What are Soulbound NFTs and how do they benefit the metaverse?
A common criticism of today’s Web3 ecosystems is how focused everything is on money. People currently celebrate the possession of NFT ownership through large amounts of wealth. While this can be seen in the same way as collecting art or rare items in the physical world, which is nothing wrong, we at DeQuest believe that there needs to be a different kind of NFTs to create long-term sustainability for GameFi ecosystems. Making tokenized items “soulful” can be a path to an alternative where NFTs can represent much more of who you are, not just what you can afford.
Soulbound, a term conceptualised by one of the most popular games in the world, World of Warcraft (WoW), offers players possession of powerful and unique items that ONLY THEY can keep or use in the game. They can collect these items by completing certain quests or killing extremely powerful creatures in the game. This concept is closely related to a concept first introduced in 2018 in EIP-1238 called NTT, also known as Non-transferable Non-fungible Tokens. While this new type of token was largely ignored at the time, things changed when Vitalik Buterin described a similar idea when he wrote about Soulbound NFTs. Thanks to his love for WoW, the Ethereum co-founder argued that Soulbound NFTs should also have their place in the Metaverse and that “there is also a large and underexplored design space for what non-transferable NFTs could become.”
After the concept of NTTs was initiated already by EIP-1238, it took until the rise of GameFi and Blockchain gaming for Crypto projects to start revisiting the idea. In the summer of 2021, DeQuest was founded with the idea of introducing badges and trophies tokenized as NTSTs (Non-transferable Social Tokens) into the Metaverse. The badges would act as tokens that, once minted to a certain wallet, could not be transferred. These tokens would bring activities, achievements and behaviours on-chain and could be used also to gate access, categorise user groups of users and give them exclusive non-monetary rewards, among other things. Dapps and Smart Contracts could utilise them to filter users in an automated way and offer them different treatment. Meanwhile, the concept of NTSTs is appearing in more and more Metaverse and NFT projects.
Coming back to Soulbound NFTs: The focal purpose is to have NFTs that cannot be bought or sold for profit. These NFTs would prove that you have really been “on the grind” to get them. For example, in real life, we have to acquire a degree in 4 years without being able to buy it. Similarly, we have to complete a certain number of hours and driving lessons to get a driving licence, which again we pay for but cannot buy. Implementing this parallel concept in the GameFi world would open up many possibilities for developers, as a bonus to what they already offer through regular transferable NFTs.
A similar idea to DeQuest’s Soulbound NTSTs, and a good example of badges earned for activities, are POAPs (Proof-Of-Attendance Protocol). They allow you to create NFT badges for people who “attend” your events such as concerts, games, conferences, etc. This is great, but as the badge can be bought, sold and transferred, the person holding the badge may not have actually attended (but just bought it). In contrast, 100% non-transferable tokens open the door to a whole new world of using tokenized assets.
To further elaborate, the purpose of Soulbound Tokens is more or less to reinforce the idea of NFTs and make them much more personal by requiring owners to do something first-hand. Be it participating in an event (whitelist) along the lines of POAP or, as in World of Warcraft, completing certain tasks such as battles or quests in the Metaverse. The use cases are sheer endless:
- Users can earn Soulbound Tokens for hours of play or online activity along with game wins, high scores and special achievements. Thereby, Soulbound Tokens not only allow players to possess exclusive items but also to gain “respect” in the gaming community for acquiring these items.
- Game projects, in particular, can utilise Soulbound Tokens as a non-monetary motivation for their users, adding a new, exciting layer to their world without inflating the in-game economy. Furthermore, they can offer the incentive of Soulbound NFTs alongside traditional in-game NFTs to attract large numbers of players and encourage communities to spend more time playing and interacting, which would then benefit the Metaverse as a whole due to the increased activity. This concept can also serve as a form of “marketing” in the Web3 world for new projects that want to develop and expand.
- For Guilds, DAOs and other organisations, the so-called reputation layer that DeQuest builds can be the key to scalability and automation. Depending on the needs of each party, a user’s skills and behaviour can be recorded in the metadata of Soulbound NFTs and thus used as an assessment tool. A prominent example of this use case is vetted “proof of scholar” badges introduced by DeQuest.
As Soulbound Tokens both in form of NFTs and fungible tokens continue to grow and see an increasingly widespread application, more time, research and effort are needed to explore all their potential use cases and establish them in Metaverse ecosystems, as envisioned by the DeQuest team. Or as the Ethereum co-founder once said: “It has the potential to open a much wider door for blockchains as the centre of ecosystems that are collaborative, fun and not just about money.
Co-authored by Mohit & Alex (DeQuest), May 2022
