What is SoulBound Token? How will it define Web3? 

Most NFT artists are bound to centralized entities like OpenSea and Twitter, where a person’s profile decides their popularity. DAOs are witnessing troubles such as Sybil resistance, often due to depending on social media profiles. We still depend on web2 solutions like social media and others that are not completely decentralized. In other words, this dependency is because of a serious lack of mechanisms to display social identity on the web3. So in an attempt to bring a factor of social relationships and trust into web3, we are now going to learn more about the SoulBound token (SBT) that can serve as a virtual CV.  

Accordingly, continue to read about this type of token and why many think it is revolutionary!

• What is a SoulBound token?
• The Idea Behind SBT
• What is Possible With SoulBound Tokens?
• What if we lose our Souls?
• What if someone fakes their Soul status?
• Solutions to address cheating souls

What is a SoulBound token?

SoulBound tokens or SBTs are non-transferrable, non-tradable tokens that can be used as a token of identity in the web3. So you might be familiar with the basic functions of cryptocurrencies and NFTs. We trade, hold, and in the process, transfer them in and out of wallets. Then what exactly is a non-transferrable and non-tradable token? Let’s cut to the chase.

We cannot trade or transfer SBTs from one person to another in exchange for an entity. This is because the token is like a resume or an identity card that will contain information about a person on the web3. We use the token to show who we are to others on the web3. The tokens will record our activities, memberships, interest, credentials, affiliations, and more. In short, they are public-verifiable digital tokens representing a person’s identity or social status in the glorious world of the web3. 

So, a person wouldn’t trade their identity or transfer it to someone else. That will be a forgery, which is why the SBT is non-tradable and non-transferable. You can only use it to represent yourself. 

In addition, the SBT is essential for the Decentralized Society or DeSoc to function in web3. So using the SBT in DeSoc will change away from the extremely financialized web3 and create a new social atmosphere of relationships and trust.

Also here, the co-founder of Ethereum, Vitalik Buterin, with two others, Puja Ohlhavr (lawyer) and E Glen Weyl (social technologist and economist), announced the proposal for the SoulBound project in May 2022. 

The Idea Behind SBT

If we take the name “soul-bound” literally, it means something attached to you, almost inseparable. Famous video game like World of Warcraft is a popular example of the above. Here few game items are soul-bound and untradable between players. This game serves as an inspiration for the basic structure of SBT and other web3 networks. Moreover, it prevents the trade of their identity and social status with others. 

Every SoulBound token is connected to a specific wallet permanently. Also, the wallets that host an SBT are called “Souls.” So when you read further, if you come across the term “Soul,” it means the wallet that stores the SBT permanently.

If we draw a parallel between SBT and the real world, we can compare it to your resume, which contains your education, work, and other credentials. The SBT project is still in the pipes at the time of writing, and many perceive the concept vividly. So, the chance of receiving an invitation to a posh party on web3 depends on your SBT.

What is Possible with SoulBound Token?

Just like how an identity card with our designations can get us into certain spaces, the SBT, too, can be a ticket to many opportunities in the web3. But, certainly, the power to access stuff is not the only purpose of this token. Also, souls can be helpful in NFT creation, secure DAO workings, DeFi lending, and more.

• NFT Creations and SoulBound Token

NFT artists can stake their reputations naturally through Souls. As shown above, artists can issue tradable NFTs from their Souls, and the more SBTs, an artist has, the more credible and reputed they become. They can also link SBTs stored in a Soul to an NFT collection. Users can explore more about such provisions when the SoulBound project goes live.

• Tracing and Verification 

Using SBT, verifying the authenticity of facts, especially photographs and videos, is much easier. While blockchain helps to trace and identify the time a user made a particular creation, SBTs can help us identify the social provenance. Besides, provenance means the initial creation of the origin of something. With SBTs, we get to know the Soul’s memberships, affiliations, and credentials related to the subject in the talk. Also, this can counteract technologies like Deep Fake, which are the main problem creators in forging. 

• Soul Lending for DeFi Lending 

One of the main uses of having an identity in the web3 could be helping people secure uncollateralized loans. So, private decentralized projects such as Aave have refused to offer these types of loans because of the lack of required authentication they can get from the borrower. Accordingly, to solve this, the SBT can provide DeFi protocols that enable visibility to real-time interactions of a Soul in different communities. Moreover, this can be credible enough to avail of uncollateralized loans. 

• Countering Sybil Attacks 

A hacker can carry out a Sybil attack in a DAO coin voting by buying around 51% of the governance tokens and taking over the protocol. This is one of the biggest system risks in coin voting with a DAO. On top of it, they may not even have the expertise required to make governance decisions. 

SBTs counter Sybil’s attacks with their property of non-transferability. So, no individual can buy or trade SBTs to participate in a governance process. SBTs guarantee the transfer of voting rights to users with proper academic credentials, licenses, and others.

• Souldrops 

Crypto drops for a new crypto project aim to create trustworthiness and new communities. The Airdrops feature across the SoulBound tokens makes it possible to verify SBT held within a user’s Soul properly. Here, the whitepaper by Buterin outlines an example of this. Here the whole transaction is verified openly, and hence, the integrity of SBTs is tracked properly.

• Transparency and Integrity with SoulBound Token

Despite having a very peculiar function from other NFTs, the SBT works similarly to most NFTs. Except for the popular difference of non-transferability. Correspondingly blockchain-based wallets or Souls issue self-certified SBTs, and store them. Then the SBT creators can issue a token to another Soul as well. Such transactions are verified openly, and as a result, the integrity of SBTs is tracked easily. 

What if we lose a Soul? 

One can lose an SBT due to theft or sale (yes, your web3 resume might get stolen because of how good it is). In particular, losing an SBT indicates the loss of a Soul or a wallet. Moreover, they are permanently bound to the wallets and act as private keys.

As a recovery method, the social connections of the SBT can be used. Simultaneously the owner of the SBT can curate a list of institutions, individuals, guardians, or wallets that can help reset the private keys. Users found this method to have some operational risks, and as an alternative, Buterin proposed an alternative community recovery method.

In this method, the recovery guardians are not curated by the SBT owner. Still, looking at the maximum number of real-time relationships the Soul has in different communities. Also, the selected community can then help recover the private keys.

What if someone fakes their Soul status?

As discussed earlier, the potential of SBT is huge, involving tickets to community membership, access to governance, and property rights. If the SBTs are such valuable social substrates, then you will surely be thinking, what if Souls try to cheat their identity? 

So before discussing more the solutions proposed by the founders, let’s look at the different malpractices carried out using SBTs.

• Firstly, If an event or access depends on SBT statuses, humans or bots can trade SBTs in exchange for bribes. They can create a fake social graph that can make accounts look authentic or highly differentiated from other SBTs. 
• Secondly, there have been concerns about people bribing on DAOs. Southbound tokens’ features and capabilities make it possible to misuse on-chain voting rights.

Solutions to address cheating souls

Here, suspicious community memberships with rich social bonds and repeated interactions help us identify impersonators and bots.

Unquestionably the openness and cryptographic verification of SBT can identify inauthentic behavior.  Here the cases related to Soul claims and the transfer of humanity to another Soul are categorized as an escalation. This step involves secure public verifications to check the profile authenticity and bot presence. So, other Souls can initiate multiple negative attestations, thus deemed non-credible attestations. GitCoin QF system already uses this system to an extent. 

Given these points, other methods of prevention and policing include the ZK technology (e.g., MACI) and whistleblowers in a particular Soul community.

Closing thoughts

The SoulBound project is the best promising solution that can help you solve many web3-related issues. It proves to be a perfect application for verifying social identity in the online world. As it is still in the prototype phase, it is yet to turn into one anyone can use for general applications. Also, we might have to wait patiently before enjoying its numerous benefits, including smooth NFT creation and distribution, DeFi lending, DAO voting, and more. As a matter of fact, the SBT project gives hope that the future of the web will not be as robotic and inhumane as predicted by the critics. Finally, If anything, a person’s identity is necessary in the virtual world, just as in the real world.