Handshake has been highly secretive about the creation of their new cryptocurrency project, but it has finally been launched. Due to support from some of the top venture capitalists and blockchain developers in the industry, the company managed to raise $10.2 million in their project. The goal is for their platform to replace digital providers that validate payments made online, though the company offers incentives and bonuses for the entities that helped create their infrastructure.
This project was headed up by Bitcoin’s Joseph Poon, Purse’s CEO Andrew Lee, and over 60 other investors and investment funds. Some of the funds that contributed to this effort include A16z, Founders Fund, Polychain Capital, and Draper Associates. This group joined together to purchase a 7.5% share of the company for $136 million. However, it is important to note that there is no entity that needs to be supported once the protocol is in place.
The other 7.5% of tokens are planned to be set aside for the “principles” of the project. However, the company is adamant about distributing the other 85% of tokens, keeping any investor or entity from taking control of the project. Investors will only need to pay about $0.10 per token when it is launched, but this value has only been discussed by those same investors.
Poon participated in an interview, during which time he discussed how experimental the project is, citing the changes to the CA system and the model used for the ICO. The ICO alone has been through minimal testing among other cryptocurrencies but has managed to raise millions. The company wanted to ensure that the majority of the funds raised were due to the sale to open-source developers. In a statement to CoinDesk, Poon said, “There's this notion that crypto tokens when they go live, it's similar to late-stage venture financing, and this gives an alternate model for that. Essentially, we give tokens as a gift, we're giving the coins as a gift to the community.”
The goal of Handshake is to contribute approximately $250 worth of tokens (about 2500 tokens) to users that participate on GitHub, P2P Foundation, Freenode, and similar projects. Realistically, with the goals of the company and their methods of distribution, the developers stand to receive upwards of $750 in tokens. The other distributions will go to non-profit organizations. However, the domains on the protocol will go to investors that own one of the top 80,000 websites. Overall, the goal is to avoid a shake-up for stakeholders. Poon sees Handshake as some variation of a donation, saying, “One of the goals is to kill the ICO ecosystem and narrative.”
A New Twist On A Classic Idea
Realistically, even though this whole process sounds a little complex, the true innovation has to do with the way that the platform plans to distribute their funds. Purse developed this software for Handshake, who specifically says that there’s “no fancy contracts.” Instead, everything is found on a minable ledger that keeps a log of each interaction between the participating users. Poon was straightforward about the approach, saying it is not new to the industry and that other systems like namecoin have used it in the past.
Namecoin was an early project for Poon that had failed, but he stands by the strength of the concept and technical team.
He said, “If you're apple, why would you use namecoin? It has amazing developers and tech, but there's always been a problem. The way we attempt to resolve it is Handshake allows anyone to publish proof to the blockchain itself and then they get the domain name.”
By keeping the domain open, Poon and the company have the option to flip the platform and sell back the rights to the participating companies. Poon said, “What can you do with the tokens, you can move the tokens around. You can use it to register for names.”
To perform the distribution, the company wanted to avoid the use of an airdrop and use a “faucet model” instead. This would just donate thousands of Bitcoins as a promotional effort, which many investors are interested in. The returns are the same, but there is no investment in one specific body. The principal (since these entities do not like the word “founder”) at Polychain Capital, Ryan Zurrer, said, “We support experimentation and see this as an interesting social experiment with an interesting distribution method.”
Lack Of Foundation
Even with overhauling the common algorithms and rules of ICO and CA systems, Poon wants to make Handshake bigger. These goals will help it to support the true innovation of cryptocurrencies, which Poon says is the ability to give value, rather than just developing tokens for it. To make this happen, there has been plenty of behind-the-scenes work on the legality and features that are usually linked to the ICO model.
Since Handshake has been nearing its launch for months, consumers may be wondering what is halting progress. Poon, Lee, and Lee claim that the main concern is determining the answer on how to finalize the tech and how to word the functions of the project.
Originally, Andrew Lee of Private Internet Access said that “The idea originally was that the foundation would manually verify ownership of each of these names and do all these things. But, we found a way to automate that on the blockchain.” Their initial project was a Handshake Foundation, which would have been a non-profit that handles the funds and deposits tokens amongst contributors. Since then, the process has been streamlined with automation. The challenge to develop a true open-source project while withdrawing centralization has been difficult, and even Poon has suggested shutting down the website all together.
Still, Poon seems to want to make the model and ideas last, even if not with the original plan. He said,
“There's a lot of pieces to this, there's a notion of the nature of gift economies, perhaps there's this emergent game where it's in one's own self-interest to ensure that the overwhelming majority of tokens are properly distributed to humanity. I think there could be interesting developments about this, and it could be one of the key features of what the blockchain can provide.”