Is the Web3.0 soul bound token an opportunity or a trap?

Author: Daniel Li

Soulbound Token, as the latest concept in the blockchain industry, was proposed by V Shen in early 2022The word Soulbound originally came from World of Warcraft. In the game, items that are soulbound (soul bound) cannot be sold, mailed or transferred to others, but can only be used by players themselves. As a senior player of Warcraft, God V obviously got inspiration from the game and created the concept of Soulbound Token (SBT).

In short, SBT is a programmable, non transferable, revocable and retrievable pass with verifiable information, similar to an expanding resume (including education certificate, employment experience, attendance certificate, etc.), which can be verified through the wallet associated with its social relationship. SBT can help users build a complete identity mapped to the real society in the web3.0 world, Solve the problem of user identity system that has been hindering the development of the web3.0 world for a long time. Therefore, SBT is considered as an important driving force to realize web3.0. However, there are also different views. Some people think that SBT is still in the early stage of research, and some assumptions are not perfect, with various drawbacks. SBT is more like an attractive trap for web3.0, and the hasty introduction of SBT will lead to disastrous consequences. So whether SBT is an opportunity or a trap of web3.0, let's discuss it today.

01 What is the soul bound token SBT?

SBT is a nontransferable token, which is used to form the commitment, certificate or affiliation representing social relations on the web3.0 network. It can mark countless characteristics and achievements of people or entities in the form of blockchain, such as education certificate, employment history, attendance certificate, and even proof of their art works.

SBT is a solution to DID (Decentralized Identity) in the web3.0 world, and it is the confirmation of our right to personal virtual assets (such as social relations and social values) in the web3.0 virtual world. Through SBT, no matter your social relationship, social identity or social reputation on the chain, you can go online, and SBT is bound to your wallet address and cannot be traded. The social activities, learning or work experience you have participated in in the real world and the web3.0 world can all obtain the corresponding SBT, such as your graduation certificate from your graduation school, your work certificate from the enterprise you work in, and the public welfare organizations you have participated in, the DeFi platform for loans or mobile mining, and the DAO organizations you have participated in. These SBTs will build your real DID in the web3.0 world over time.

02 What are the application cases of SBT

Although Soulbound Token has just been launched and is still in the embryonic stage of development, its huge potential in the future and extensive application scenarios have attracted many enterprises. In recent months, all major platforms have announced the launch of their own platform's exclusive soul bound tokens, such as Fair Xyz cooperates with OpenSea to launch the soul bound token "Minter Token" for NFT, which allows users to cast Minter Tokens for free based on any NFT they currently or once held, which has also become a new way for creators to interact with the community. There is also the first soul bound token issued by Binance based on BNB smart chain - Binance Account Bound (BAB). The BAB will be displayed on the user's wallet to highlight that they have successfully completed KYC. At present, the application of SBT in the industry can be classified from the following perspectives.

Application in the field of art

SBT can help artists build their reputation in the target community of the web3.0 world, and make these reputation can be verified by buyers. Artists can use their own SBT identity wallet to publish NFT. Many SBTs in this identity wallet are proof of artists' online and offline real activities. Therefore, artists bind their real identities with their works in a direct, on chain way, so that buyers can better verify their identities and the provenance of artistic works. The artist wallet with SBT and the online social network where the wallet is located can help prevent art plagiarism, deep forgery and other problems.

Soul airdrop to avoid witch attack

DAOs that focus on community governance often use air drop when organizing new communities, but the accuracy and effectiveness of this method are not high. Air drop may not be sent to real participants, and they are vulnerable to witch attacks. The so-called witch attack refers to that a single user in a community organization can own multiple wallets and hoard Tokens to reach 51% of the voting rights, and then manipulate decisions. SBT can provide a way to defend against such attacks, because they can more easily identify real individuals and soulless robots. Through SBT screening, soul airdrops can be achieved, matching the users who really participate, and the voting rights of witch attackers can be canceled in the voting process.

Wallet account recovery

For crypto investment participants, losing their wallets is a very difficult problem, and the probability of normal recovery of wallets once lost is very low. Although some wallets have set up a social recovery mechanism, that is, a few trusted wallet guardians, these guardians still need to be maintained daily, which undoubtedly increases the economic cost, and may not be able to retrieve wallets in this way once they have quarreled with the wallet guardians. Compared with the community recovery wallet account model provided by SBT, it has more advantages. It only requires the majority of people in several SBT communities to recover. Under the premise of ensuring security as much as possible, it makes the recovery of wallet assets easier.

Unsecured chain lending

At present, it is difficult for the web3.0 ecosystem to replicate the unsecured loan or credit of traditional finance, because we have not yet established an online credit mechanism based on trust. But in the ecosystem built by SBT, unsecured loans or credit will be realized. We can create an anti censorship, bottom-up substitute to replace the top-down and centralized commercial social credit system. SBT, which represents education certificate, work history and lease record, can be used as personal credit history record, allowing "soul" to obtain loans with good reputation as pledge.

Attendance Certification Agreement

SBT is nontransferable with verifiable information, which makes it very suitable for attending special occasions, participating in community organizations, online conferences and other activities. At present, a project close to such SBT is called "POAP". The full text of POAP is Proof of Attendance Protocol, which aims to provide a badge service to record life experience with blockchain. The event organizer can customize the design of the badge and send it to the event participants. However, the biggest disadvantage of POAP is that it is a tradable NFT and easy to be quantified by money, which also reduces its credibility to a certain extent, and SBT with non transferable attributes may become the best proof of attendance agreement in the future.

03 What opportunities does SBT bring to web3.0

The real value of SBT lies in that through it, people can establish a bottom-up personal credit scoring system in the web3.0 world. It enables the soul and community to connect from bottom to top, enhances sociality, spans social distance, and provides more opportunities to build a real and virtual web3.0.

1. SBT provides an opportunity for the web3.0 world to build a real DID

In the web3.0 virtual world without SBT, the user's identity is represented by a string of wallet addresses consisting of letters and numbers beginning with 0x. The wallet address has become the only way to identify users. In the face of the same chaotic and complex digital account identity, we simply cannot identify the real person or the person we need from many identities. The lack of a real DID has become an important factor affecting the long-term development of web3.0.

On the one hand, we have no way to establish a truly effective social relationship and network in web3.0 because we cannot determine the real identity or whether the other party is a real person. On the other hand, due to the lack of identification means, the probability of being caught in the web3.0 world for committing crimes becomes extremely low, which is tantamount to conniving at crimes in disguise. This brings uncertainty and security risks to web3.0.

The appearance of SBT provides an opportunity for web3.0 to solve the above problems. It maps the value system in real life to the web3.0 world, and establishes the corresponding real identity tags for DID identities in the virtual world. We can judge the professional and social reputation of the other party through SBT, and once the DID gets the SBT, it will be bound to your wallet address, becoming the only bound soul token. SBT is not allowed to be added or withdrawn by itself, but can only be revoked by the issuer, which also ensures the credibility of SBT.

2. SBT provides an opportunity to break the data monopoly in the web2.0 era

The existence of SBT is not only to re-establish a personal reputation evaluation system similar to that in the web2.0 era in the web3.0 world, but also to solve the problem of ownership of personal data that has long existed in the web2.0 era. We are currently exposed to Internet celebrities and some Internet celebrities who often have millions or even tens of millions of fans. In fact, the ownership of these fans and accounts is not really in the hands of the people who create or operate accounts, It is in the hands of the company that provides the platform. Big V and online celebrity are more like managing accounts for the platform, and the platform holds the right to kill and live the account.

The emergence of SBT provides an opportunity to solve this problem. It can solve the problem of personal social data migration. In the future, all your social data, including the people you follow, the people who follow you, and your private domain traffic will become your personal credit assets. These credit assets will be bound with your wallet in the form of SBT, and cannot be transferred or replaced. With SBT, we don't have to worry about losing all our social relationships because a platform blocks your account. When the platform blocks your account, we can transfer your reputation assets to other platforms. It can be said that SBT makes the creator of the web3.0 world who can really realize the data belong to the creator himself, which also provides more power for the builders and content operators of the web3.0 ecosystem in the future.

3. SBT promotes web3.0 users to comply with industry rules

The lack of effective DID in the web3.0 world for a long time has led to the frequent occurrence of various fraud and crimes. At the same time, the lack of effective punishment means has also led some people with weak willpower to commit crimes under the lure of money. In the web2.0 world, we can track users through their real name authentication information, so SBT can also play the same role in the web3.0 world. SBT can not only help users establish personal reputation in the web3.0 world, but also for those who have criminal misconduct, some corresponding institutions will issue SBT with low reputation to users and bind it to the user wallet address, Through the SBT on the user, we can identify whether the user is trustworthy. This will not only serve as a great warning, but also reduce the probability of fraud.

The emergence of SBT also provides an opportunity to build a web3.0 order. When a person commits a crime on the chain, he or she must consider whether this behavior will affect himself or herself in reality. Those who are regarded as evil can be identified and punished accordingly, then the rules and regulations will be followed.

4. SBT provides an opportunity for the web3.0 world to establish a creditworthy financial system

In the current DeFi field, because there is no unified online identity system, credit or unsecured lending is basically impossible. The emergence of SBT provides an opportunity for the web3.0 world to establish a creditworthy financial system. SBT can be used to create a bottom-up alternative against censorship to replace the top-down commercial and social credit system in traditional society (such as the central bank credit reporting system or ant sesame credit score). With SBT, just like "sesame credit score", people can use the SBT in their wallets to realize unsecured borrowing. In addition, users actively participate in various social activities in the web3.0 world, which is also conducive to improving their SBT credit score. The higher the SBT score, the higher the amount of unsecured loans users can obtain, which, to a certain extent, improves the enthusiasm of users to participate in community activities.

The personal reputation system built by SBT provides more opportunities for the web3.0 world to expand rich financial application scenarios. In the future, the financial business in the web3.0 world will not only be the highly leveraged financial lending business, but also a richer and more inclusive financial business.

5. SBT can make the community governance of DAO more fair

At present, the token voting system that web3.0 and DAO rely on has serious drawbacks. Witch attacks and whale vote manipulation problems often arise and become increasingly serious. The lack of fairness and inclusiveness of DAO community governance also seriously hindered the construction of web3.0 ecosystem. SBT provides an opportunity to solve these problems. First, we can screen out fake robot accounts and non target members of the community through the SBT of each community member. Secondly, each community member is given the governance right through SBT. This right is not fixed. It is related to the user's participation in discussions, activities and regular voting. The higher the user's participation, the higher the governance right, and the higher the corresponding voting right. This can greatly avoid whale vote manipulation and robot attacks.

Another use of SBT in voting is to avoid centralized DAO and ensure that different voices exist in the community. SBT can track the opinions of different community members before voting and break up some overly centralized votes or groups to ensure that minority voices are always represented.

04 What are the pitfalls of SBT?

The future of SBT seems to have unlimited potential. While most people are excited to welcome the arrival of SBT, some people express a negative attitude. They think that the current SBT is still in the early stage of research and development, and most of the future visions and application prospects are still in the theoretical discussion stage, and some of the ideas are not perfect at present. The hasty implementation of SBT is not a good thing for the current development of web3.0, It's more like a trap.

Privacy issues

Privacy is the biggest resistance to the implementation of SBT, and also the most controversial issue against SBT users. How to ensure that real user data can be obtained to build a social circle and social reputation of web3.0 DID without damaging personal privacy is a difficult challenge for SBT. If too much user information is exposed, people will think that the SBT system is not complete, and the exposed person is vulnerable to attacks by malicious actors; If too little user information is obtained, the credibility of SBT will be questioned. The issue of privacy protection has always been attached great importance. Especially in the blockchain industry that lacks privacy protection, people have more urgent needs for privacy. It is unacceptable for most people to give up privacy protection in order to achieve SBT. Therefore, how to balance SBT and privacy protection issues in the future will become the most important factor affecting the development of SBT.

Risk of being attacked

Security has always been a top priority in the blockchain industry. SBT has prevented the DAO from being attacked by witches to ensure the security of the community, but it also brings new risks. SBT and wallet have a nontransferable binding, but users often need to change their wallets for many reasons, such as transferring assets to multi signature wallets for security reasons, which will inevitably lead to loss. Compared with the loss of ID cards in the real world, the loss of SBT may cause more serious consequences. Some hackers may use user SBT to apply for various loans, or even engage in various illegal and criminal acts, and these corresponding consequences may be borne by users themselves. On the other hand, in real life, if the ID card is lost, we can still reissue it, but if the SBT is lost, it may not be retrieved again, because some activities and experiences cannot be copied, which means that all the experience and honor you have gained in the chain may be returned to zero.

Bribery

The emergence of SBT makes the governance of the DAO community more fair, but it is not without loopholes. People with a mind may bribe the soul with a specific SBT in order to obtain the governance right and voting influence of the agreement. The higher the voting power and influence of the members in the community, the higher the probability of being bribed. In addition, the briber can find people with different opinions more easily through the SBT of the user, or even find real people through the SBT. Both parties trade off the chain, so that even if they are found, they can not get conclusive evidence. So to a certain extent, the appearance of SBT has provided convenience for the briber.

05 Summary

As a new concept of identity protocol, SBT is launched based on the market demand and the attempt of web3.0 to solve the identity system problem. No matter from any aspect, identity protocol is bound to be a new trend in the future blockchain industry. Although the current SBT still seems to be imperfect or even has loopholes, However, the concept conveyed by SBT points out the development direction for the user identity assessment system in the blockchain industry and provides more narratability, which also brings new hope to the crypto asset industry in the current bear market.