There never has been such a time. It has always been a mistake to use a fake domain name, even just on internal networks. This has caused problems as far back as the 90s, e.g. when companies merged and suddenly realized they had conflicting fake domain names upon connecting their networks and now lots of stuff started failing. For more information see: https://jdebp.eu/FGA/dns-use-domain-names-that-you-own.html
So the only time it has ever been safe to name your hosts server1.dev is within the past year, now that .dev is actually live and you can use a real globally unique domain name that you actually own, thus preventing any of the possible issues that have been there all along.
And there aren't any TLDs run by Nigerian scammers. You may be underestimating the difficulty, cost, and technical know how of acquiring and running a TLD.
I'm sure ICANN would love to claim ownership of the entire name hierarchy, but I disagree. At least on my servers.
First problem with your suggestion - you don't own domains, you rent them. That can change, you have to pay, someone can forget to renew, etc. Though I agree, sometimes it is better to use proper registered domains.
When setting up limited scale server-to-server communication I really do not want to interact with DNS. It's all downside and no upside. Servers get names in a subdomain of a widely squatted invalid TLD, names with locally appropriate IPs go in a hosts file and I can be reasonably sure they get resolved to the proper IPs, or as a failure mode - none at all. With the occasional network layer security, it is important to get the IPs right.
If the need should arise, I can change the domain. I don't see how using a proper DNS name would be better instead of a clearly local one I can trust.
So the only time it has ever been safe to name your hosts server1.dev is within the past year, now that .dev is actually live and you can use a real globally unique domain name that you actually own, thus preventing any of the possible issues that have been there all along.
And there aren't any TLDs run by Nigerian scammers. You may be underestimating the difficulty, cost, and technical know how of acquiring and running a TLD.