Auction process

You can place a bid on any available name with Handshake coins (HNS), which will trigger the name auction's 720 block (~5 days) bidding period. Bids can take on any value and you can optionally add a blind to hide the true value of your bid from others. Your bid + blind is called your lockup, which is the only value that other bidders see. 

After the bidding period ends, the 1440 block reveal period will begin, during which bidders must reveal the value of their bids so a winner can be determined (otherwise only the lockups are known and not the value of the bids). If you placed a blind, your blind is immediately returned to you when you reveal your bid. If you forget to reveal your lockup, it will be lost forever and your bid will not be counted. However, Namebase does the revealing automatically for you so if you’re a Namebase user you won’t need to worry about this step.

After the reveal period ends, the bidder who placed the highest bid will only pay the second highest bid amount, will be refunded the difference between their bid and the second highest bid, and will receive the name they've won. Losing bidders will receive their entire bid back in full. If there is only one bid, the sole bidder will receive that name for free because the second highest bid is effectively "0". Note the winner’s payment is burned from the blockchain, so the winner doesn’t pay bids to anyone, creating deflationary effects on the HNS price.

Check your understanding of the Handshake name auctions with these case studies.

Blinds and lockups

Lockup Amount = Bid Amount + Added Blind

Your lockup is the sum of your bid and your blind. It's called a "lockup" because you won't be able to use your locked up HNS until the auction ends. This is to prevent people from bidding more than they can spend and to prevent people from spamming bids on more names than they’re willing to actually purchase.

It's important to note that only bids determine the auctions' winners, the blinds are completely optional. In other words, highest bid wins the auction, not highest lockup! Adding blinds can be helpful because they hide the value of your bid and causes your bids to appear higher to others (only you can see your bid amount while the lockup amount is what's shown to other bidders). You also receive your blind back right at the beginning of the reveal period, while your bid is you only returned once the reveal period has ended.

Your lockup cannot be updated after you submit it. You can submit additional lockups but your previous ones will still be locked up (e.g. if you submit two lockups of 1,000 HNS and 10,000 HNS, 11,000 HNS will be locked up for the duration of the auction).

What happens if there's a tie?

If you tied with someone else but they won, there are two possibilities:

1. You may have actually been outbid by a tiny amount. Go to the auction page on a computer (not on mobile) and mouseover the bid amounts to show more decimals. Namebase shows 2 decimals by default, so if you bid 1 HNS, and someone else bid 1.0001 HNS, they will win, but your bids will look identical unless you mouseover the lockup.

2. If you and the person who won really did place identical bids, whoever’s reveal transaction comes first wins. However if both you and the winner are Namebase users, the winner will be chosen at random because Namebase reveals all bids at nearly the same time.

Many ties are caused by humans preferring round numbers. If you always bid 1.xx instead of 1, you will tie less frequently.

Case Studies

Check your understanding of the name auction process by seeing if you can answer:

1. Which bidder won?

2. How much HNS did the winner burn?

3. How much HNS will the winner receive back?

Case Study 1

Case Study 2

Case Study 3

Answers

Case Study 1

1. Bidder A won because they had the highest bid amount at 1,000 HNS

2. Bidder A burned 100 HNS because the second highest bid was 100 HNS

3. Bidder A receives a 900 HNS rebate because they only burned 100 HNS of their 1,000 HNS bid

Case Study 2

1. Bidder B won because they had the highest bid amount at 150 HNS

2. Bidder B burned 100 HNS because the second highest bid was 100 HNS

3. Bidder B receives a 50 HNS rebate because they only burned 100 HNS of their 150 HNS bid; they'll also receive their entire added blind as does everyone else

Case Study 3

1. The winner here is a bit difficult to determine because all 3 bidders tied with identical bid amounts of 1,000 HNS. The winner of a name auction with identical winning bid amounts is determined by whichever bidder reveals their bid amount first. However if all 3 bidders are Namebase users, then the winner is pretty much random.

2. The winner burned 1,000 HNS because the second highest bid was also 1,000 HNS

3. The winner receives no bid rebate because they've burned their entire 1,000 HNS bid; they'll still receive their entire added blind as does everyone else

Notes on "sniping"

While Namebase submits your bids nearly instantaneously to the blockchain, it may still take a few blocks for miners to actually add your bids to the blockchain. Given this, there's a risk-reward spectrum for placing your bids at the last minute (colloquially called "sniping"): the later you place your bids, the less information you reveal to the market, but the higher the chance your bid doesn’t make it onto the blockchain.

When bidding on a name you really care about (e.g. your first, last name), we highly recommend placing your true bid amount masked with a blind well before the end of an auction. This way you can both ensure your bid is mined in-time, and that if you do get outbid, you can rest assured knowing someone else was simply willing to pay more for the name. For example, if you place a 5 HNS bid on your name, you're signaling that you wouldn't be willing to pay more than 5 HNS for your name and would be okay giving it up to someone else who bid more.

More

Confirm your understanding of Handshake Auctions by taking this bidding quiz: quiz.nb/.

Still not entirely sure how to proceed? Visit the Namer Community Discord’s #auctions-and-marketplace channel to ask about and discuss bidding strategies.