Ethereum co-founder Vitalik Buterin’s Soulbound Token proposal for a robust identity and reputation system has stirred up the crypto community.
Soulbound Tokens or SBTs are non-transferable, non-financialized tokens tied to a unique profile proving verifiable achievements and commitments. Still at the concept stage, it’s suggested SBTs will be capable of tracking memberships, credentials and affiliations with educational establishments, decentralized lenders and other entities.
Supporters say that SBTs could be the use case for the next bull market. But others have likened the concept to China’s social credit system and say it’s an “expensive solution to a problem that’s already been solved.”
So, which is it? Let’s take a deeper dive.
Web3 should be more than financial assets
Last month, Vitalik Buterin and co-authors Glen Weyl and Puja Ohlhaver released a paper outlining their vision for Soulbound Tokens, which would enable individuals to accrue permanent non-tradeable records of merits and attributes and store them in a private blockchain wallet.
These would form an essential building block for a decentralized society, or DeSoc, which points away from the current hyper-financialized state of Web3 and depends on non-transferable social relationships of trust. The crypto world, the co-authors say, will move past simple transferable financialized assets.
The non-transferable Soulbound Tokens represent credentials, commitments and affiliations and are linked to our “Souls.” To put it simply, they are tokenized representations of a whole host of possible traits, features and achievements that make up a person or entity. Souls can also issue and attest SBTs to other Souls. Students will receive an SBT, for example, from a college, which will also be represented by its own Soul.
Why we need Soulbound Tokens
Co-author Glen Weyl, an economist with RadicalxChange, provided the core ideas for the paper on Soulbound Tokens. When I get through to him on Zoom, he is just getting his board ready for a paddle around Lake Washington next to his house. As he saunters down to the waterfront, he explains why this new concept is vital.
“Right now, almost all the things that happen in the Web3 ecosystem are purely financial objects: They’re transferable and saleable wrappers, like wallets of transferable saleable assets, like tokens and currencies, there’s no actual such a thing as a person. All there is, is a financial holding account,” he says.