Soulbound Tokens? They Might Be The Key To Tokenomics
An article titled “Decentralized Society: Finding Web3’s Soul” was published recently. What was particularly interesting about this article was its authors: One of the three authors that signed it was Vitalik Burin, who gained world recognition for his invention, Ethereum.
In the article, Vitalik (together with Puja Ohlhaver and E. Glen Weyl) introduced a new and innovative kind of token called “Soulbound Tokens.” Like our souls, these tokens will be attached to us for life. They are meant to display features that are linked with our identity and secure the data on the blockchain.
The Soul of Web3.0
As we all know by now, an NFT is a non-fungible token, meaning a token containing specific data stored on the blockchain. Each NFT has its distinguishable data, which makes it unique, and, therefore, non-fungible. NFTs nowadays are usually used for owning digital rights to digital art., such as graphic art, music, etc. However, NFTs are transferable and can be traded by crypto wallets.
A soulbound token is unique like an NFT, except that they are non-transferable since they signal something that is relevant only to its holder. For instance, one example can be a token that signals that we have graduated with a law degree or finished a certain training or course. SBTs can also signal plain facts, such as our birth date, bank account, credit score, etc. They can even state things that we might want to hide about ourselves, such as our reputation or our criminal record. Anyway, and as stated in the article, in order to develop a sustainable tokenomics-based society, we need all kinds of solutions, and soulbound tokens are the answer for some of the foreseen problems since they will enable us sustainable contracts such as apartment leases, loan agreements, etc.
Not So Fast
As we also know, one of crypto’s major issues today is that it is so vulnerable to hacks, phishing scams, and whatnot. If someone will tokens that include our identity, bank account, etc., we will become victims of identity theft, one of the hideous crimes that exist. Therefore, before we can start relying on SBTs, we need to make sure it is safe.
This problem was addressed in the article. One of the coping mechanisms offered there is a social recovery model that could verify the authenticity of the token holder. For instance, if we are talking about a soulbound token that states that we have graduated from X university, that University will have several authorized personnel that could verify the token’s actual holder.
As for now, this doesn’t solve everything, but it signals the general direction: every problem has a technological solution. Soulbound tokens are expected to go on trial stages by the end of 2022. Will they go from theory to reality? We should know soon enough.