even worse. Photographers are the most gullible individuals to walk the surface of the planet. Just because somebody compliments them on their pictures, they think they stand a chance of success. They don't ever seem to realise that they don't need domain names. They don't need social media. Nobody needs domain names. Not when a search engine can find anything, easily and quickly.