Soul bound tokens and digital reputations

Growing up, I get shivers whenever I hear the call from Mortal Kombat's shang tsung "Your soul is mine". Apparently, he had the ability to transfer and imprison a person's soul. A soul ought to be unique, I said to myself, why this?

Fast-forward to 2022, Vitaliy Buterin proposed a system that would finally allow uniqueness of entities to become bound to a particular wallet. Alas, my soul can finally become mine and mine alone. Buterin saved us all!

Enter in Soul Bound Tokens

Prior to now, one of the major ways of tracking user participation was through issuance of POAP, a proof of attendance token issued to participants for attending a digital event either via the metaverse or other supported channels. These NFTs, though intended to be unique, are transferrable, and hence becomes hard to properly ascertain whether the current holder really attended the said event or got it off someone that did.

Soul Bound Tokens are a form of NFTs with non transferability at its core and often held or issued by wallets called soul. These tokens can represent a digital form of certificate, a health record, a basic attestation of KYC (Know your customer) completion, credit score history, event attendance and lots more. Vitalik and co, in their paper titled Decentralized Society: Finding Web3's Soul published the importance and major use cases for them.

Most recently, a close example that bears resemblance to this idea is the 'W3ST'(Web3 Status Token) issued by cyberconnect; a decentralized social platform that aims to help projects give out a digital proof of attendance which can be accumulated with more events attended then overtime serve as a basis for getting more goodies such as mystery boxes and even the famed link3 profile. Since the tokens are non-transferrable, it holds attestation to a user's participation.

Why Soul Bound

The original idea for web3 was centered on decentralization and user controlled privacy, which sadly isn't what is at the forefront today. Most people troop into this space for financial gains and with success stories like those from beeple's artworks, crypto punks and BAYC, it becomes hard to overlook the immense value that can be gotten. This creates a system where everyone mixes in and hence becomes difficult to differentiate true believers of the decentralized web with those chasing gains. By making tokens bound to users, it becomes easier to track users actively participating and building reputations, as the proof will be the bound tokens. This makes it easier to select those really worth giving drops and whitelist spots for rewards of engagement.

Removing an NFTs transfer function?

While this approach might seem plausible for creating a soul bound token, the idea of bounded souls go beyond that, as issuers of this token can revoke it if the issued is found wanting. A system of social recovery is also at the heart of this new infrastructure for recovery of compromised wallets in the case a user can no longer access his/her wallet. Vitalik even talked about the ability to hide soul bound tokens for privacy concerns, especially in the case of health records, where many might find it inappropriate to have their health records made public.

Since no formal standard for soul bound tokens exist, many have proposed what they feel soul bound token implementation should look like in code. Many projects have started working on this idea, with prominent players like Binance developing their own soul bound token on the BNB Chain called BAB (Binance Account Bound) as a certificate to prove that a user has completed all KYC requirements.

Use Cases

Undercollateralized Loans

When the value of the asset provided for collateral isn't greater or on a 1:1 basis with the loan requested, the loan is said to be undercollateralized. Most financial institutions seek collateral so that in the case where the given loan couldn't be repaid, the collateralized asset could be sold to recover such a loan. This system makes it difficult for reputable and honest users who don't have such a collateral to be able to access needed funds. With soul bound tokens, a lender can check the user's past financial dealings and credit scores and decide whether he/she could be a good fit for a loan. This creates a system where people are encouraged to act just towards their financial dealings to get a good and reputable identity.

Employment/Job Hunting

In a world where falsification of experience and educational history is common, it becomes difficult to take an applicant word for it. Most recruiters often turn to portfolios and repositories, followed by rigorous interviews to assess an applicant.

Soul bound tokens can hold experience, achievements and educational history issued by educational bodies and past companies to attest to an applicant skill and qualification. This can drastically reduce the time-to-hire ratio and allow companies to gain more capable hands.

Voting

What if we vote for candidates based on a verifiable proof of capacity, experience and ability to manage the office been contested? What if a system exists where a verifiable attestation of capacity trumps lauded word of mouth? This will go a long way to help nations such as those from Africa from been ruled by tyrants and unqualified hands and bolster the economy of Africa.

Soul bound tokens as a reputational system could go a long way in alleviating such an issue by ensuring that only candidates with proven track records, educational history and salient experience are voted into the right offices. This would greatly improve the quality of governance and economy at large.

Way Forward

Projections by Eric Glen Weyl, who also worked on the idea of soul bound tokens with vitalik predicted that towards the end of 2022 most projects would begin shifting towards this novel idea of soul bound tokens. True to this, many projects have started acting on it for a more balanced form of identity management. This can be implemented in airdrops to mitigate Sybil attacks(A system where users create multiple wallet accounts to gain an edge) amongst others. While still in its nascent stage, it would be interesting to see the use cases and projects springing up from soul bound tokens since the web3 space is shifting towards robust means of privacy and decentralization. One thing is certain, soul bound token will create a reputable and more credible means of verification.

Building Reputations through Soul Bound Tokens

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