[tptacek]

Even if we stipulate to all of these points, why would anyone believe that the sponsors of this protocol are entitled to profit from it? See, for instance, Handshake.org's discussion of the "10 million dollar grant" it offers to FOSS developers.

[sdtsui]

If the chain benefits people, the sponsors are likely to profit. Early in the life of any public protocol, there will be some discovery process while word gets out and early use cases are tested: for public blockchains, that process includes price discovery.

I don't think that means the sponsors of the protocol are entitled to profit: they also took risk by putting up initial capital. The downside is capped in that if the project doesn't go anywhere and the coin goes to 0, FOSS projects that received $10.6mm benefitted.

[tptacek]

To say the least, that is not normally how we manage and incentivize core Internet protocols.

[emeltzz]

I get that this looks very weird from the perspective of someone who’s been around since the early days of internet mass adoption. ICANN is basically a US-controlled bureaucracy, and bureaucracies are something that we’ve had for a long time and know the pros and cons of. And in fact ICANN has done a remarkably great job of what can only be described as a job from hell—coordinating the interests of a bajillion conflicting parties in one of the worlds most valuable digital assets.

That said, I hope you won’t write this off just because it looks weird. After all, the internet itself looked extremely weird for years (and arguably was at its most fun and interesting during that weird period.)

Handshake solves some real problems with the existing domain root zone system. Perhaps most interestingly to you, it trivially makes certificate pinning decentralized, and relieves us of the need to trust an increasingly obviously untrustworthy set of CAs. Further, it lets people hold domains anonymously, and creates something much more akin to actual ownership than the sort of “at the whim of the crown” perpetual renting that is available under ICANN.

Finally, handshake was designed from the ground up to be maximally compatible with the existing ICANN system. While we’ve identified serious problems with that system, we also have huge respect for it, and are well aware that for the near future Handshake’s usefulness will be very dependent on it being a “yes, and” rather than an “either, or”

Anyway, hopefully you can look past the novelty and weirdness of what we’re proposing and evaluate it substantively—your feedback would be immensely valuable

[rasengan]

Great question. The design notes paper [1] does an excellent job explaining this:

## Financial Contributors and Pricing - 7.5%

A total of $10,200,00 USD have been allocated to purchasers to price the initial value of the coins for 7.5% of the total supply, with a total valuation of the initial coin supply at $136,000,000.

100% of the dollars raised are being given to non-profits and FOSS projects, and FOSS communities such as hackerspaces. This is effectively a one-way non-destructive "proof-of-burn" on the dollar side to price the coins.

The role of coin purchasers is critical as an initial stakeholder in the growth of the project. The purchasers have been curated to maximize effective change by primarily allocating funds to Venture Capitalists and Token Funds with specialty in the cryptocurrency and decentralized internet ecosystem. Many of these purchasers have been effective in disrupting entire industries and have been involved in large-scale growth of internet services (some even across generations).

The existence of these participants are necessary and fundamental in pricing the tokens, as the distribution event requires real value to be established (a sale of 1% of total initial supply is not credible in pricing the tokens). Additionally, the sale has occurred as close to launch/announcement as possible.

Other projects replicating this mechanism may require greater capital to fund development and/or greater claim to the Pre-Launch Development allocation. This may result in not having a one-way "proof-of-burn", and instead use the capital to fund development of the project.

The role of pricing the coins for distribution is necessary as the coins need to have understood value during the distribution process. While it would ostensibly be ideal to spin-up projects and deploy blockchains without this mechanism, there may be insufficient coordination and ex-ante expectations of value. The role of the high-reputation Venture Capital provides a tastemaker function which provides a signal and Schelling Point for potentially economically and socially valuable projects. These entities are a significant stakeholder in the current ecosystem and a continuing game for project selection and curation may persist as a result ("putting your money where your mouth is"). [1]

[1] https://handshake.org/files/handshake.txt

[sdtsui]

> I find the words confusing [1] and incompatible [2][3].

1 - for Handshake, VCs are 'used' primarily as a signal to price the coins - like in Bitcoin, the asset having a price helps on many dimensions, for example, security (miners mine it).

2 - in Handshake, unlike most VC projects and startups - the capital raised was not used to pay salaries or enrich the developers building it - development was funded by other means. This is what is meant by "one-way non-destructive 'proof-of-burn'" -> in fact, it's not really a burn but a generative action since funds were donated to FOSS projects that put the capital to use!

That's why 1 and 2 are not incompatible.

[throwaway3157]

Can you explain this in a simpler way? I find the words confusing [1] and incompatible [2][3]. For example:

[1] > "The role of the high-reputation Venture Capital provides a tastemaker function which provides a signal and Schelling Point"

[2] > "100% of the dollars raised are being given to non-profits and FOSS projects"

[3] > "by primarily allocating funds to Venture Capitalists"