diff --git a/component.go b/component.go
index d5555d2..64a3e57 100644
--- a/component.go
+++ b/component.go
@@ -1,6 +1,8 @@
 package xmpp
 
 import (
+	"crypto/sha1"
+	"encoding/hex"
 	"encoding/xml"
 	"errors"
 	"fmt"
@@ -15,17 +17,41 @@ const componentStreamOpen = "<?xml version='1.0'?><stream:stream to='%s' xmlns='
 // using external components. Component specifications are defined
 // in XEP-0114, XEP-0355 and XEP-0356.
 type Component struct {
+	Host   string
+	Secret string
+
 	// TCP level connection
 	conn net.Conn
 
 	// read / write
-	socketProxy io.ReadWriter
+	socketProxy io.ReadWriter // TODO
 	decoder     *xml.Decoder
 }
 
+type Handshake struct {
+	XMLName xml.Name `xml:"jabber:component:accept handshake"`
+}
+
+// Handshake generates an authentication token based on StreamID and shared secret.
+func (c *Component) Handshake(streamId string) string {
+	// 1. Concatenate the Stream ID received from the server with the shared secret.
+	concatStr := streamId + c.Secret
+
+	// 2. Hash the concatenated string according to the SHA1 algorithm, i.e., SHA1( concat (sid, password)).
+	h := sha1.New()
+	h.Write([]byte(concatStr))
+	hash := h.Sum(nil)
+
+	// 3. Ensure that the hash output is in hexadecimal format, not binary or base64.
+	// 4. Convert the hash output to all lowercase characters.
+	encodedStr := hex.EncodeToString(hash)
+
+	return encodedStr
+}
+
 // TODO Helper to prepare connection string
 func Open(connStr string) error {
-	c := Component{}
+	c := Component{Host: connStr, Secret: "mypass"}
 
 	var conn net.Conn
 	var err error
@@ -36,7 +62,7 @@ func Open(connStr string) error {
 
 	// TODO send stream open and check for reply
 	// Send stream open tag
-	componentHost := connStr // TODO Fix me
+	componentHost := connStr // TODO Fix me: Extract componentID + secret
 	if _, err := fmt.Fprintf(conn, componentStreamOpen, componentHost, NSComponent, NSStream); err != nil {
 		fmt.Println("cannot send stream open.")
 		return err
@@ -53,7 +79,7 @@ func Open(connStr string) error {
 	fmt.Println("StreamID = ", streamId)
 
 	// Authentication
-	if _, err := fmt.Fprint(conn, "<handshake>aaee83c26aeeafcbabeabfcbcd50df997e0a2a1e</handshake>"); err != nil {
+	if _, err := fmt.Fprintf(conn, "<handshake>%s</handshake>", c.Handshake(streamId)); err != nil {
 		fmt.Println("cannot send stream open.")
 		return err
 	}
@@ -68,6 +94,8 @@ func Open(connStr string) error {
 	switch v := val.(type) {
 	case *StreamError:
 		fmt.Printf("error: %s", v.Error.Local)
+	case *Handshake:
+		fmt.Println("Component connected")
 	default:
 		return errors.New("unexpected packet, got " + name.Local + " in " + name.Space)
 	}
diff --git a/component_test.go b/component_test.go
new file mode 100644
index 0000000..925222c
--- /dev/null
+++ b/component_test.go
@@ -0,0 +1,18 @@
+package xmpp
+
+import "testing"
+
+func TestHandshake(t *testing.T) {
+	c := Component{
+		Host:   "test.localhost",
+		Secret: "mypass",
+	}
+
+	streamID := "1263952298440005243"
+	expected := "c77e2ef0109fbbc5161e83b51629cd1353495332"
+
+	result := c.Handshake(streamID)
+	if result != expected {
+		t.Errorf("incorrect handshake calculation '%s' != '%s'", result, expected)
+	}
+}
diff --git a/parser.go b/parser.go
index f2bfc41..41b778e 100644
--- a/parser.go
+++ b/parser.go
@@ -86,6 +86,8 @@ func next(p *xml.Decoder) (xml.Name, interface{}, error) {
 		nv = &ClientPresence{}
 	case NSClient + " iq":
 		nv = &ClientIQ{}
+	case NSComponent + " handshake":
+		nv = &Handshake{}
 	default:
 		return xml.Name{}, nil, errors.New("unexpected XMPP message " +
 			se.Name.Space + " <" + se.Name.Local + "/>")