Thread by @TheSpartanLabs

Why Are #Soulbound Tokens (SBTs) So Hyped Up?

When the SBT concept was first dropped, it took the crypto world by storm.

But what are #SBTs and why should we care?

In this 3-part series, we explore all things SBTs: definitions, uses and improvements!👇

medium.com/@spartanlabs/t…

2/ In May’22, @VitalikButerin co-authored a white paper on SBT with fellow authors @glenweyl and @pujaohlhaver.

Within the white paper, they detailed their vision for a fully decentralised society and how the concept of “Soulbound” tokens could make it a reality.

3/ The economic value of the world is largely produced by people and their interdependent relationships.

However, Web3 lacks the representation of such social relationships and identities, which results in its dependence on the centralised Web2 infrastructure.

4/ @balajis once aptly described the ability to have the benefits of traditional interdependent economic relations while maintaining anonymity.

The concept of Souls could potentially encode the trust networks of the real economy with on-chain reputation.

https://twitter.com/balajis/status/1418309677163552770

5/ Souls are wallets that hold SBTs.

SBTs are digital tokens that represent the characteristics of “Souls”.

How can SBT allow for greater pseudonymous composability?

6/ For example, if a lending platform like @AaveAave were to deploy an SBT, each address (Soul) could have unique on-chain identity, hence, enabling credit-score based lending and composability by other Dapps.

7/ What makes SBTs powerful is that it decentralises fundamental concepts such as credit score. Dapps are empowered to choose whose credit system they believe and develop their own judgement, instead of trusting because they have no choice.

8/ More importantly, SBTs enable various other critical applications and use cases, such as:

- Community wallet recovery
- Sybil-resistant governance
- Mechanisms for decentralisation, and
- Novel markets with decomposable, shared rights.

9/ Currently, there are no hard definitions of the core features of SBT.

With the idea of generalising SBTs for use by Web3 projects, we have come up with key features that SBTs should consist of 👇

10/ The design guidelines around the implementation of SBT are:

🔹Non-Fungible
🔹Non-Transferable
🔹Issuance and Verification of Souls for Composability
🔹 Privacy
🔹 Off-chain data storage for SBTs

We dive deeper into these features in the full article.

11/ SBTs may sound super abstract, but how does it look IRL?

On the blockchain, users are anonymous and with only addresses as a publicly verifiable attribute.

Projects can consider using SBTs as a mechanism for on-chain identification and storing a user’s KYC data.

12/ This enables the project to allow only KYC-ed users to interact with the project and then perform different actions based on the user’s KYC data.

Other projects should also be able to verify and perform operations on the user’s data on-chain.

13/ To ensure that users are not doxed, privacy is a cornerstone of SBT implementation.

A technique that we could consider is using Zero-Knowledge (zK) tech, which has been commonly used in zK-Rollups like @0xPolygonHermez, @Scroll_ZKP, @StarkWareLtd and @zksync.

14/ In a nutshell, zk-Proofs can be computed over SBTs to prove characteristics of a Soul (e.g., that it has certain memberships) without revealing its actual attribute.

For example, I can prove that I work in Web3 without revealing the company I work for.

15/ TL;DR:

SBTs are reputation-based, non-transferable, non-fungible tokens with data that can only be accessed by selected parties.

The integration of social identities with trustless composability, if done right, could change the future of the Web3 ecosystem.

16/ In this article, we laid out our vision for SBTs, their potential use cases, and the key features that should be implemented for SBTs.

We've sketched out the design principles of the SBTs, but this is just the beginning.

17/ SBTs are designed to bridge the gap of identity in Web3 while maintaining pseudonomity. We believe that it has applications in in the Defi, NFTs and GameFi space.

If you are interested in having a composable unique on-chain identity for your users, SBTs might be for you!

18/ If you have a radical idea for SoulBound Token use-case? We'd love to hear it!

Or if you are interested in integrating SBTs into your project, don't hesitate to reach out as well 📣

Check out the full article here: medium.com/@spartanlabs/t…

19/ If you enjoyed this article or you learnt something new today, do give us a follow @TheSpartanLabs and give us an RT to spread the word!

We’ve linked the first tweet below as well 👇

https://twitter.com/TheSpartanLabs/status/1567505091418279940?s=20&t=ZEYUiU7bHues6rAdhbj-rg