What is Handshake? (HNS)
The Beginner’s Guide
Handshake is a software that aims to incentivize a distributed network of computers to operate and manage a new system for domain name ownership.
You may not be aware, but today, website addresses are governed by a non-profit body called ICANN, which sets standards for what letter combinations can be used after the dot in any domain (such as .com, .org, .net and the many other varieties).
Handshake seeks to replace ICANN’s role as central authority for creating and issuing top-level domains with an open auction system operated by its computing network. Since ICANN isn’t in the picture, Handshake believes it can offer an unlimited range of top-level domains.
Creating an alternative to a centralized entity like ICANN also has another important side-effect. Over time, it could help make a group of companies involved in the management of domains called Certificate Authorities, or CAs, obsolete.
On today’s web, CAs tell users whether they are connecting to a genuine website. (You can see a CA at work every time the green padlock icon appears on your browser URL bar.)
Yet, a problem with the current system is that CAs — through error or manipulation — can make mistakes in identifying a genuine website. The CA system also depends on ICANN to maintain a list of domains, making it subject to errors that could arise from central management.
On Handshake, the verification that tells users whether they can trust a website would move to the blockchain, potentially creating a new way to manage one of the web’s oldest resources.
Who created Handshake?
Handshake is the product of a group of technologists with deep involvement in cryptocurrency.
This group includes Joseph Poon, who helped to create Bitcoin’s Lightning Network and Christopher ‘J.J.’ Jeffrey, the CTO of early bitcoin startup Purse.
The Handshake team has so far attracted $10.2 million in investment from a cast of prestigious venture capital firms. These include Andreesen Horowitz, Draper Associates and Peter Thiel’s Founders Fund. A total of 67 investors took part in the funding round.
Investors received 7.5% of the initial supply of 1.36 billion HNS.
The Handshake Launch
Of note is that Handshake’s creators tried to jumpstart the disruption of the HNS cryptocurrency by pricing and distributing HNS tokens creatively.
After setting aside about 15% of HNS tokens for developers and investors, the team proceeded to give away the remainder of the initial supply, with 68% going to open-source developers.
The rest of the HNS was allocated to the owners of the web’s top websites, ICANN and CAs, as Handshake’s creators reasoned that all parties with an interest in domain names would need an incentive to adopt their new system.
Handshake officially launched on February 3, 2020.
How does Handshake work?
Put simply, Handshake is a system for distributing website addresses through auctions.
With Handshake, auctions for top-level domain names are held every two weeks. Users must bid Handshake’s cryptocurrency, HNS, to take part in the auction.
The winning bidder pays the second-highest price, using a format known as a Vickrey auction. These auctions are all handled automatically by the Handshake software.
The Handshake Blockchain
The Handshake blockchain shares several similarities to the Bitcoin blockchain. For example, miners running the Handshake software compete to unlock newly minted HNS tokens by solving mathematical puzzles and adding blocks to the Handshake blockchain.
As on Bitcoin, new blocks are added to the blockchain every 10 minutes. Further, like Bitcoin, Handshake has a fixed 2.04 billion limit on the supply of HNS that can ever be created.
Handshake miners are paid 2,000 HNS every 10 minutes for performing this task.
Creating Handshake Domain Names
Handshake names must be claimed in an auction. All possible Handshake names will be available for bidding within a year of the Handshake network’s launch.
A user who wishes to create a Handshake name needs to check that it’s available, and then send a special transaction to the network that opens an auction.
The network’s algorithm will then determine when that auction will take place.
Handshake names can be used in a variety of ways. For example, they can be used to point to a website, but they can also be used as an address for a cryptocurrency wallet.
Name Claims and Name Auctions
Notably, the 100,000 web addresses with the most traffic, as measured by Alexa, are being set aside on Handshake for their current owners to prevent abuse of the system.
Owners of those websites can claim a Handshake name by issuing a cryptographic proof.
Auctions are the main way Handshake names are acquired. Users can bid for names roughly every 14 days. Bids are private and the highest bid wins.
Why does HNS have value?
The official currency of the Handshake network is HNS. This means users need to buy HNS to participate in auctions for domain names and to pay renewal fees on those existing addresses.
Since Handshake users can create any top-level domain they wish, the supply of domain names has the potential to sharply increase. New top-level domains could gain popularity among users and thus drive demand for more domain names.
As of 2020, more than 366 million domain names have been registered at an average cost of $10 to $15. This implies a global domain-name registration market of over $3 billion annually.
The opportunity for Handshake, then, is to disrupt the $3 billion domain-name registration business with a more trusted alternative.
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Why use HNS?
You may be interested in HNS if you believe the internet’s basic infrastructure could be better managed by a decentralized alternative.
Investors and traders may wish to pay attention to Handshake also, as its cryptocurrency and domains could become more valuable should the network see wider adoption.
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