On The Namespace Economy
When the Internet Becomes Money
The names our parents gives us, the ones we register with the State, those are fiat names. They matter to the government, they matter much less to the Internet. What matters to the Internet are the names of our websites, our emails, our profiles, our wallets. These names are useful — we can host stuff with them, share with them, and pay with them. These name are fluid — they can be pseudonyms, we can have multiple, and they can change on a whim.
The more our lives happen on the internet, the more our internet names take precedent. And the more we rely on internet names, the more the architecture of that namespace matters.
What is Handshake?
In the current DNS system, top-level domains like .com and .org are awarded by ICANN. Select governments, non-profits, and for-profit companies are given TLDs and can issue sub-domains like google.com. ICANN and these TLD owners are the gatekeepers of our namespace.
Handshake is a decentralized naming protocol. It replaces the root zone file where top-level domain ownership is stored with a blockchain that anyone can use. Handshake domains are uncensorable, permissionless, and free of gatekeepers. Anyone can register and own a top-level domain. They can be used like traditional TLDs (i.e blog.blockchannel/) or by themselves (i.e blockchannel/). You can be your own registrar that sells subdomains or you can gift subdomains to users of your network.
You can name more than just web pages, too — you can name social handles, profiles, digital wallets, or smart contracts. Handshake collapses all the various naming use cases into one thing. Domains that name more can do more. Handshake domains can host frontends, accept payments, run financial protocols, or receive encrypted messages all with cryptographic assurances of the endpoints you are interacting with. Handshake is sound namespace. It serves as a foundation for more secure domains with far more programmable use cases.
What is HNS?
HNS is the currency of the Handshake network; effectively now, the Internet has become money.
HNS is used to pay for names. Initially, top-level domains are released into circulation through auctions. HNS is used to place bids in TLD auctions. TLD owners can then sell subdomain space in HNS.
HNS is also used as gas to pay transaction fees. Every auction bid, name transfer, or subsequent economic transaction on Handshake requires a fee denominated in HNS. In seven months, users have submitted 1.7M+ transactions.
A namespace economy is emerging, and it runs on dollarydoos.
Fig 1. Total Transactions on Handshake via HNScan.
The Moneyness of HNS
All blockchains have native cryptocurrencies. A cryptocurrency is not inherently money, it must earn its moneyness. In order to assess the moneyness of a cryptocurrency, we must first define the properties of money, of which there are three.
(1) Money is a store of value. In order to maintain its value over time, money should be scarce, hard to produce, and desired.
(2) Money is a medium of exchange. It should be widely accepted as a means of payment in the market for goods or services.
(3) Money is a unit of account. It is the ruler by which other things of value are measured.
Handshake has two native assets — its currency and its namespace. The use of HNS to engage with Handshake domains satisfies all three properties of money. As a result, HNS achieves an inherent moneyness for the namespace economy.
HNS is a store of value.
HNS is locked in TLD auctions. Being locked refers to its use as escrow for users’ auction bids. In order for users to lock up HNS, it must maintain its value for the duration of an auction. Total HNS locked, today at over 27M, is a measure of HNS as a store of value asset.
Store of value assets should be provably scarce and HNS is increasingly so. Auction lockups temporarily constrain HNS supply. Winning bid amounts are burned from circulation, permanently constraining HNS supply. Nearly 10M HNS have been burned to date.
Fig. 2 Total HNS Locked on Handshake via HNScan.
HNS is a medium of exchange.
HNS is traded for namespace on Handshake. Without a native asset, cryptocurrency must compete with fiat currencies as a medium of exchange. Bitcoin can be a good store of value but it’s not clear what assets are worth parting ways with your BTC for. ETH over time has attracted a set of digital assets to trade with, though it still competes as a medium of exchange with stablecoins on Ethereum. Namespace, as a native asset to the chain, creates an inherent medium of exchange quality to HNS.
HNS is a unit of account.
Names are priced in HNS. Bids are placed and measured in HNS. Emergent HNS pricing patterns for top-level and subdomains, uncorrelated to USD or BTC denominated values, will reinforce HNS as its own unit of account over time.
In meatspace, money is location specific. In cyberspace, money is application specific. BTC, ETH, and HNS can all achieve moneyness in their own application-specific jurisdictions. HNS is money for the namespace economy.
The birth of cryptocurrency taught us how scalable markets require scalable money. With Ether’s base layer, we now have decentralized financial markets sourcing, automating, and allocating billions of dollars in capital. Well, a scalable web requires a scalable namespace.
A name makes you legible to a network and there’s a growing set of networks online. But not all namespace is created equal. When we move from a system secured by ICANN to one secured by code, we go from a system that is manual and inconsistent in security to one that is automated, global, and much more secure.
Decentralized naming is a step towards the vision for a decentralized web (DWeb). Steven McKie of Amentum taught us why a focus on securing domain names is actually a foundation for scaling to a wider set of tooling for identity, login, social networking, and more.
[Low level technologies] that are built to be more generalized from the start will many times fail to gain necessary traction… it’s only those protocols that are app-specific which will find a niche to scale and then generalize overtime. The DWeb will be no different. Its innate generalizability allows rich experimentation (with public chain incentives), and when we get to that phase, that’s when we will see the app cycle of decentralized apps be taken seriously.
- Steven McKie, The Decentralized Web
Namespace is an Internet primitive. Once you look for it, it’s everywhere. And its reinvention is the foundation for a better, more decentralized web.