My fellow retards,
Earlier this week, discord user Mickey was asking questions about the creation/destruction of phonons that originate on a L1. He wrote:
Smooth-brained question time. I have my phonon card and my terminal and I want to transact in ETH. So I send my ETH to a smart contract and I send the keys to that smart contract to Bob. Bob then receives the phonon and then if he wants to leave the phonon network, bob redeems from this address?
As we would hope from any engaged community, a phren stepped up and guided Mickey towards how creation of Phonons on Ethereum would work. Thank you, Senor – your contributions are always welcomed.
Senor provided a technically correct and thorough answer. As far as everything that has been discussed within the discord so far, he provided a flawless execution.
Phon/ongod read Mickey’s conjecture and Senor’s answer, and realized that while Senor is 100% correct, he may be missing some key ideas.
Thus far in the discussion, the process to create a Phonon has been private/public keypair generation and then encumbering assets in an address derived from that public key. This topology would work for Ethereum, or bitcoin, or any L1, since they all use private/public key pairs. Phon/ongod agrees that this is the *best* topology for generic phonon creation, but strongly cautions the community not to presume this is the *only* topology.
Ethereum gives us smart contracts, but more importantly it gives us rich statefulness. Smart contracts on their own without a very robust platform that stores balances and code would not be nearly as useful. The rich statefulness is what allows so many defi and other applications to interact seamlessly with one another.
Phon/ongod suggested another structure for the creation of phonons on Ethereum:
We think senor is totally right in his description but if we think outside the box you could be right too, @Mickey !! So in the simple case outlined the private key pair generation makes sense for creation of phonon on Ethereum. But we can conceivably create a smart contract to handle deposits (phonon creation events).
This would look like all the pool med eth or value sitting in that contract and when you destroy your phonon you get the priv key that can make a sig to do a withdrawal of a deposit with a specific deposit location in the contract.
You ask why do this? We dox all the value in phonon protocol. Sure this is a bit of loss to privacy... But their is upside. You could have the dao manage all of the value locked in this contract and then earn yield by lending it out via yearn or a maker vault or something.
This isn't the simple case for using phonons but this is a very promising area we think is unexplored. We've really only talked to our 🐐 about it.
Sure there are typos, having been written on goatback, but the point remains that we can conceive of application specific phonons. What we mean by this is not a generic “backed phonon” which would relate to a value stored in a public address by which the private key within the card can sign and transact once the on-card phonon is destroyed.
We can imagine creating a relatively simple smart contract to handle the creation and destruction of phonons. This has some terrible potential consequences, but also some truly remarkable benefits.
The Texas architect chimes in saying the team has thought of this and has written it off because;
There are major issues of socialized risk in the smart contract, as well as DOXing, higher fees for minting and redeeming with no material benefit to the users. Someone could build this but it would be entirely optional for people to use it.
The architect is correct. This has significantly more risks than the basic design of phonons. The architect is absolutely wrong that stating there is no material benefit to the users. Further, the Texas architect is assuming this system would have to be used by many users…not necessarily the case.
If we look at a project such as yearn finance. Their vaults currently hold multiple billion dollars in value. This means that the global community of Ethereum defi users trust their smart contract system with billions of dollars of value. Why do we bring up a separate system? With our idea of pooling phonon deposits, 99% of the risk could be offloaded to this system which is already securing billions of dollars. We would not have to build significant smart contract code. All that would be needed is a contract to handle deposits and redemptions and a function to send funds to yearn finance / redeem funds. It’s not absolutely trivial, but its not as complex as building everything from scratch.
We agree with the Texas Architect that this *should not be* the architecture used for creation of most phonons, but strongly suggest that our community *should* welcome imagination, exploration and experimentation. Perhaps there are users who would be willing to risk their backing assets in order to earn more yield. Can we think of none?
Do you recall our goblins from pheverdream-changes?
If we think about the role of changemaker goblins, they make many small deposits that are unlikely to ever go back to L1 because it is not economically feasible to do so. Goblins expect most of the moveable value to exist and stay in the phononscape. At any given time, they are likely in control of the majority of the phonons that they have created. selling some and buying them back, always at favorable terms. In the goblin’s ideal world, he would be earning yield on all of this value just waiting to be used. He may be the perfect individual to use a smart contract deposit/destruction system for bringing and removing value to the phononscape.
The risk is mainly with him; he is earning yield through the aggregation of all of his deposits that are being lent to another defi protocol. Most users within phonon would be willing to accept this, because at any time they are probably only holding a few dollars of value in goblin created phonons. This is smart, and may be worth exploring for any aspiring goblin entrepreneur, as it will significantly increase his revenues.
What is the lesson here?
First, ask questions. Thank you Mickey. You are a gem and we treasure your contributions. Second, don’t shoot others down because their design may be slightly counter to your preconceived notions. We’re not saying that happened here, but we must move our mental models away from absolutes.
The phonon protocol exists, and should be simplistic and risk minimized. The Texas Architect is completely right in his reasoning to move to a utxo model for deposits. That being said this space exists entirely due to experimentation and thinking outside the box. If not for that, no bitcoin, no Ethereum, no generation of crypto-adherents liberated from cube-farms and HR and middle-management solutions.
Phon/ongod would probably have fewer goats, and fewer interesting projects to talk with them about. For the sake of fidelity to the precedent, and out of respect to what the process has brought us, we obligate ourselves to explore experimentation at the application layer.
One final thought that will get its own pheverdream coming soon is centered around nomenclature. We use native and backed phonons as our descriptors for now. There really is only one type of native in different sizes, so this term works. Backed is much more difficult. Phon/ongod can imagine a scenario where backed can be referencing a L1 asset, or a yielding deposit, or a NFT, or an authentication key to login to goatsgonewild.xxx
The whole phonoverse should find time for a step back for a good, hard think about the language we use when we describe these systems and our interactions with each other. We are doing a great job of answering each other when questions arise, but most answers given are absolute and are regurgitating previous design discussions as being absolute in nature. This protocol is in infancy. It will change. It will become stronger, for it is anti-fragile. We should not shoot down ideas because they are counter to our understanding of the world as it is, but seek to understand them in the context of what could be.
Let’s have an open mind and create the best Phonon possible.
Tips to phonongod.eth will be invested in bounties that advance the Phonon project.
Hatemail to phonongod@protonmail.com will be scathingly considered.
Targets for the marketcap of PHONON DAO remain:
$1b by Q2 2022, $12b by EOY.
On the high end, $300b marketcap in 3 years.