NFTs are widely despised, and rightly so. They tend to promote over-capitalistic behaviors, they hurt the environment, they come from centralized entities that often outright lie about their value… the list goes on. Billions are however invested in the technology every year. While many of the ideas conjured today are outlandish, real use cases are likely to appear in the near future. When we throw enough money and brain-power at an idea, we make it reality — it’s a self-fulfilling prophecy.
With this is mind, it’s healthy to consider the future of NFTs, when we’ve (finally) evolved beyond worthless monkey JPGs. A few months ago, the creator of Ethereum did just this by co-publishing a surprisingly accessible white paper about “soulbound NFTs” (a reminder that geeks are bad at naming stuff). I highlight below the key takeaways from the 35-page long research.
The problem with NFTs
The most realistic NFT use case today is within the realm of community-building. The technology can help companies, sports teams and artists interact with their community and reward them for their commitment to the brand.
Football tickets as NFTs are a simple example. A fan could receive a signed shirt if they prove with a unique, entry-activated token that they attended every match of their team that year.
The issue, however, is that a vast majority of NFTs today are A) transferable and B) cannot be revoked. This means that identification and active membership cannot be guaranteed, rendering communities relying on NFTs worthless and over-transactional. Meanwhile the real world revolves around non-transferable and revocable relationships — immensely valuable assets that cannot and should not be sold.
We do, in fact, live in a society. We are connected to one another in a thousand different and non-transactional ways, and our tech needs to reflect it. Web3 came to be mostly because of a lack of social links. To reach wide-spread adoption, it will need to reinforce these links, not erode them. One of the key challenges of the 21st century will be ensuring that we manage to square that circle.
This is where soulbound NFTs come in.
The solution : “Soulbound NFTs”
The name comes from Warcraft lore, but the similarities stop there. This specific type of NFT would not be transferable, and would create on-chain / digital proofs of our social links. Picture it as cryptographic wallet filled with unique tokens representing the companies you’ve worked for, fairs you’ve attended, schools you’ve gone to…
It will serve two purpose. First, it will aggregate online the specific social elements that make us unique (a bit like Facebook in the early days, but verifiable/traceable). Second, the “wallet” will highlight and categorize social connections between entities and people, creating a spiderweb of networks that enables a wide variety of use cases.
It embodies the theory of identity proposed by 20th-century sociologist Georg Simmel, in which individuality emerges from the intersection of social groups, just as social groups emerge as the intersection of individuals.
Let’s continue our example of the football fan. The tokens he accumulated representing the games he’s been to show he likes football. That’s very one-dimensional. If we add to this a token for the university he’s attended, for the job he’s been to, for the shelter he volunteers at, for the supermarket loyalty card he’s got… you start to see three-dimensional person emerge. Correlation and network effects are very powerful forces here.
It may sound dystopian, but assessing social context is something we do very naturally every day. You’re more likely to listen to a violinist in a concert hall rather than in the metro. A good brand name on a CV makes applying for a job easier. Good clothes tend to make a person seem more trustworthy. The list goes on. We can recreate this natural behavior online… and improve it to reduce current negative externalities.
Towards a decentralized society
The “soulbound” concept opens up a whole new world of social organization.
Reducing online manipulation
It’s difficult to see today if a decentralized project is a scam. So many of them are. We can now imagine a world in which every participant’s wallet is accessible on the blockchain, showing not only which entity has vouched for this person, but also the social value of these entities, how many people are linked to them, and how trustworthy these people tend to be. This traceable social spiderweb would drastically increase trust, and reduce the risk of falling for a scam.
The technology can also do away with a lot of online / web3 “cheating”. A system can be put in place to ensure that only socially “rich” or “reputable” wallets can participate in projects, ensuring that no one can create many wallets to influence governance in decentralized projects.
Improving social links
The above does not mean excluding people from less prestigious social background. Far from it. Having access to an unimaginable depth of data on social, real-world connections can ensure we prioritize access to assets / programs for those that need it most.
Some parts of society are heavily lacking in social contextualization. Hundreds of years of racism, sexism and homophobia will do that. Public wallets can help identify very specific social groups to onboard them and link them tighter to the rest of the world (think of it as the inner city / suburb divide caused by lack of public transportation).
Soulbound NFTs can also ensure that when decisions are made online, highly correlated wallet are given less power of vote to ensure we have real pluralism. This solves a HUGE real-world problem : decision-makers are often very correlated socially (same sports club, same schools, same interests…). This makes the decision-making offices of the world ground zero for “innocent cooperation” — which is today very much baked in the system.
Innocent cooperation happens even among people who don’t know each other, highlighting the need to create a new paradigm entirely. Using soulbound NFTs means we can assign a score to each project depending on its actual decentralization… and reward diversity.
Making more informed decisions
Today, loan-taking includes a thorough review of one’s finances, and little else. Taking out an insurance policy, however, entails reviewing every part of one’s life (where you live, who you interact with, where you work, your habits…). Why can’t this also be applied to loans? The strength of someone’s character is not limited to their income, and we KNOW many people just need a shot.
Soulbound tokens could offer a helpful additional avenue to review one’s loan request. It could also be applied for people looking to rent apartments, adopt a pet, a child…
Finding a community
If it feels like we go back to community again and again, you’d be right.
Soulbound tokens and the wallets they’re in are by nature transparent and accessible by all. This means we could more easily find people like us in some ways… but who are also very different in others. If you look at your friends and family, it’s likely you see that this is rare.
This kind of already exists today on Reddit and Facebook, but is being so heavily financialized that communities are slowly perishing under the weight of The Algorithm.
The many issues
It’s easy to get caught up in the excitement of a new technology. But, as with everything, soulbound NFTs could have a very dark side if we’re not careful. Saying “There are a lot of dystopian issues, but at least they’d be transparent”, as the soulbound paper’s authors do, is not good enough.
Creating a social credit score
As I wrote the above paragraphs, I was very careful to avoid the phrase “social credit score” — a much-maligned chinese “invention”. This is however very much what we’re discussing here. We have to be upfront with the fact that this technology is potentially very dangerous if misused.
This is why we need to make sure that governments are not in charge of such a system, and do not have the keys to the house. Governments serve a necessary, powerful role in society. They may even mean well. But the Orwellian risks are too great. Blockchain technology is useful in that regard, though I do not like the odds of the fight between “a few well-meaning web3 aficionados Vs the world’s governments”.
Furthermore, we need to make sure people choosing to opt out of such a system for ethical reasons are not punished in any way — an interesting social challenge if you think about it.
Cryptographic wallets are meant to be traceable, auditable and anonymous. The latter is the one I have an issue with, as some social detective work makes identifying their owners fairly easy. We don’t want to dox the world, especially using potentially very personal information. Targeting minorities or disfavored social groups is what society often does best, and this could be a terrifying tool in the wrong hands.
We need to test the technology with information we’re already willing to make public. I’m specifically thinking of the information currently on LinkedIn profiles or open-source projects, which could benefit from having a stronger authentication potential (diplomas, work history and code repository participation…).
The idea of programmable privacy through zero-knowledge proof is also a very powerful concept. Using this concept would make it possible to prove that you’re above 18 without revealing your birthday. It is however very difficult to achieve this at scale from a technological standpoint.
Losing a wallet
A “soul wallet” would be absolutely key to everyday life in the world I describe in this article. But, as anyone can attest, it’s very easy to lose a wallet, and even easier to forget a password. There is an elegant social solution: social recovery. The primary idea is to let people who know you vouch for you through a “vote of confidence”. If 50% agree that you are indeed you, you can regain access to the wallet.
But people lose touch, die, get influenced, and collude (rarely all at once). It might thus be very powerful to implement the concept of “community recovery” : a set of guardians socially linked to you through soul NFTs come together and regenerate a private key. This set would be automatically generated by an algorithm to ensure they are connected to you socially, but not through each other, making it difficult for them to collude and influence each other.
I’ve said it before, and I’ll say it again. Everything web3 invents already exists today. Soulbound NFTs are just shiny re-iterations of the Nakamoto coefficient and/or the Herndahl-Hirschman index. In fact, we’re not witnessing a revolution, but being presented with an opportunity to experiment on a wide scale to improve our current systems.
Whether we like it or not, some part of the crypto/web 3 world is here to stay. A robust identity and reputational system will be key to making it somewhat tolerable. Furthermore, it’s hard to imagine any of use interacting in any metaverse without being able to re-create real-world social links in it.
Good luck out there.