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Phonon Network: a New Scaling Solution for Bitcoin & Ethereum

When it comes to blockchain scaling, all roads lead to Rome. In other words, there are many routes to take. Notably, another route has just been forged yet via the Phonon Network, a proposed scaling solution for Bitcoin and Ethereum to start with and then further blockchains in the future.

Announced this week by GridPlus co-founder Karl Kreder, the second-layer scaling solution has been designed by the GridPlus team — best known to date for developing the Lattice1 digital safe — as a so-called “hardware enforced off-chain payment system.”


Those familiar with the cryptoeconomy will recognize the Lightning Network (Bitcoin’s proposed scaling solution) and Raiden Network (like Lightning, but designed for Ethereum) similarly as off-chain payment systems. Where GridPlus’s new network differs, though, is its payments — “packets” dubbed phonons — can be transacted directly between two participants without an intermediary, e.g. routing hubs.

Smart Cards Are the Key

The system will be unfurled for the two biggest public blockchains first and will accordingly be blockchain agnostic, capable of working with both account-based blockchains like Ethereum and UTXO-based ones like Bitcoin.

As for how it works, the network lets users transact with on-chain assets like bitcoin, ether, and tokens off-chain courtesy of a unique off-chain protocol and smart cards.

These cards, which adhere to supported blockchains’ consensus rules, are secured by physically unclonable function (PUF) technology, which is also used to secure credit cards. This tech ensures that a card’s identity can’t be forged or changed, and the PUF is validated within each smart card by an ECDSA signature provided by the card’s manufacturer.

Thanks to this design, the Phonon Network can mitigate double-spend attacks, as it won’t be feasible for malicious agents to compromise the cards to commandeer them. Notably, the network has been designed to work with smart cards tech in general, but the system will be immediately compatible with GridPlus’s in-house SafeCards product.

Smart Card

Phonons themselves will be packets of data attached to a given asset, for instance a single bitcoin or one ether. These phonons are “mapped” to a deposit address on the appropriate blockchain. A phonon transaction begins when two smart cards use an encrypted channel to transact a private key of phonon at hand.

Thereafter, the smart cards would verify each other’s identities via certificates, at which point transaction details would be delivered to the receiver. The receiver’s card then pings the blockchain to check that the underlying asset (e.g. BTC, ETH) is where it’s said to be.

If everything checked out, the receiver’s card would greenlight the transaction, and the sender would finally deliver the phonon, after which their card erases any memory of it. With the phonon now delivered, its receiver can deposit it on-chain as they wish.

Altogether, the outlined second-layer network would be unique among its scaling contemporaries. As Kreder explained in his announcement post:

“Like with all scaling solutions, there are advantages and disadvantages of each topology. The Phonon network has advantages in that it does not require capital lock-up, intermediaries, or participants to monitor the blockchain continuously.”

Plenty of Upper-Layer Blockchain Innovation Lately

This month has been an intriguing one for Lightning Network.

With the latest LND software release, users can now run their own watchtowers — long-awaited tech designed to protect Lightning channels around the clock from attacks or accidental loss of funds. And word broke last week that a “Spectrum” protocol was in the works that would allow the issuance of colored coin tokens on Lightning.

Beyond LN, also proposed this month was Utreexo, a Bitcoin scaling method that would make running a full node easier and cheaper. And the minds behind goTenna recently announced Lot49, a protocol for decentralized communications layer powered by bitcoin micropayments.

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