What is Bitcoin? A decentralized way to keep track of ownership of a fixed quantity of things.

The DNS problem is a specific example of a more general functionality: keeping track of ownership of a fixed quantity of things, where each member of the set is distinguishable.

It turns out that bitcoins are already distinguishable. They are well ordered, mathematically speaking, so a number can be assigned to every bitcoin, for example 0 to 21 million.

So, for a DNS functionality, this is all we need to do:
1. create a second coinbase, possibly forked from the main coinbase (bitcoin)
2. interpret each coin in the second coinbase as a well-defined interval of the sha256 hash space of all DNS names.

Ownership of DNS names is therefore determined by which coins in the second coinbase you own.

Some months ago I was opposed to adding DNS stuff to the existing bitcoin network protocol and client, because I argued bitcoin should stay true to its limited purpose. However, thinking more about this now I support inclusion of additional coinbases / tracking systems in the main network. The reason for doing this is so as not to water down CPU power into multiple networks. We want one strong network, so the network should be versatile.

In fact, maybe anyone should be able to create a new coinbase on the main network, and specify rules such as quantity and distribution rate. In the case of DNS, everyone will just have to agree that a particular coinbase is to be interpreted as the DNS rights to different parts of the sha256 hash space for the DNS names.

I agree with the idea put forth by da2ce7, which he says is derived from an idea put forth by Satoshi. I think it is compatible with my idea of allowing arbitrary creation of new coinbases on the same network.

I cannot find the nanotube+theymos proposal so i cannot comment on it.