In short, the Internet’s naming system is getting stretched beyond capacity. Result: a memorable, easy-to-spell domain name is more valuable than diamonds, and about as easy to get as finding a gemstone in the ground.

The prime evidence of a system in trouble is “cybersquatting.” Some people use this term only to denote those who grab names for the purpose of misrepresentation (claiming trademarked names, for instance, and directing those who type it in to their homemade porno sites), but it makes sense to also include anyone who acquires a name for purposes of financial speculation. In any case, the term is overly kind. It’s an insult to actual squatters, who occupy vacant apartments for which they have no legal claim but an actual need. On the Net, the problem is people snapping up names for sites they will never establish, figuring to legally extort money from those who can really use the names. Their motivation isn’t need, it’s greed.

Every day provides news of another cybersquatting outrage. Recently we heard of the operators who grab the monikers of sports or movie stars and try to sell them for big bucks. (Or they use them for profit: type in “sammysosa.com” and you get a pitch to buy vitamins.) As the election season heats up, there’s a run on every possible permutation of a candidate’s name–miss one and your opponent might grab it. (But the GOP front runner made sure to procure “bushsucks.com” for himself.) And on eBay, you can find sellers soliciting astronomical prices even for relatively awkward names like “artmosphere.com” (asking $5K). The problem gets worse when people set up private home pages. Ideally, a personal Web site should bear its owner’s name. But when many folks share a name, only one wins out. My own name is far from unique–there are dozens of us, including a sportscaster, lawyers, teachers and some fellow who got lucky with a woman he met in 1970 outside a doughnut joint in Boston (she sent me e-mail asking if I was that guy). I was lucky enough to claim stevenlevy.com first, but where is it written that I deserve it more than my identically dubbed brethren?

The system has its defenders. “If you want a name, get there first or pay for it,” says Richard Forman, CEO of Register.com. “I’m perfectly OK with the idea of a secondary market.” But the fact is that the winners in this contest are those who knew how to exploit the game early and grab the good words. Another class of canny parasites monitors the “hold list” of names for which renewal fees haven’t been paid to the registrar, and snap them up as soon as they hit the market again.

Ironically, those precious domain names are only artifices. They’re a redundant addition to the literal addresses of Web sites: a string of numbers known as the IP address. Think of these as phone numbers that you never see. Originally, it made sense to create a registry that tied those numbers to words, but while numbers are potentially infinite, there’s a limited pool of meaningful words. When you’re in a specific business–selling prescription drugs, say, or furniture–that pool is even more limited. And only one business gets the absolute primo appellation: drugstore.com or furniture.com. Those names are so valuable that they become the cornerstones of billion-dollar business plans.

Fortunately, this problem may not be with us indefinitely. Some companies are already working on directory systems, in portals or browsers, that bypass domain names and use other means to link people with the sites they seek. Leading the pack is a technology called Real Names, which has deals to be embedded in the searching and browsing technology of big players like AltaVista, Inktomi and Microsoft. Eventually, such systems could use artificial intelligence and knowledge of your own interests to more effectively lead you to places you’d like to visit. If you type in “Sony,” they send you to the Japanese media company’s Web site, of course. But if you type in “football,” you might get a choice of several locations, including sporting-goods stores, NFL sites and fantasy football leagues. If you consistently visit the Green Bay Packers site, they might zip you there directly.

If such directory services become ubiquitous, “the obsession with domain names will go away,” says Esther Dyson, chairman of ICANN, the nonprofit organization charged with resolving Internet-addressing issues. “They’ll still be there, but people won’t always need them to go directly where they want to on the Web.”

Dyson certainly hopes so, because she recently learned that her own natural domain name–estherdyson.com–is in the hands of someone named Russ Smith, an ICANN critic who grabbed the name, he says, “because I don’t like Esther Dyson.” Deservedly or not, he’s the master of her domain.