Vitalik Buterin, best known as one of the co-founders of Ethereum, has a major new Web3 project under development. In the whitepaper called "Decentralized Society: Finding Web3's Soul," Buterin and his co-authors outline their vision of a distributed society (DeSoc) and how they can bring it into possibility. Their suggestion? We'll need to develop something known as "Soulbound Tokens" (SBTs).
In the main, SBTs are not transferable identification and reputation certificates. They enable people to verify their personal information -- such as their educational background, work history, credit score, medical history, professional certificates, and more. -- by using blockchain technology.
The concept is highly discordant.
Some believe that SBTs are a more efficient and reliable way to verify the authenticity of the information. Some compare it with China's dictatorial social credit system. Which is the more realistic view? It isn't easy to decide. In this article, we cover all you should know about things that can change your life.
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What are Soulbound Tokens (SBTs)?
An NFT, also known as a non-fungible token (NFT), is a digital token containing data (data) stored within the cryptocurrency blockchain. Each NFT is unique in its ID code and metadata, so each NFT is unique, and the information it holds can not be altered. Normal NFTs can be offered for sale or at no cost. Also, they don't have to be restricted to a specific individual or company.
Soulbound tokens are non-transferable, permanent NFTs, so they can't be transferred or taken from your Blockchain wallet.
Certain SBTs could be considered real-life achievement badges like the badges you receive in video games when you finish a certain goal or surpass the specified standard. But instead of earning the badge to defeat an opponent and saving a princess (or prince! ), You will receive an SBT when you complete an academic degree, obtain an official certification, or win an award. Even if the award is such as being the world's top kickball expert, your SBT is evidence of your accomplishment to other people.
However, SBTs don't have to be about just achievements. They can also be linked to various other characteristics, features, and private information. For instance, the SBT can be used to confirm your birthday, name, political affiliations, charitable donations, criminal record, medical history, country of origin, religious background, military history, and many more. The possibilities are virtually endless.
The most important thing to remember is that soulbound tokens contain every factual detail about you, broken into individual NFTs and kept in your blockchain wallet.
What is the process behind Soulbound Tokens?
Anyone could claim they attended Harvard by adding it as their school of choice on Facebook. However, when using SBTs that Harvard's "Soul" (aka their private wallet) will need to give the "Soul" (aka your private wallet) an SBT of a degree for you to claim that status. This way, SBTs can be distributed to members of an institution or group to prove affiliation. This will make it impossible for anyone to present fake credentials.
Similar to this, Buterin and his co-authors observe that, because the tokens can be traded and transferred to another wallet, the tokens may aid in helping "solve some of the problems ravaging decentralized finance, like scams and theft." That's where they believe that the system's true strength lies because thefts of NFT are becoming more frequent.
In addition, reputation plays a major role in how much trust people in the community have in the credibility of an NFT project or artist. We've seen this before and time again, as it was revealed that the Azuki collection sank to record-low price for the floor following the revelation that the creator was known for dropping projects. With SBTs in place, the Web3 community can determine on their own if a person is reliable. Therefore, the Web3 community can make better-informed decisions about which projects merit their support.
But what happens if someone or an organization sends the Soul an SBT you don't like? SBTs are forever; therefore, do you remain stuck with them forever?
Ideally, no. For the system to function efficiently, the team said it needs to incorporate features that allow people to cover up the SBT from the public eye or destroy it. But, as the system isn't in place, the precise mechanism isn't fully understood.
What happens when you lose your Soul?
What is the outcome? What happens if the Soul wallet is compromised? What happens if you cannot retrieve the password for the Soul address? This is, unfortunately, an extremely valid concern.
As mentioned earlier, frauds are commonplace in those in the NFT community. Therefore, when it concerns SBTs, it's essential to put in place proper security measures or contingency plans to deter criminals from increasing identity theft to an entirely new level.
In response to this issue, Buterin proposed a community-wide adoption of"the " social recovery model." Through Social Recovery, members could designate a group of people (or institutions) in the role of "guardians."
These guardians can access and modify the private keys of the user's wallet, should it become compromised. Based on this model, the authors state that the recovery of a Soul's private keys will "require a member from a qualified majority of a (random subset of) Soul's communities to consent."
But this won't resolve the issue. For instance, a person is unlikely to retrieve stolen SBTs when the guardians who they appointed as guardians passed away or the relationship has broken down. What happens if a group of guardians decides to band together against a person they have a dispute with? The consequences could be devastating.
However, by giving an entire community the capability to help in the process of recovering, Buterin believes that SBTs are, at a minimum, slightly more easily retrieved in the event of theft.
What are the disadvantages of SBTs?
Alongside providing our details and making it more difficult for fraudsters to impersonate us, tokens also have other benefits. They can be used for ticketing for events, airdrops with exclusive prices (aka "Souldrops"), and other benefits targeted at members of a certain group. For instance, a company could send tickets to reunions for every alumni who graduated at the specified time.
Naturally, the other is also true.
SBTs can be used by criminals to target and identify members of particular communities. The risk of this happening to the governing bodies is alarming. For instance, those with a particular SBT might be refused entry to certain facilities, medical care, disqualified from traveling permits, or have their voting rights taken away.
They acknowledge the potential for dystopian in the paper, noting that the database of SBTs could allow for "automate red-lining of disfavored social groups or even target them for cyber or physical attack, enforce restrictive migration policies, or make predatory loans."
This is among the reasons the authors state that users need the ability to delete or conceal their SBTs when required.
When will SBTs be made available?
SBTs could be in use in 2022 by the deadline, according to the report of Jason Levin, who interviewed the paper's co-author E. Glen Weyl.
However, it's only meant for "early uses," - meaning there's a long time before we get the DeSoc Buterin mentioned in the paper. How do we get there? It's going to be a collaborative effort.
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