Frequently Asked Questions
The following questions are commonly asked about the Phonon Protocol.
Why is the Phonon Protocol useful? I still have to pay gas fees to use it?!
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 Phonon 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.
How is the hardware secure? Why should I trust hardware manufacturers?
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.
How can I trust the certificates that say the hardware is acting the way it should?
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 key/pair 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 Protocol mimics the design of the internet itself with regards to trusted counterparties, though there is sufficient recourse in the Phonon Protocol design such that nobody should ever be scammed without being made whole again.
What is stopping a manufacturer from acting maliciously? Can I be rugged?
To become an approved manufacturer of hardware for the Phonon Protocol, the DAO requires a certain amount of the Phonon DAO token to be staked by the manufacturers to secure against malicious attacks. In the unlikely event a piece of hardware was created in bad faith, the limit of loss is restricted only to users who interacted with the malicious party. This means that if a malicious act was conducted, the Phonon DAO would be able to revoke that hardware’s certificate from the approved list of certificates. This limits the loss, as said loss is covered by the forfeited Phonon DAO token that the manufacturer staked.
Buying malicious hardware will not allow your fund to be stolen unless you are transacting with the bad actor. Once the bad actor is discovered, anyone using that hardware will be able to settle back on a blockchain.
Why should I trust the central certificate authority (i.e., the Phonon DAO)?
The process by which hardware manufacturers request their security certificates to be allowed on the Phonon Protocol is completely open and transparent. Additionally, the value of the Phonon DAO token is directly linked to the health of the Phonon Protocol and to the applications built upon the protocol.
Will I be able to confirm the provenance of certificates and hardware?
Phonon Cards will always mutually authenticate and validate each other’s certificates before transfers take place. Users will also be able to certify the validity of their own hardware’s certificates with client software. You can think of the certificate certification process as similar to the one used to verify that you are using a secure internet connection (SSL certificate).
Will trusted third-party organizations beyond the DAO be able to certify hardware/software? Of course – talk about it being a transparent process to certify your hardware for the Phonon Protocol.
How would cross-chain transactions work with phonon?
A phonon is a phonon is a phonon, regardless of the assets it encumbers. Any number of tools could be built on phonon to move assets cross-chain, and right now we visualize a system that the phonon creator, Dr. Karl Kreder, calls Project Kafka. More details are available at that link, but in general this would be an order book and a phonon trade engine. If you had bitcoin that you wanted to swap for ether, you could use a cross-chain DEX, such as the Phonon Protocol powered, Project Kafka, to find another person who wanted to swap their ether for bitcoin and then use the Phonon Protocol to simply swap phonons for free (remember: there are no fees to transact phonons).
If phonons are created from L2 assets on top of smart contract networks, then users can likely destroy their phonon to recapture their L2 asset and recreate phonons in any denomination necessary. This would bypass the need for a changemaker service. In short, there are solutions to getting phonons of the appropriate magnitude, and this should not be a deterrent to use the network.
Why should I use the Phonon Protocol to move assets cross-chain when many low-cost and easy-to-use alternatives exist?
Phonon is free, fast and keeps your transactions private. Like the cash in your wallet, it is simple to use and reconciles transactions instantly. There is no concept of a chain within the Phonon Protocol - all cryptocurrencies can be exchanged.
You have options for moving cryptocurrency between blockchains, but those services are akin to portages between lakes. You cannot access all lakes at once. Portaging back and forth between lakes is tiring. It takes time and energy to learn which portages are passable, trustworthy and safe.
If cross-chain bridges are portages, then the Phonon Protocol is the aquifer or ocean that all lakes and rivers feed. Once cryptocurrency enters the Phonon Protocol, it can be exchanged between anyone on the network an infinite number of times. It just flows.
What are the downsides to phonon?
Phonon shares a downside with fiat cash: If you lose it, it’s gone. It’s important to think of phonon in these terms. We doubt you’d walk down dark alleys in a major city with your entire net worth in cash on your person. Likewise, you wouldn’t want to put all of your crypto assets into a single phonon and haphazardly lose the Phonon Card or smartphone that contains it.
Everyone has different risk tolerance, but, in general, Phonon is intended as a cash-like system, not as a savings account. For the savings account (in crypto terms) we recommend the GridPlus Lattice1 hardware wallet. It’s the most secure publicly sold hardware wallet we’re aware of. And bonus: it will have native Phonon integration soon!
For future versions of the Phonon Protocol, there may exist some backup capabilities to ensure that if you lose your card or it is destroyed you may be able to reclaim your assets. One such idea is that of a “slow claim.” This would allow anyone to call a function in the deposited contract and claim the balance of that phonon on-chain. They would have to put up a security deposit and wait a specified period of time, perhaps a month. If the card that holds that phonon does not create a signature to prove someone else owns it, then the deposited amount would go to the user who initiated a “slow claim.” This is akin to some fraud proof idea proposed by Vitalik a few years back. The only person who would put up collateral to start a “slow claim” would be the person who knows their card has been destroyed. If someone goes around trying to “slow claim” other people’s phonons, card owners would have within the specified time period to produce a signature to show they control the private key to that phonon and in doing so they would claim the collateral from the malicious claimer. If this type of safeguard is implemented, it is unlikely to be used often, really only in scenarios of lost cards.
What happens when a transaction fails or is purposefully interrupted mid-transaction?
We are working to add “transfer replayability” so that a transaction that is stopped midway will be able to have the same encrypted phonon packet sent at a later time. This replayability will not be able to resend the phonon to a different user, it will only be able to recreate the attempted transfer that failed to complete. This will not result in the ability to double spend.
Why should I buy the PHONON token?
Because PHONON is the next DOGE, SHIBA and BITCOIN – combined! Kidding. The Phonon DAO Token, or PHONON, is a governance and bonding token right now, which may or may not be sexy to you depending on your view of the Phonon Protocol and its potential. We have more plans for the token, though, and if you’re interested and have more questions about the token we recommend reading the Phonon token FAQ.
At the highest level, the PHONON token governs the system. Going forward, there will be more value added to the token. Hardware manufacturers who wish to produce phonon-compatible hardware will be required to stake phonon. Applications that leverage the Phonon Protocol will likely pay fees to the Phonon DAO. Read more in the FAQ and note that these are all early iterations and they can be changed and updated by the community depending on what benefits the DAO the most.
What happened to the GridPlus token?
At the launch of the Phonon DAO, GridPlus released a smart contract to allow GRID holders to convert GRID to PHONON at a rate of 1:155. More details here. GRID holders made phonon possible, and this conversion clarifies the value proposition of the token and rebalances the overall distribution towards the community in order to put control of the effort to grow phonon into the hands of the community.
We are dedicated to ensuring everyone has an opportunity to convert their GRID to PHONON. The conversion contract will be open at least until December 2022, at which time the DAO will decide next steps for the conversion contract.
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