Phonon

The Phonon Protocol uses secure hardware to enable private, off-chain, free transactions for nearly all blockchains. The Protocol lets you securely use any digital asset with all the privacy and security properties of physical cash.

The Phonon Protocol is a peer-to-peer (p2p) system which prevents double spends through the use of unique hardware-derived cryptographic properties. Secure hardware isn’t just limited to hardware devices focused solely on wallet functionality; compatible device categories also include SIM cards and smart-cards which use the same kind of chip found in today’s credit cards. Utilizing the cutting edge security that ensures safety in the current global payments system endows Phonon with robust security. Phonon will work with any blockchain wherein the curves that underlie a given blockchain are supported by the system on a chip (SoC) used in Phonon cards. As of now, this will cover 99% of all public blockchains. The Phonon DAO token and protocol governance framework are built on Ethereum.

A phonon is a non-fungible “packet” of tokens (e.g. ether, bitcoin, ERC20 tokens) from a supported blockchain (e.g. Ethereum, Bitcoin, Solana). Each phonon contains information about the network, asset, amount (in atomic units), and other metadata related to the deposit transaction (e.g. tx hash). Blockchains that use the secp256k1, secp256r1 and ed1559 will all be supported in the Phonon beta. As more cryptographic curves are added to the SoCs, additional blockchains will become compatible with the Phonon protocol.

Phonons are deposited on-chain according to the rules and constraints of the given network. Each phonon is associated to a given deposit address, which is derived from a keypair generated by the depositor’s card using its PUF (Physical Uncloneable Function) For Bitcoin, phonons may be deposited with a standard transaction. For Ethereum, a deposit can be made with a standard transaction, or settlement smart contract could be used to hold balances and map them to phonons/deposit addresses. In all cases, each phonon maps 1:1 to a deposit address, which is itself derived from the PUF on the depositing card.

Phonon is true, digital cash. Once you have phonons, you can spend them, send them, trade them, hold them, etc., all without paying any transaction fees. The value of Phonon is this: it is completely off-chain, peer to peer, private and free!

On- and off-ramps for the Phonon Protocol are still being built (one would be required for every blockchain). Once these are built, you would need to pay that chain’s transaction fees to turn your on-chain assets into phonons (and vice versa).

Perhaps in the future, you could pay to have phonons sent directly to your wallet! The Phonon DAO is working to incentivize developers to build tools on top of the Protocol. We don’t want to dictate what has to be with Phonon, we want to inspire what could be! The art of the possible is at our hands and we look for the community to build and inspire a plethora of future applications.

The Phonon Protocol utilizes bank-level security practices. The hardware’s identity is linked to an internal physical unclonable function (PUF) chip. A PUF is a digital fingerprint derived from uncontrollable process variables during the manufacturing of the hardware. The PUF guarantees that copies of hardware cannot be produced. A manufacturer’s signature over the hardware’s identity ensures that malicious cards would not be accepted when forming an encrypted tunnel to make a phonon transfer.

In order to sell Phonon-compatible hardware, a manufacturer certifies to the Phonon DAO that they will maintain the security integrity of their hardware by staking the Phonon DAO token as collateral, which can be forfeited. One benefit of the design of Phonon is that even if there was a malicious hardware producer, they could at most break the rules only with other cards that they connected with. There is no global pool to steal from. Immediately after a card has been duped with a malicious cert the victimized card could produce cryptographic proof of fraud, which would cause the manufacturer to forfeit all of their posted collateral. It will cost hundreds of thousands of dollars to start producing Phonon compatible cards and all of that will be ruined if even one malicious handshake between cards is formed.

Each Phonon-compatible device has a unique certificate that consists of a manufacturer’s signature over the public key of the identity certificate derived from the card’s PUF. This is very similar to the security process used to encrypt and secure HTTPS/SSL transactions on the web. The certificates show provenance so you can be sure where it was created.

To explain this further, the manufacturer has a keypair that signs the ID key, which says this secure hardware has two properties. The first: that the hardware is running the Phonon applet code; and the second: that it has a PUF.

When two parties are engaging in a transaction, the hardware uses the certificates to check each other and verify they are on the approved list of certificate manufacturers for the Phonon Protocol. This list is comparable to how HTTPS works, and the hardware is manufactured in the same, secure way a bank manufactures credit cards. Thus, the design of the Phonon Network mimics the design of the internet itself with regards to trusted counter-parties, though there is sufficient recourse in the Phonon protocol design such that nobody should ever be scammed without being made whole again.