In this blog post, we introduce the SBT definition; for that, it is necessary to know its origin and how it relates to Web 3.0 and the Decentralized Society concept. Then, we mention the difference between an SBT and an NFT, the SBT use cases and its drawbacks. Finally, we share a conclusion and what we are doing at kommit regarding SBT.
Which are the main things that give an identity to a person or an entity?
That is an important question when talking about a Soulbound Token because, as its name mention, “soul” is what we are, where we belong, our history, what we have done, and what we have been through. So, what if we can “move” our “soul” into blockchain technology? I think that could be the question in Vitalik Buretin’s brain (The Etherium Founder) that inspired him to create the concept of “Soulbound Token” with his partners E. Glen Weyl and Puja Ohlhaver. They published on May 11, 2022, an article called “Decentralized Society: Finding Web3’s Soul” (You can find it at the end of this blog). In the title of that article are three concepts that will be explained in this text: Decentralized Society, Web3, and Soul (SBT). Then, some use cases and drawbacks of SBTs will be listed.
Web 3.0
It refers to a “decentralized online ecosystem based on blockchain”. As we can guess from the name, it is the third phase of the evolution of the web or the internet and it is the latest one. Web 3.0 covers blockchain technology, distributed, decentralized, and autonomous systems, data architectures and networks, also, AI-driven services, and edge-computing infrastructure. It defines how we consume, interact and share information between services, applications, and devices through the internet. The following image shows the technologies that make up the new ecosystem in Web 3.0.
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| source: Why the Web 3.0 Matters and you should know about it (Mat Zago, 2018) |
Decentralized Society
The following picture shows a comparison between a centralized and decentralized social structure, which will be helpful as an intro to this topic.
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| Source: Centralised and Decentralised Societies Compared (Geoffrey Gardiner, 2022) |
Currently, Web 3.0 works on achieving a decentralized financial system known as DeFi (Decentralized Finance), which means that it has been used to empower people to take ownership of their finances in a secure network where all members validate the information and not just a centralized organization that could be corrupted. But, these decentralization concepts of control, security, power distribution, empowering people to participate and avoid unique authority can apply to Society concepts. To create governments, entities, organizations, communities, teams, etc., into blockchain technology. So, in a society, the identity of the members and the trust relationships are essential. That’s why the soulbond tokens are born; they are the basis for achieving a decentralized society.
On the other hand, decentralized societies (DeSoc) are still a concept being built. Nowadays, we don’t have too many valid real examples. But this might be the future, and many big tech industries are working on this. In fact, at kommit, we are exploring this by creating certificates to be saved into a consensus network as an SBT.
Soulbound Tokens
A Soulbound Token (SBT) is defined as:
A concept that describes a type of token. An SBT works as an NFT, with the difference that an SBT is not transferable.
It is common to confuse an SBT with an NFT because both are public tokens and non-fungibles, but the main difference is that an NFT can be bought, and the market defines its price; it represents property and assets and could be exchanged. While an SBT does not have a price, it can’t be bought and represents identity and reputation.
The idea is that the SBT is useful to create a digital identity, as mentioned at the beginning, bringing the soul of a person or entity into blockchain technology, so an SBT could represent the qualities, the history, the awards, and so on. As shown in the following picture, there are some examples of possible SBTs that are stored in wallets. These wallets have a special name, they are called "Souls”.
The wallet is the soul, and the SBTs are the characteristics that identify and give a reputation to a person or entity in a blockchain ecosystem.
A soul wallet can store SBTs (for representing persons or entities) or issue them (for example, an entity that gives certificates to its members).
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| Source: What is SoulBound Token (SBT)? (Charlie, 2022) |
The SBTs are public, but there are some conversations to make them private or be able to hide them. Besides, the SBTs are planned to be revoked.
Also, the concept of SBT is still in progress; currently, they are just in the paper and unavailable. Its first release is supposed to be in 2024. However, Binance has created its first-ever SBT called Binance Account Bound (BAB), which is issued on the BNB Chain to be delivered to the users who have completed the KYC (Know Your Customers) process as an experiment of SBT.
Where is SBT useful?
- Identity: store the holder's information, such as: credentials, certificates, memberships, and academic or work history in the form of SBT.
- NFT: Reinforce the authorship of the artists of an NFT since the SBT is non-transferable.
- DAO (Decentralized Autonomous Organization): Avoid the Sybil attack to secure voting systems; each SBT will certify that a participant votes once.
- Loans without guarantees: The reputation through SBTs will help determine if someone is trustworthy to lend money. So if you don’t pay, you will have a bad reputation and no loans, but if you pay, your reputation will increase, and you will have a bigger loan.
Limitations of SBTs
- Because the SBTs are public, if the information needs to be private, it is necessary to encrypt the content first.
- There is a risk that members with SBTs with higher credentials form groups to make decisions for their benefit.
- The SBTs must get a great reception as NFT to achieve the purpose of a decentralized society. Otherwise, it will be useless.
In conclusion, what happens in Web 3.0 can change how we live, behave, and interact. That's why we hope you get interested after this brief in the new web ecosystem and the society of the future. There is still significant work to make SBT recognized and more robust to achieve the dream of decentralized societies.
Kommit wants to keep building the future by developing through the SBTs a system to offer innovative, unique, easily verifiable, and non-transferable certifications. We intend to achieve that system by conceiving an SBT in a blockchain like Stellar. We are digging into SBT because certification systems need to be at the forefront of today's technology and accurate with the web 3.0 ecosystem to contribute to creating a new society. ¡We are excited to share this with you in an upcoming blog post!
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