Vitalik Co-Authors Soulbound Tokens Research Paper: Like NFTs But Not Tradable
Ethereum co-founder Vitalik Buterin, in cooperation with economist Glen Weyl and Flashbots researcher Puja Ohlhaver, published a research paper explaining how non-transferable Soulbound Tokens (SBT) can create a richer pluralistic ecosystem within Ethereum, called “Decentralized Society” (DeSoc).
Buterin suggests SBTs to better code social relationships in Web3
Web3, as it stands today, relies primarily on financialized and transferable assets. These assets are in different formats, with ERC20, ERC721, and ERC1155 being the three most common token standards on Ethereum, all of which can be transferred between network participants.
However, many common economic activities such as “collateralless lending and building personal brands” rely on non-transferable social relationships that are built on trust and persist over time. To bring this concept to Ethereum and to be able to encode trusted social relationships, Buterin offers non-transferable Soulbound Tokens (SBT).
As their name suggests, SBTs are tokens that cannot be sold or separated from their owners. These tokens can be stored in “souls,” which are similar to accounts or wallets that can hold SBTs. By tracking the “commitments, referrals, and affiliations” of chained souls, SBTs would be used to better code social relationship networks in Web3.
By relying on SBTs, Decentralized Society (DeSoc) would allow “souls and communities to come together bottom-up, as emergent properties of each other to co-create plural network goods and intelligences, at different scales,” the authors said.
Notably, the potential of DeSoc lies in its ability to facilitate new governance mechanisms that “reward trust and cooperation while protecting networks from capture, extraction, and domination.” In short, DeSoc aims to distance itself from the current hyper-financialized state of Web3 towards a “more transformative and pluralistic future of increasing returns through social distance”.
“To circumvent hyper-financialization – while unlocking exponential growth – we propose to augment and connect our sociality across virtual and physical realities, empowering souls and communities to encode social relationships and wealthy economy.
According to DeFi journalist Jason Levin, who interviewed the paper’s co-authors, SBTs will be available by the end of the year. “I suspect the 2024 ascending cycle will focus on them,” Glen Weyl reportedly said.
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Potential use cases for SBTs?
SBTs, which would underpin the DeSoc ecosystem, could offer a wide range of use cases. For example, universities could give SBT degrees to their graduates instead of NFT degrees. Indeed, NFTs can be traded online, but SBTs cannot be sold or separated from their owners.
Another use case for SBTs can be in the Proof-of-Attendance Protocol (POAP), a mechanism that distributes crypto-badges to indicate that a user has personally attended an event. POAP tokens are currently transferable, but their primary use suggests they should have been non-transferable.
Finally, a third use case would be within a DAO, which can spread SBTs among its loyal members. Since SBTs are non-transferable, governance power would remain widely distributed in the DAO, not allowing concentrated entities to buy governance rights from others.
Buterin had also explored non-transferable NFTs earlier this year in a blog post. At the time, he claimed that “there is also a vast and underexplored design space of what non transferable NFTs,” adding that achieving SBTs would open a door “for blockchains to be central to fun, collaborative ecosystems, and not just money.”
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About the Author
Ruholamin Haqshanas is an accomplished crypto and finance journalist with over two years of writing experience in the field. He has a strong understanding of various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi) and the emerging non-fungible token (NFT) market. He is an active user of digital assets for remittances.