Disclaimer
The following is a comparison article. I write these with a checklist of criteria in order to make projects more comparable to another. This leads to the fact that the following is a rather dry read. If you read (or scroll) to the end however, you'll find a juicy price prediction.
Intro
Handshake is being built and used as a decentralized addition to the legacy centralized organisations that were established in order to organize and operate the Domain Name System (DNS). Handshake introduces a blockchain in order to achieve global concensus on the set of domain names under management the domain ownership and as a means to allocate resources for this system. Assigning ownership of a top level domain (something like ".com") to a cryptographic key makes it possible to create a certificate chain down to that key by creating a signature signed by that key. This is not possible with the legacy centralized system since the owners of traditional top level domains are not "keys" but organizations in the world of paper contracts. Since a blockchain documents a temporal order of events changes in domain ownership in Handshake can be traced over time.
The projects whitepaper is a rather demanding read especially for people who have little or no technical background or domain (no pun intended) experience. It can be found at hsd-dev.org. The projects website however is relatively accessible, especially the FAQ section.
The idea of managing domain names using a blockchain is not new. Maybe the oldest and most well known project in the space is namecoin[4]. Namecoin was in fact the first fork of Bitcoin. So what differentiates Handshake from its competitors.
Namecoin domains are subdomains under the top level domain ".bit".
Ethereum Name Service (ENS) is an application on Ethereum not a blockchain like Handshake is. Its primary purpose is to resolve human readable names like "dareview.eth" into wallet adresses. Each name is a subdomain under ".eth".
In Handshake all names are top-level domains. Its goal is to try to decentralise the DNS root zone. A name owner could rent out subdomains of his names.
Handshake goes out of its way to make sure it is perceived as an addition to the legacy system. Existing top level domains (TLDs) cannot be registered in Handshake and also over 100 thousand exising websites. Rights-holders of existing trademarks were allowed to claim their trademarked name. All of that is to minimize the (legal) friction for the project and its users and to maximize the chance of widespread adoption.
Development
Handshake is an active project. The blockchains genesis was at the 615817th Bitcoin block which was mined on February 03, 2020.
The projects source code is publicly available on github. At the time of writing the repositories were under active development and issues that had been raised were usually answered and discussed in a timely manner by contributors.
Exchange Listings
The HNS token is listed on a number of smaller exchanges. These are at the time of writing Namebase, Gate.io, Bittrex, Mexc, CoinEx, Hotbit and ViteX. A listing on a larger exchange like Binance for example could lead to a short term increase in demand for the coin.
Network
Since the term Handshake is not unique to the project it can't be easily determined how often people use search engines to look the project up.
Handshake has 21.7K followers on Twitter but the number of mentions still pale in comparison to the more established projects, of course. The subreddit r/handshake has 3.2K members.
Tokenomics - token distribution and incentives
The Handshake blockchain started with an initial supply of 1.36 billion coins. There is a max supply of 2.04 billion coins.
- 7.5% of the HNS coins are allocated for the companies behind protocol development and their advisors. These are Purse.io and Private Internet Access. 7.5% is a relatively small percentage compared to other projects.
- 7.5% of the premined coins went to early investors. (Among the notable investors are a16z).
- A whopping 68% of coins go to open source developers
- 10% went to existing TLD holders. They were able to claim their domain on Handshake.
- 5% went to CA/Naming Corporations and other blockchain projects. These are:
- ICANN
- Cloudflare, Inc.
- Namecoin
- Verisign, Inc.
- Keybase
- Public Internet Registry
- Afilias plc
- Brave Browser
- Namecheap
- Godaddy
- Blockstack
- ENS (True Names LTD)
- GnuNet
- 2% Non-profits and FOSS projects
Domain names are auctioned in a Vickrey auction[5]. When a name is auctioned off the coins which are paid for the winning bid are burned. This creates a deflationary pressure on the coins price. Domain names need to be renewed every two years which costs a standard network fee. This fee goes to the miners.
Risks - Criticism & other things to be aware of
I could not find a vesting schedule for early investors. This might lead to significant sell pressure at any time when VCs feel like cashing in on their investment.
Mining fees correlate with congestion of the network. So if the HNS price were to increase significantly and the number of transactions was very high - renewing Handshake name might get more expensive than renewing some traditional subdomain names. In that case a subdomain name with a traditional registrar could provide better value for some users. High registration costs is certainly a problem with ENS domains and the high gas fees on Ethereum at the moment. However this is a minor risk and one that would require significant adoption of Handshake - something that could be noticed months in advance.
Most browsers do not currently resolve Handshake names natively. There are several ways how this can be achieved but all of them require the user to do something on their end - which is currently still a barrier to adoption. However there are browsers which support Handshake - the most widely known one - Opera - have announced Handshake support in 2022.
Metrics to keep an eye on
Fundamentals that allow a look at the inner workings of the Handshake Blockchain are similar to other Proof of Work Blockchains. e.hnsfans.com features some nice metrics like the number of opened names (2695227) and charts showing HNS Supply Amount, Burned HNS Amount, Daily Transactions, Daily Total Transactions or the current Difficulty.
Something that would be useful to know is the distribution of HNS held among the network participants and how equitable the coins are distributed.
Also the distribution of names among adresses would be interesting. It seems reasonable that regular users would hold a small amount of names (maybe 1-10) whereas speculative users can be expected to hold thousands of names. Given that assumption one could interpret an increasing number of adresses holding only a small amount of names as a proxy for mainstream adoption.
Price Prediction - How high can it go?
HNS makes it possible for its users to buy and sell domain names as well as rent out subdomains of names they own. These activities are carried out using the HNS token as a medium of exchange.
When it comes to estimating the potential market size HNS could reach at some point in the future the traditional Domain Name Registrar market comes to mind as a comparison.
HNS extends the traditional domain name market - given the risks and limitations mentioned above - and allows its users to participate in the same business models as traditional domain name registrars.
HNS has a max supply of 2.04 billion coins.
Handshake is not a company of course but as a first comparison let's have a look at the market capitalization of one of the largest domain registrars there is currently - GoDaddy. At the time of writing GoDaddy has a market cap of 12.75B USD. If a comparable amount of commercial activity took place on Handshake each token should be worth 6.25 USD (this is not taking into account the token burn mechanism).
As a more far fetched price goal let's look at a report by Straitsresearch which estimates the traditional domain registrar market size to be at around 1000 billion USD by 2027[3]. Given the competition of Handshake mentioned above and the dominance of the legacy DNS system let's assume that HNS can reach between 10% to 50% of the traditional domain name markets size in the long run. In this scenario each token could reach between 49.02 USD and 245.1 USD. This estimate does not take into account the fee burn mechanism.
Summary
It is still early days for the Handshake project. Mainstream adoption of Handshake is not on the horizon - yet. That makes it certainly a more risky investment than for example the crypto blue chips. Handshake adresses a real problem from the perspective of somebody who cares about decentralization but that comes with some technical hurdles that need to be solved before most users will be able adopt it. An average internet user certainly does not particularly care about decentralization in the first place. So why is it that I think Handshake could be widely adopted some day. As it is stated so nicely in namebase.ios' documentetion - it's because who would not like to own a top level domain instead of having to rent a subdomain?