What you need to know about Handshake (Deep Dive)

burningphoneix (25)in #crypto • 3 years ago (edited)

Handshake Protocol

TLDR: Handshake is a decentralized DNS that could create the foundation of web 3.0.
Not financial advice, do your own research

Introduction

Before I explain HDNS here is a brief synopsis of DNS for those who need a refresher. In a time long ago before lady internet graced us with her presence, there was the now long-forgotten piece of technology called the telephone. Instead of hopping on a discord call or zoomline when you wanted to talk to your friend (like a civilized human being), you had to manually punch out a string of 10 digits on a keypad to call a friend. To help remember what number correlated to what company, so-called “phone books” were printed that had businesses and a number you could use to call them.
DNS uses the similar concept, but this time with IP addresses (a series of digits given to a public facing computer) instead of phone numbers. When you type in youtube.com, the domain (youtube.com) is then matched with its corresponding IP address using the DNS as a “phone book” to look at its IP address.
You might be wondering, “who distributes these domains”? Afterall if anyone could create a domain, it would create chaos, rendering the internet as useless as your great grandparents phone book from 1978. What honorable hero was harkened upon to heal this harrowing hardship? I would like you to meet ICANN (Internet Corporation for Assigned Names and Numbers). It is a non-profit that does all the necessary internet magic to keep the DNS database up-to-date, eliminate duplicates, and takes down domains when daddy government calls. What’s that? You don’t want a single organization responsible for maintaining the entire internet?

Why should you care about blockchain domains?

Un-censorable
One of the biggest selling points of blockchain domains is that it is censor-proof. Since there is no single organization in charge of domains (cough cough ICANN), the feds can’t order the supplier of the domain to take it down.

It’s in the root zone baby!
Owning a root-zone domain (such as .io or .tech) is difficult to say the least. Handshake gives you the ability to own and lease out sub-domains (similar to namecheap and godaddy). Imagine the astonished look on your fellow crypto-punk's faces when you direct them to .memez instead memez.com. Talk about internet street cred.

Web 3.0
The ability to decentralize domains is foundational to creating a truly decentralized web. Getting in early to this foundational piece of technology could theoretically pay dividends.

How it works

Think of HDNS (Handshake DNS) as a soft fork of regular DNS. To access handshake domains, you must make some adjustments on your system. Once the adjustment is implemented, you can search for both regular DNS domains as well as handshake domains. Now when you search for a domain on your browser, it first checks your query against handshake names, and then through the normal DNS records.

Auctions

By now you are convinced, you want to get your hands on this brand new piece of the internet. After all…

Well not quite. That is where auctions come into play. How do you get one of these sweet sweet root zone domains?
Say you want to buy .memez because why not (FYI it’s sold, I already checked).
These are the general steps taken to secure a TLD:

Either setup a Namebase account or download and install Bob Wallet. For this tutorial we will be going with the Bob Wallet method.

Exchange or purchase some HNS (handshake token). HNS is not going to be on your mainstream exchanges like
Uniswap or Coinbase. I got mine at Gate.io (<- referral link go brrr).
Transfer your HNS tokens to your wallet (Bob or Namebase).
Search for .memez and place your bid.
If no one outbids you, then .memez is all yours.

As an example here are the steps I took to buy my TLD:

Bought USDT on Coinbase
Transferred USDT to gate.io
Buy HNS with USDT
Install Bob Wallet
Transfer HNS to Bob Wallet
Search for name and start auction
Wait for auction to start
Submit bid

You might be wondering how handshake sets dynamic prices that accurately reflect the market value without being centralized. Prepare to grow a couple more wrinkles in your neuron bag. We are getting technical.

Handshake auctions are blind, meaning you don't know what other people have bid until the auction is over. During the 5 days the auction is live, you may increase your bid (by placing a second larger bid) to match how many people you see bidding on it. Here is where things get different. When you win the bid, you pay the second highest bid. This type of auction is called a Vickrey Auction. For example you bid 100HNS on .memez while a different cryptopunk bids 75 HNS. You would win the bid, but only have to pay the 75HNS.
When a name is bought, the tokens are destroyed. The idea is based off-of game theory to prevent one person from buying up all the domains for pennies as well as preventing auction sniping (placing a large bid at the last possible second).

Tokenomics

The token launched with 1.36 Billion tokens split up as follows:

Screenshot from 2021-03-19 21-08-42.png
~screencap from Namebase

The supply will increase 680 Million through mining over roughly the next 100 years. While this sounds like a significant amount of coins and inflation, tokens are burned(disappear into an empty void unlike other decentralized DNS projects) when a domain is auctioned off. This is in hopes of offsetting the inflation.

Concerns

Access
One of the biggest obstacles for mass adoption is access. As stated previously, you have to be somewhat technical to even access Handshake domains. This means that normies will have a difficult time accessing it. While the Handshake community has made great strides (and continues to do so) in this area, it is nonetheless a significant barrier. I felt that the general sentiment at Handycon (the Handshake conference) was that HNS was going to grow and expand, but never completely overtake traditional DNS.

Scalpers
The complexity of the auction gives a clear advantage to the scalper. This could have negative side effect of creating a more expensive second hand market as well as keeping newbies from getting involved.

Alternatives
Handshake isn't the only project in town. There are two other primary projects that are in the decentralized domain space. Both work off of the same principle. The subdomain is decentralized while the TLD (top level domain) is managed by the issue agent (ENs or Unstoppable). Thus the project is not truly decentralized in the way that Handshake is.

Disclaimer: Namecoin is another contender that is more like Handshake, but the website looks boring and I am not covering it.

I was going to compare the unique features of ENS(Ethereum Name Service) and Unstoppable domains, however the more I dug into the internet, the more I realized they are essentially the same but with a different skin. It turns out that the biggest difference is the popularity. Checkout this graph from Google Trends.

Screenshot from 2021-03-19 21-09-01.png

Features
The biggest features are the same as handshake:

Censorship-proof
Tie your crypto address to a domain

Issues
Here are some of the cons of Unstoppable and ENS:

Both use the Ethereum blockchain. This means congestion which means high gas fees.
Not truly decentralized. They operate in this grey zone where they own the TLD and “lease” out the subdomain.
Renewal fees

Here is my take on the situation. ENS and Unstoppable are going to have the greatest short-term potential. It’s easy for people to use as there is no complicated auction or special currency. In addition there is a very low risk of collisions with ICANN.

That said it is my opinion (not financial advice, obviously) that Handshake has the most long term potential. Having a separate token to govern it means that it is not dependent on another project (like ETH). The fact that you can buy TLDs means it is about as decentralized as you can make it. Fundamentally, I want to live in a world where Handshake is the primary means of domain management and that is why I like the project.

Future Plans

When I attended Handycon, I was encouraged at the direction that the community is taking. Their primary goal is to make accessing HDNS (Handshake DNS) easier and more accessible. A developer on one of the panels said that he expects Brave to support HDNS within the year. In another panel, the founder of Civic mentioned the idea that your handshake TLD or subdomain could also be used as a part of your online digital identity.

Conclusion

Handshake will go down as either a forgotten relic of a hopeful age in the internet’s history, or it will alter this fundamental building block, ushering in a new age of decentralized internet for all. It’s no secret where I stand. HNS RULES!!!
I look forward to watching and investing in this project.

If you found this deep dive helpful please share it! I spent a lot of time doing research on this report and would appreciate the support :D

If you have any corrections on anything I said, I want to hear it!