On Symbiotic Protocols
Handshake, still less than a year old, is beginning to realize the virtues of the decentralized web in which anyone can own their own namespace free of gatekeepers or fear of censorship. Happening in parallel, Ethereum’s decentralized financial protocols are maturing from lofty experiments, to hardened primitives.
The opportunity for cross-chain collaboration is immense. As I’ve said, DeFi and DWeb are complementary revolutions. The budding symbiosis between Handshake and Ethereum is a powerful one worth continually exploring in detail.
Previously I touched on how the Handshake namespace strengthens decentralized finance through cryptographically secure frontends.
The decentralized finance (DeFi) movement contends to offer open and permissionless markets. But DeFi does not operate in a vacuum. In practice, frontend websites and applications remain centralized choke points to backend protocols. Decentralized finance is not truly decentralized until the whole stack is.
Let’s now explore the flipside of this relationship — how decentralized finance enhances Handshake’s namespace economy. Decentralized exchanges unlock greater liquidity for the HNS currency. Meanwhile, smart contracts introduce openness and programmability into Handshake registrars. In both areas, efforts are underway to implement Handshake tooling on Ethereum.
HNS on Ethereum
HNS is the currency of the Handshake blockchain. It is money for the namespace economy. And in order to scale in this role, HNS needs highly liquid markets. Liquidity begets price discovery and price discovery begets speculative investment, all of which is necessary for sustaining public blockchains.
Siloed on its own chain, the path to liquidity entails bootstrapping its own on-ramps and market makers. While Namebase is a known brand and simple interface for buying and trading HNS, all centralized exchanges suffer from the same regulatory and UX frictions; as well as the classic chicken and egg problem of also needing to grow its userbase as new startup. Larger centralized exchanges will not even list HNS until there is sufficient liquidity to do so. Price discovery is held back by the need to roll your own exchanges.
On the other hand, Ethereum’s decentralized exchanges like Uniswap are uniquely suited to source liquidity for nascent crypto assets. Regulatory and UX burdened order books are replaced with open and incentivized liquidity pools. Ethereum assets can be traded by anyone, anywhere. Wrapped and trustless HNS are two ERC-20 implementations of Handshake. Both versions act like file formats of HNS that make the currency legible to the Ethereum network. Ethereum-legible HNS can leverage existing DeFi infrastructure to become a more liquid money. We are seeing this early stages of this as the first HNS was wrapped just this week through Wrapply.
Once inside the Ethereum arena, HNS becomes a more useful asset. Earn yield on HNS by supplying it to liquidity pools. Borrow against your HNS position. Coordinate Handshake-focused DAOs around HNS treasuries. The list goes on.
Namespace on Ethereum
The internet makes everyone a publisher. Ethereum makes everyone an investor. Now, Handshake makes everyone a name registrar as well.
For the first time, anyone can own their own top level domain and distribute subdomain space as they see fit. It is first worth considering emergent namespace patterns on Handshake. Top level domains may represent market categories, specific networks, or individual brands. Accordingly, some TLDs will open up subdomains to the public, some will allocated subdomains to users of their network, while others will reserve subdomains for themselves.
A free market of TLDs that disrupts ICANN’s monopoly is in itself a feat of decentralization. Though, we can go further. Ethereum offers tooling that will make ‘fiat’ registrars feel antiquated in comparison. Smart contract registrars — that is, Handshake TLDs that manage subdomain markets on Ethereum — stand to be transparent, autonomous, and programmable.
The sophistication of Ethereum-based markets juxtaposed with the manual nature of simple name transfers for websites or social handles is staggering.
Consider how, on Foundation, a fraction of a tokenized t-shirt can be resold with correct profit splits distributed to the seller and creator programmatically. But I can’t even manage to contact the owner of a desired name on a top social network, let alone trust they would transfer it upon receipt of my payment.
The gap between fiat and crypto markets will only widen as the tools available to crypto-related applications make the UX increasingly more fluid and attractive for consumers.
Smart contract registrars can also trustlessly escrow payments for names. With this more secure foundation, registrars can build in added complexities. Dynamically priced registrars could sell subdomains across factors such as character length or order of name registration. Or top level domains could offer namedrops for users to claim their permanent, permissionless corner of a network.
Ethereum can not only iterate on how registrars sell subdomains, it can reshape the structure of registrars altogether. TLD ownership can be fractionalized, leaving names (and rights to subdomain renewal fees) to be owned by communities of users. Just as governance tokens are distributed to decentralize ownership of network backends, domain tokens can similarly be distributed to decentralize ownership of network frontends. RealtyDAO is one project scratching the surface of what’s possible surrounding a tokenized namespace melding with the programmability of Ethereum.
We implicitly understand the value of namespace. More than mere legibility to a network, names carry a sense of social status, identity, and brand. We haven’t been able to act on this value and these ideas in meaningful ways. The interplay between Handshake and Ethereum unlocks a world of possibility.
Handshake and Ethereum are, yes, a symbiotic relationship, but more specifically a mutualistic one. Like species interactions, protocol interactions can fall into one of several symbiotic classifications — mutualism, commensalism, parasitism, or mimicry.
In mutualism, both species / protocols benefit. Decentralized namespace on Handshake benefits decentralized finance on Ethereum, and vice versa.
In commensalism, one benefits and the other is not significantly helped or harmed. Wrapped Bitcoin gains access to DeFi while Ethereum is largely unaffected.
In parasitism, one benefits while the other is harmed. “Ethereum-killers” accumulate liquidity (or don’t…) at the detriment of Ethereum.
In mimicry, one adopts distinct characteristics of the other, sometimes to provide mutual benefit and other times to exploit. ZCash and Bitcoin Cash are planned and contentious forks of Bitcoin, respectively.
I look at Handshake, Ethereum, and other public blockchains and see self-interested networks vying for survival in the cryptoverse. I may be overplaying the analogy of protocols and species. You don’t have to view liquidity as the lifeblood of cryptonetworks used to carry out their programming. Biological mental models or not, the point is we’re moving towards an interchain world. Protocol relationships are becoming increasingly intertwined.