Can NFTs Carry a Soul?
Introduction
A new paradigm shift is coming — one that will forever change the narrative of NFTs from accruing financial value to building social value. The paper Reflecting on Decentralized Society: Finding Web3’s Soul by Glen Weyl, Puja Ohlhaver, and Vitalik Buterin opens with a quote by Laozi that illustrated the deep-rooted meaning of Dao across the Pacific:
“The Dao is the hearth and home of the ten thousand things. Good souls treasure it, lost souls find shelter in it.” — Laozi, #62
Conceptually, the Soulbound Token (SBT) is designed with social composability in mind: the same verifiable identity can be used across multiple social networks. An SBT can give you access, credibility, and ownership of your metadata. In essence, “Souls” are the wallets that are tied to you, and SBTs are the tokens you hold in those wallets.
In this article, I hope to highlight nine key takeaways from the paper and share my own vision of how NFTs can carry Soulbound tokens.
Takeaway #1: SBTs allow one to remain pseudonymous while retaining social credibility
The promise of SBTs is that it offers a solution to Web3’s prominent problem: How does one remain pseudonymous while retaining the same level of social credibility? Should SBTs be adopted by the decentralized autonomous organizations (DAOs), each of their members will be able to prove their stakes, earn their keep, and contribute to the DAO while keeping their pseudonymity.
DAO is just one of the Web3 sectors SBTs can help transform. Fundamentally, SBTs can realign Web3’s incentive structure and help transform its trustless system into a trust-based social network. I believe that when SBTs come to fruition, they will be instrumental in establishing provenance across both physical and virtual worlds, creating new marketplace systems, and reward mechanisms.
Takeaway #2: SBTs can be “revoked” in the world of DeSoc
An interesting idea that might be counterintuitive to what NFTs represent (the full-irrevocable ownership of an asset) is that SBTs can be revoked — meaning that a user who no longer meets the ownership requirements set by the issuer can have their SBTs taken away. This is especially useful for SBTs that serve as certificates of knowledge (i.e. language proficiency levels) because once the holder loses that knowledge, their SBT should be revoked.
Different from NFTs which give the holder complete ownership over their tokens, SBTs give ownership and control back to the original issuer. By changing the power dynamic between the token issuer and holder, SBTs can usher in a richer pluralistic ecosystem — Decentralized Society (DeSoc) where complex and interesting systems can be built around people and their digital assets. Similar to staking an NFT, revoking an SBT is such an elegant solution that realigns user behaviors to the issuers’ intent. It is telling that this section of the original article was titled “Stairway to DeSoc” as a nod to the NFT enthusiasts who might share the same vision for DeSoc, but see little value in SBTs.
Takeaway #3: SBTs can work alongside NFTs to track social provenance
Speaking of NFTs, a compelling argument was made in the original article for how SBTs can work alongside (instead of in competition with) NFTs. One example of such would be the use of SBTs as certificates of authenticity for NFT artists, providing them a reliable way to build up their reputation and a mechanism for others to stake their trust in them.
I believe the future of Web3 will be built on top of both NFTs and SBTs. NFTs alone can prove an individual’s ownership over a digital asset, but NFTs used in conjunction with SBTs can transform digital ownership into records of our social provenance, proof of who we say we are and what we say we’ve done.
Takeaway #4: SBTs can unlock a bottom-up credit system
The conversation about empowering people through SBTs extend beyond sentimental ethos to affect real-world systems like our credit score system. SBTs could unlock a bottom-up credit system that is created on the ethos of Web3 — by the people for the people. Having read Muhammad Yunus’ book Creating a World Without Poverty, I am keenly aware of how a top-down financial system can be used against the minority. It is possible that SBTs bring to scale the non-biased and transparent community lending practices from the Grameen Bank that have lifted many lives out of poverty in Bangladesh.
Though SBTs aim to redirect Web3’s focus from accruing financial value to building social value, the bottom-up credit system is an example of how the two can be intertwined. I believe that facilitating and prioritizing human relationships can bring about a better financial system. Imagine a world where your credit score is not calculated in a black box — instead, anyone who has proven their trustworthiness through accruing their SBTs can earn their credit — bringing to life a truly merit-based society.
Takeaway #5: SBTs can enable community key recovery
Now onto a more practical note — what happens when you lose your soul? Because Soul wallets collect SBTs across a wide array of communities; Under the same framework, their private keys can be recovered by the same community of institutions and/or individuals that issued the SBTs.
This community recovery is a great safeguard to have in place. Instead of storing the private keys on a centralized server or asking the individual to memorize them, the private keys can be retrieved by the community of SBT issuers in a purely decentralized fashion. As long as the Soul has interacted with multiple communities and collected corresponding SBTs, the members from these communities can come together to vet for the Soul. I believe the community recovery process will be critical in driving the adoption of SBTs across non-crypto natives.
Takeaway #6: SBTs can “vest” into transferrable tokens
The idea of SBTs that can “vest” into transferrable tokens over time is a fascinating concept. One of the criticisms of Soulbound is that the non-transferability of SBTs can be a huge limitation for security and economic reasons. Vesting aims to mediate this problem by changing the transferability of SBTs over time.
Unbeknownst to most, this concept of vesting has already been explored in my friend Kale’s Seed Society whereupon watering an initially non-transferrable seed token, the fully grown plant can be traded on the NFT marketplace. Many artworks on the Tezos and Solana blockchains have explored interactivity between tokens and their users’ wallets. What SBTs offer is the storage of information that comes from those interactions. Because each SBT is tied to a unique Soul, it has the ability to store relationships between tokens and their holder at a much personal level. Most importantly those relationships stay with the holder even after the tokens are no longer in their wallet.
Takeaway #7: SBTs allow for in-between ownership agreements
Most of our contracts in today’s world do not transfer full ownership. SBTs aim to serve those needs by creating in-between ownership agreements. These agreements can be designed to give partial access rights to individuals who have met set criteria. Furthermore, these agreements can change over time as the individual accomplishes certain tasks or as the organization grows indefinitely.
The authors of the original paper pointed out that the “emphasis on transferability” can be seen to “Web3’s detriment…” NFTs’ prominence in transferring 100% of ownership can hamper Web3’s ability to support some of the simplest, yet ubiquitous contracts in today’s world (i.e. rental agreements) which do not grant the renter full rights to the property and therefore can not be traded as an NFT. By pushing forth SBTs’ agenda, we can begin to serve the larger community of lenders and renters that have been kept on the sidelines.
Takeaway #8: The vision of SBTs is to empower the “souls”
If the takeaways from above have not convinced you of SBTs’ innate value, Glen Weyl, Puja Ohlhaver, and Vitalik Buterin further emphasized their vision for Soulbound halfway through the original paper.
The authors of the original paper envision SBTs to augment and bridge the virtual and physical realities, to empower the “souls” to encode rich social and economic relationships. Adding to this inspiring vision, I believe the decision on how much crossover there should exist between one’s virtual and physical self would help empower the individuals. By curating their SBTs, the holders get to decide whether they want to see their Soul as a direct representation of their personal identity, as one of their many social identities, or as an entirely new identity built on their interests and passions.
Takeaway #9: SBTs can be a double-edged sword
The promise of a fully pseudonymous world of Web3 can be shattered by SBTs that reveal too much information. As the authors of the original paper pointed out, it is “naïve” to put all SBTs on-chain especially when those SBTs hold rich relationship data. The proposed solution is to store metadata off-chain, leaving behind the hash so that the individual can decide when and to whom they will like to share their data.
Just like any other technology, SBTs can become a double-edged sword when handed to the ones who abuse its power. It is very true that “The downside of having a Soul is it can go to hell…” Imagine corporations or even governments using SBTs to instill ideologies in their employees/citizens. Because of the decentralized nature of Web3, the decision ultimately falls on the user whether they want to do good or bad. As early developers, we should do our best to account for misuse and create incentive systems that encourage good behavior.
Conclusion
With the bear market looming, this is a unique time to be building toward a Decentralized Society. The authors of the original paper outlined multiple paths one can take to reach DeSoc (even non-blockchain-based frameworks). However, laying out the core concepts of SBTs in an academic paper seems to suggest that there are many years of research and technical hurdles to overcome.
Will it be worth it? Yes, Vitalik and his co-authors agree that encoding sociality into the fabric of our society will be the next step in human evolution. The promise is clear, I feel validated knowing that Glen Weyl, Puja Ohlhaver, and Vitalik Buterin, the titans of our industry, all share such strong beliefs in Soulbound tokens and I am excited to see how this non-financially driven asset can reinvigorate the entire Web3 ecosystem.
Check out the original paper
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4105763
