Authoritarian Social Credit System or Trusted Verified Information
Vitalik Buterin described the concept of soulbound tokens in his white paper, Decentralized Society: Finding Web3’s Soul. According to Buterin, Puja Ohlhaver, and economist Glen Weyl, these digital entities are critical to a “diverse, transformational future” where social interactions and human relationships are important for Web3 identity.
The creators believe that adding “augment sociality” to the digital identifier zone (read NFT) will introduce the element of authenticity that is currently missing (Wagner, 2019).
What is the purpose of Soulbound Tokens (SBTs)?
A SBT is a non-transferable, non-fungible token (NFT) that cannot be given or taken from a private blockchain wallet. An NFT is a digital token with its own unique identification code and metadata that lives on the blockchain.
An individual’s “Souls” (accounts) will hold or issue SBTs, which are tokens that represent an individual’s “commitments, credentials, and affiliations,” according to the authors’ vision for a decentralized society. These tokens will serve as an extended resumé attesting an individual’s social connections, since other wallets will issue them.
An SBT verifies your specialty—for example, being a scuba expert. You earn an SBT for completing a degree, earning professional certification, and so on.
SBTs work how?
Let’s say, the New York Yankees Soul (their private wallet) will have to provide an SBT to Joe Fan’s soul in order to legitimize his life long season Ticket holder status. If that does not occur, everyone will know that Joe Fan is a liar.
Having SBTs distributed among members of a group or institution can verify affiliation. In this case, it would be nearly impossible for people to claim false credentials. SBT marks, however, are not permanent. It has been proposed that users would be able to conceal them. Because there is no regulatory framework, such features are not yet fully developed.
Is it possible to buy or sell SBTs?
No, they are not formed to have market value.
The SBTs are being used as a solution to stop thefts and scams, according to the researches. They believe that this is the true strength of the SBTs at a time when NFT thefts are rampant.
What purposes can soulbound tokens serve?
The paper explores the potential of SBTs to drive Web3 forward by reducing the reliance on centralized structures in Web2. According to the paper, SBTs could push Web3 forward by reducing the reliance on centralized entities in Web2. Custodial wallets like Coinbase and Binance allow users to store cryptocurrency, and similar to this, OpenSea and Twitter are centralized platforms where NFT artists sell their work.
SBTs also want to dissuade people from the hyper-finanacial status of cryptocurrencies and the status symbol nature of NFTs, which are often associated.
Tokens can help users traverse Web3’s anonymous nature, fuelled by pseudonyms, by establishing verifiable reputations.
On the other hand
Once SBTs are pumped into the virtual world, their disadvantages will become apparent. Some people may associate a poor reputation with certain tokens. For example, SBT holders may be denied entrance to facilities, denied medical care, denied travel permits, and have their voting rights revoked, among other things. This may be especially true for people from disadvantaged or maligned communities.
The authors acknowledge the negative potential in the white paper, noting that tokens may “automate red-lining of disfavored social groups or even target them for cyber or physical attack, enforce restrictive migration policies, or make predatory loans.”
Is the Soul wallet lost or hacked, there is another valid concern?
SBTs are already being stolen in the NFT community. Therefore, it will become crucial to secure them with proper safeguards and prevent hackers from stealing these unique identities.
A team of scholars has created a social recovery method that allows an individual’s cryptocurrency wallet to be overseen by members of a group or institution. Guardians can access and alter an individual’s private keys if his wallet is hacked, but these members must be drawn from a “random subset of Soul’s communities.”