There should be some system in place like you can only have X% of domains not being actively used for a legitimate purpose. And if you fall below, you will need to pick Y domains to relinquish or they will be randomly relinquished for you.

Define legitimate. There are plenty of domains that point to simple images.

I'm with you in spirit, but this is a hard problem to solve.

I'd at least define it as "not just parked for profit."

But it's trivial to just put something on these domains like Wikipedia picture of the day or whatnot, and who's to say that's not "valid"? It's just that no one bothers now because they don't need to.

In principle I agree, but I don't really see how it can be solved in a practical way without a lot of collateral damage.

Lots of domains don't necessarily point to anything as obvious as a website for perfectly normal reasons, either.

Well there are annual registration fees and those add up quickly if you are squatting on 1000's of domains for 10+ years.

There isn't remotely any possible way to enforce this. There are thousands of registrars out there and there's no way to know all the domains owned by a single person or company. Even if you solve that problem, now you'd just have domain squatters spinning up shell LLCs.

Also you have no way to properly define "legitimate".