A long-secret cryptocurrency project whose investor deck once touted Burning Man as central to its anti-capitalist ethos has finally arrived.
Released Thursday, Handshake, backed by top venture capitalists and some of the most well-known blockchain developers, has raised $10.2 million for an attempt to replace the digital entities that today authenticate web payments, in the process rewarding those who built the essential infrastructure for the internet itself.
Spearheaded by co-creator of bitcoin’s lightning network, Joseph Poon, Purse CEO Andrew Lee, Private Internet Access founder Andrew Lee and CTO Christopher “J.J.” Jeffrey, the effort is now backed by 67 individuals and funds including A16z Crypto, Founders Fund, Polychain Capital and Draper Associates.
The investors combined to purchase 7.5 percent of the protocol at a $136 million valuation.
The key difference here, however, is that this figure isn’t a valuation for a company, it’s a valuation for a protocol and its tokens – in the case of Handshake, there won’t be any entity to support (or value) beyond the protocol.
So while a remaining 7.5 percent of tokens will be set aside for the project’s “principles” (those involved eschew the term “founder”), more notable is what’s being done to quickly dismantle the entity that’s bootstrapping the project and distribute the remaining 85 percent of tokens, worth a combined $115 million, at launch.
In interview, Poon touted the new cryptocurrency as an experiment that’s heralding two leaps forward – an improvement on the existing CA system and domain registrars and also the initial coin offering (ICO) model itself, which that has found untested projects raising millions.
As such, Poon framed Handshake as a project intent on raising as little as possible, so that the largest amount could be given away to open-source developers.
Poon told CoinDesk:
“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.”
All told, Handshake aims to give $250 worth of its tokens to *each* user of the websites the company has partnerships with – GitHub, the P2P Foundation and Freenode, a chat channel for peer-to-peer projects. As such, developers who have existing accounts on each could receive up to $750 worth of Handshake tokens.
Additional token distributions are set to go directly to the Electronic Frontier Foundation, the Tor Foundation and other like non-profits, while domains controlled by the protocol will go to those who can cryptographically prove they own one of the top 80,000 websites.
The goal, project leaders say, is ensuring what they framed as a recreation of the web, but without a shake-up in its stakeholders.In this way, Poon described Handshake as a donation, one that he hopes will set the tone for a new wave of more philanthropic blockchains.
“One of the goals is to kill the ICO ecosystem and narrative,” he said.
Old ideas, new twist
But if the idea already sounds too complex, Poon sought to stress the innovation with Handshake lies in the distribution, not the code itself.
A fork of a bitcoin software developed by Purse, Handshake offers “no fancy contracts,” just a simple digital, minable ledger to record engagements between users. Poon even went so far as to state plainly his belief the idea been done before, naming blockchain-based domain systems such as namecoin (one of the industry’s earliest projects) specifically.
However, he framed the effort as one that sought to answer the question of why the project failed, given that he believes the idea and technical team were strong.
“If you’re apple, why would you use namecoin? It has amazing developers and tech, but there’s always been a problem,” he said. “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.”
Essentially, this would keep the decentralized equivalent of the Apple.com domain open to the company itself, rather than squatters and early adopters, who, hoping to score money on the flip, merely want to sell back these rights to those entities.
“What can you do with the tokens, you can move the tokens around. You can use it to register for names,” Poon continued.
As for the distribution, Poon, Lee and Lee sought to position the model not as an airdrop, in which funds are cryptographically distributed to those who are already users of a blockchain, but a return to the “faucet model” by which early adopters gave away thousands of bitcoin in order to get the word out about the project.
So far, investors seem keen on the idea, as the returns should the protocol become widely adopted (and accrue value) are still the same, even without the investment in an entity.
“We support experimentation and see this as an interesting social experiment with an interesting distribution method,” Ryan Zurrer, principal at Polychain Capital, said.
But if rethinking the ICO and CA systems wasn’t enough, Poon sought to brand the project in even larger terms, emphasizing how Handshake is properly expressive of what he sees as the key innovation behind cryptocurrencies – the ability to give value, not just create it.
Still, that’s not to say getting the project off the ground didn’t require time, legal work and the other trappings that have come to be associated with the ICO model.
In the case of Handshake, the project has been close to launch for at least three months, though Poon, Lee and Lee said it has been held up by questions of how to best position the wording around the project, as well as to finalize technical details.
The most notable change is that the project will no longer create a Handshake Foundation, a non-profit whose sole responsibility is to distribute the tokens and manage funds allocated to project contributors, instead automating the whole process to the extent possible.
“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,” Lee, of Private Internet Access, said.
To best capture the “spirit of open-source,” those involved say that one day, there might not even be much evidence of a centralized start to the project at all. “We’re even thinking about turning off the website,” Poon said.
However, that’s not to say that he doesn’t have every aspiration that the model and ideas will be lasting.
“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,” he said, concluding:
“I think there could be interesting developments about this, and it could be one of the key features of what the blockchain can provide.”