Hmm. My issue with that is a majority consensus could decide that, for instance, .gov domains should no longer be relegated to the American government. Same issue as with a crypto 51% takeover.
I'm sure other countries would like to use .gov.
My point is I don't like a system in which the majority can decide they don't like you having something and take it. For instance, what if people decided they didn't like facebook, so decided to seize its domain?
Are there any examples of longstanding institutions that are _not_ beholden to the will of the many? All things fall if you can get enough people to revolt.
Fragmenting and an inability to formulate a standard answer when communicating are serious issues with using it, but a takeover is not.
If Chinese users would rather trust some Chinese government entity to resolve URLs, then that's what they'd get. At the same time as other users might get something else.