Interesting idea, but I think a slight modification is in order. Like you said, if someone buys and domain for $5 a year and holds it for a few years, and then

Interesting idea, but I think a slight modification is in order. Like you said, if someone buys and domain for $5 a year and holds it for a few years, and then someone offers $1000 for it during a renewal auction, the owner could pay $100 to keep it. If they decided that it wasn't worth $100, the new buyer would pay the $1000 to get ownership. In this situation, I think it would be fair that the old owner get $100 of the buyers $1000. The same portion would be returned to the owner as it would have cost to keep the domain. Although, this could lead to attacks if the price didn't drop back down to $5 a year. If someone owns whatever.com, and someone offers $1000 for it, the owner wouldn't just have to decide if its worth $100, but if it's worth $100 a year in perpetuity.