Names are not able to be traded, so it's first come first serve. It's impossible to completely defeat name squatting, but you can make it less enticing. In the above case, Alice can "sell" her name to Bob on some aftermarket but the only way to do so is by transferring the cryptographic material. This is fraught with issues, especially considering once Bob has the keys he has no obligation to pay.

Names are valid for one year and range from $10/yr up like current domain names. Letting a name expire opens it back up to being registered again.

We have quite a few other "tools" in play behind the scenes that make name trading/squatting extremely impractical, but I won't go into those details here :)

Seems like you could use an escrow to defeat this and sell domain names safely and easily.