Crypto: What is Ethereum’s Soulbound Token?
- on Aug 10, 2022
Ethereum has launched a new blockchain-based asset called Soulbound Token, or SBT. Ethereum founder Vitalik Buterin has announced that a person’s identity may soon be stored in Soulbound Tokens when interacting with the burgeoning Web3 world.
What differentiates SBTs from NFTs is that they are not transferable and once they appear in your crypto-wallet they cannot be sent to another wallet address. They are unfunded tokens designed to secure people’s identities, accomplishments, and perhaps even past transgressions in the web3 space, which is evolving into a decentralized version of today’s society.
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In May, Vitalik Buterin co-wrote a white paper describing his vision of a “decentralized society” (called DeSoc). The document described the need for a new token that was not about trading financial assets, but “encodes social relationships of trust.” In his plan, people will work, spend, produce, and create in a borderless online world and in doing so will accumulate a permanent record of merits, transgressions, and attributes that are stored in private blockchain wallets as unsecured tokens. exchangeable which can never be exchanged with other wallets.
The authors of the article refer to these achievement badges as “Soul-Bound Tokens” (SBT) and propose that they will produce a “more transformative and pluralistic future” for every individual who interacts with the Web3 world.
The authors suggest that an SBT could look like a much more verifiable web3 version of Linkedin, stating that they could create “a world where most participants have souls, digital wallets, which store SBTs corresponding to a series of ‘Affiliations, Memberships and Credentials’.
The newspaper adds, “For example, a person may have a soul that stores SBTs representing degrees, employment history, or hashes of their writings or artwork.”
Speaking to Yahoo Finance on the possible impact of SBTs on the crypto-ecosystem and wider society, Elisha John Kohthe general manager of Web3Authsaid, “Think of SBTs like the future web3 reputation score, but in the form of an NFT.
“This could lead to better token distribution, reward, voting and governance processes.”
The COO of Web3Auth added: “SBTs are still a relatively nascent part of blockchain technology, but could also see applications outside of the metaverse as well as in areas such as proof of employment and education certifications in the physical world.”
Possible use cases for SBTs
At last week’s Ethereum conference in Seoul (ETH-USD), Vitalik Buterin said that SBTs should not be transferable and should “represent something about who you are and what you have personally done”.
A university may issue SBTs to its alumni to verify that they have graduated from that school.
The article co-authored by Buterin highlighted the need for SBTs that could become “an extended CV” for each individual. However, verification of these CV qualifications would be “issued or attested by counterparties” who have a relationship with the owner of the SBT.
Read more: Ethereum supply will shrink after ‘Merge’ upgrade, says Vitalik Buterin
An SBT could also store a person’s credit history, with Buterin and his co-authors stating that “SBTs that represent educational credentials, work history, and rental contracts could serve as a persistent record of credit history. ‘relevant credit history’.
In this fully automated future, when a loan is issued to a person, the loan record would be stored in that person’s SBT, and when fully repaid, it could then be burned and replaced with a proof of reimbursement, and thus create a positive credit rating.
What is a Decentralized Company, or DeSoc
Recently, much has been said about “networked states” or “decentralized societies” among the most influential voices in the web3 space. A recent book by former Coinbase CTO Balaji S. Srinivasan titled “The Network State” describes the trend towards a decentralized society made possible by blockchain-based technologies.
In “The Network Society”, the author posits that native Internet groups will collectivize to form new communities and decentralized institutions that could grow to challenge existing institutions and even nation states.
Ownership of a particular cryptocurrency associated with these “network states” would provide economic incentives to the community, fostering cooperation.
This type of action encouraged by the crypto community is already evident among fringe memecoin groups, such as Shiba Inu’s’Shib Army‘.
Read more: Can the Ethereum merger make Ether the next bitcoin?
At Ethereum conference in Seoull, Buterin explained how important web3 communities would be to verify the identity of SBT tokens and return them to the rightful owner, if they were somehow misplaced or a wallet owner lost their keys (passwords). pass).
He said: “An SBT would be connected to a community and that community would be in some way responsible for controlling this matter of legitimate transfer and otherwise allowing whatever the community determines to be the original owner a chance to reclaim the SBT. .”
Difference between an NFT and an SBT
In the document, Buterin states that SBTs will not replace NFTs or non-fungible tokens. NFTs will still function as a way to monetize digital assets that cannot be traded in the same way for other assets, in the same way that commodities and currencies can be priced and traded. Instead, SBTs will act as proof of character, rather than proof of wealth for each individual who is the recipient. They will be stored in an individual’s Web3 wallet address along with their cryptocurrencies and NFTs.
The Chinese Social Credit System and SBTs
Buterin is aware that an SBT database that automatically stores each individual’s personal details is a boon to any surveillance regime, and suggested that an option could be programmed into the design allowing SBT owners the right to ” burn” or hide their SBTs from the public. .
In 2014, the Chinese State Council published its “Guidelines for Building the Social Credit System”.
It was the Chinese Politburo that began in earnest to create a techno-authoritarian Chinese surveillance state.
The social credit system creates an online persona for every citizen in China, and every citizen receives a positive or negative social credit score based on their actions, which can be automatically detected through China’s vast network of monitoring devices, or in a more traditional way. of the neighbor observing and then informing about the neighbor.
Parallels have been drawn between China’s “Orwellian” social credit system and Ethereum’s Soulbound token system for tracking people’s personal footprint in the online world.
The Chinese social credit system gives full control to the communist political bureau when distributing a positive or negative social credit score to each citizen.
The SBT system relies on the decentralized “smart contracts” deployed on the Ethereum blockchain to dispense associations, qualifications or achievements to everyone.
However, the same SBT system could allow the blockchain to store a person’s transgressions, and those stains could then be stored on a person’s online identity wallet forever.
In China’s social credit system, when these transgressions are linked to “programmable currency”, such as the digital yuan, a person may lose their right to function freely within society, through the loss of shopping freedoms.
Whether Ethereum’s Soulbound tokens will create a free society or lead to a restrictive future, akin to China’s social credit system, depends on the extent of decentralization and democratization of the Ethereum blockchain.
And with Ethereum “merged” into a proof-of-stake consensus mechanism, the future trajectory of its decentralization and democratization is fiercely debated.
Watch: The Crypto Mile: Episode 6 – Ethereum Insider Reveals the Aftermath of the “Merger”