Discussion Post: Are Soulbound Tokens the best way to create a trusted layer on the blockchain?

[ivanplazacic]

Thank you @jmcgirk for starting this very interesting topic. I enjoyed reading this discussion.

@dwither

evaluating who made the claim, their expertise, their experiences, and their motivations

It seems that the underlying question here is Who would have the ability to or, rather, what would be the criteria to allow someone to mint attestations if they are not endorsed by a Centralized institution? Would anyone with an Ethereum address be able to do so? Or, more precisely, in the case of small-scale subjective attestations (@dwither), if the entity is a small business or an individual, would their attestation be worthless in the beginning while they build up a reputation and accumulate positive attestations themselves? If this is the case, I wonder how the conversion of an entity that enjoys a certain reputation in the off-chain world would look like when they decide to transfer their business on-chain. Especially, if the attestations are used in the way of reviews as @Yesh already mentioned. It seems that it would mean building one’s reputation from the ground up and basically running two groups of followers both on and off-chain, until the wider blockchain adoption happens.

@dwither

But consider the difference between a degree awarded by a low quality perhaps fraudulent university, compared to an ivy league school. Decentralised attestations would be similar, but with even more questions regarding who is providing the attestation. THe biggest limitation for decentralising attestations, is what they can actually attest to.

In the case of Universities or Centralized institutions, I don’t see a reason for them to be anonymous on the blockchain. That being said, if an institution already enjoys a good off-chain reputation, is there a reason for them to not be trusted on-chain? If, however, an individual is anonymous on the blockchain, then the attestations they own should be the measure of reliability.

There should be some coexistence between the community-issued and institution-issued attestations. As it is in the traditional business world, as well as education, both private and government-run institutions are issuing all kinds of attestations that are not less worth just because they are issued by a private company/university or a non-accredited institution. There are diplomas and certificates equally worth and even companies that issue certifications that are close to or on par with an undergraduate diploma. For example, what gives credibility to Google Certificates, is the fact that they are issued by a reputable company, even though it’s not an accredited program.

@jmcgirk

On some level existing legal frameworks would probably apply in most cases, although if codes on a wallet, then any funds might be gone for good!

If we ought to be relying on the issuer’s positive history and credentials for issuing attestations to others, it would make sense to not have their SBTs deleted off the blockchain in case of death. In doing so, wouldn’t it inherently render others’ reputation invalid since the issuer’s reputation is gone?

I think there is a way for most web2 (social media) profiles to be removed upon one’s death. If the current legal framework is such that the web2 digital legacy can be deleted, what happens to the on-chain legacy that is there to provide reputation for other users i.e. would this necessitate at least some new legal work to maintain at least the most important minimum attestations? Would this pave the way for creating a new way of keeping public records - on-chain or is it the beginning of the end for the core trait of the blockchain - immutability?

This begs the question - if the alterations to the blockchain such as reversible transactions get implemented, would there be an on-chain record of which tokens/transactions were reversed?

@Woodrow_Jackson

Only bad part I see in this for a soulbound token once its on your wallet. Its on your wallet forever. Which is the main and biggest concept of soulbound tokens.

I wonder if this might be a good situation for the application of ERC-721R (reversible) token? If the ban or the marker needs to be lifted, the token might be reversed by the issuer if all the conditions are met. I see this as an opportunity to actually build in some caution within the community and for the bad actors to know that they might get punished if they act out. Provided that there is a record that shows that such a marker existed at some point.

[dwither]

@ivanplazacic

It seems that the underlying question here is Who would have the ability to or, rather, what would be the criteria to allow someone to mint attestations if they are not endorsed by a Centralized institution? Would anyone with an Ethereum address be able to do so? Or, more precisely, in the case of small-scale subjective attestations (@dwither), if the entity is a small business or an individual, would their attestation be worthless in the beginning while they build up a reputation and accumulate positive attestations themselves? If this is the case, I wonder how the conversion of an entity that enjoys a certain reputation in the off-chain world would look like when they decide to transfer their business on-chain. Especially, if the attestations are used in the way of reviews as @Yesh already mentioned. It seems that it would mean building one’s reputation from the ground up and basically running two groups of followers both on and off-chain, until the wider blockchain adoption happens.

Yes, I think a key question that comes up often is ‘who gets to decide?’ Or even, who gets to decide who gets to decide. I envision an ecosystem where significant numbers of small and medium enterprises can confer attestations upon each other, which over time will build up reputation which can be used as a currency in a way that money cannot.

As to on-chain/off-chain, I think there should be ways to import current reputation from off-chain sources as a kind of foundation to build upon, but the key differentiation would be reliability. As on-chain reputation builds up, off chain reputation will possibly become less useful.

@ivanplazacic

In the case of Universities or Centralized institutions, I don’t see a reason for them to be anonymous on the blockchain. That being said, if an institution already enjoys a good off-chain reputation, is there a reason for them to not be trusted on-chain? If, however, an individual is anonymous on the blockchain, then the attestations they own should be the measure of reliability.

Yeah, I am thinking of the individual with the attestation as being anonymous, but the the issuer of the attestation being visible. Knowing that X anonymous person has Y degree from university Z has value, but it can also reduces anonymity. If you have a PhD from a very prestigious programme, then there are only so many people you could be etc.

@ivanplazacic

There should be some coexistence between the community-issued and institution-issued attestations. As it is in the traditional business world, as well as education, both private and government-run institutions are issuing all kinds of attestations that are not less worth just because they are issued by a private company/university or a non-accredited institution. There are diplomas and certificates equally worth and even companies that issue certifications that are close to or on par with an undergraduate diploma. For example, what gives credibility to Google Certificates, is the fact that they are issued by a reputable company, even though it’s not an accredited program.

Aye, who gets to decide who gets to decide. The quality of the attestations is what is important, so I expect some sort of process will need to be developed to monitor the quality of the attestations.

[BenjaminMukoro]

In my opinion, soul-bound tokens (SBTs) are very much akin to certification systems and have a wide range of potential use cases.

SBTs and Non-fungible tokens (NFTs) may be applicable to different aspects of the same transaction. For example, in works embodying some form of intellectual property, NFTs may be used to create specific representations of a work while SBTs to attribute the origin to the creator. This concurrent use of SBTs and NFTs would conform to the distinction between use rights and the moral right of attribution.

Concerning the issue of decentralization, while SBTs as originally conceived give issuing entities a measure of power similar to that associated with centralized institutions, ‘claims’ as an alternative or improvement to SBTs would lack the evidential weight of an SBT issued by an entity that controls the concerned process/activity. Although there is a broader problem of subjectivity associated with certification systems, this would be more pronounced with extrinsic attestations distributable by a public key.

This also leads to the question, in relation to DAOs, whether some measure of centralization is needed or in fact inevitable. Again, the question surrounding the inevitability of centralization touches on the possibility of dystopian outcomes for specific projects and for DAOs as a new global organizational paradigm. With the permanent nature of blockchain records, if DAOs come under central control, then data would end up being controlled by a small and powerful circle.

As regards the permanence of SBTs, there is the question of how they will impact the right to be forgotten in some of their use cases such as credit reporting. In order not to totally eliminate the right to be forgotten in the use of SBTs, particularly with records that lose their validity, how can SBTs be revoked?

[Austin_jul]

To provide a brief overview, soul-bound tokens are a form of token that can retain a record of a person’s life and actions. These tokens are used to digitally identify persons in a manner that is decentralized (academic, social, personal, etc.).

Individuals are able to represent not just themselves but also their unique traits and the communities in which they participate as they earn SBTs that serve as symbols of their connections, memberships, and qualifications.

Souls have the ability to cultivate reputations, reveal where they originated, enter financial markets without the need for collateral, and safeguard both their identities and reputations through individualization.

I’m intrigued by this question. If the purpose of blockchain technology is to address the problem of trust, does it make sense to design a token that encourages people to trust each other?

@jyezie

Why do we need a trusted layer when the blockchain itself is supposed to bring some trust?

Additional investigation has turned up various uses for SBTs, such as a DAO voting replacement. Instead of the current governance model, which is dependent on how many tokens a member holds, DAOs might issue SBTs that assign voting power based on users’ interactions with the community. The most loyal users would have the most voting power under the SBT principle. Sybil’s attacks are one of the biggest problems with the way DAO governance is set up right now. DAO voting might be able to protect the integrity of DAO voting.

A preventive measure for the Sybil attack is the minimum nakamoto coefficient, which can be used to track a system’s degree of decentralization. The degree of decentralization in the system increases with the value of the minimal Nakamoto coefficient. The more decentralized a system is, the more resistant to attacks it will be. The main concept is to

• Find out the fundamental components of a decentralized system

• To determine how many compromised entities would be required to take control of each system,

• To determine how effectively the system is decentralized, choose the least of these.

To take down a DAO, one or more malicious actors must seize control of the majority of the governance tokens. Voting can be rigged and the project can be directed in their favor by the individuals who have the majority of the votes. Because they are visible and checkable, SBTs could help identify and stop malicious players from entering the DAO. Corruption and Sybil assaults might be prevented by doing this.

As a result, we can see that SBTs are an idea that is to be welcomed. To what extent, though, does this suggest that one will have to start over to earn SBTs?

Because of the slow adoption of blockchain in some regions of the world and the lack of strong reputation infrastructure in other regions, don’t SBTs disadvantage those who find themselves in this situation?
Could SBTs in a system produce some level of inequity within a DAO? The presence of SBTs in a system has the potential to make a decentralized autonomous organization (DAO) less equitable. If this is the case, then there is a possibility that totalitarianism will emerge from inside the system over time.

When it comes to the long-term viability of SBTs, there is a question about the effect that they will have on the right to be forgotten in certain applications of the technology. How can SBTs be revoked in a way that does not completely do away with the user’s right to be forgotten while using SBTs? This is especially important when it comes to records that have outlived their usefulness.

[Samuel94]

I am happy reading and learning about SBT and that it can be used in the education institution, health, and virtually anything that requires proof of identity.

However, i have concerned about SBT faciliating decentralisation of personal information, especially in public Blockchain where anybody can have access to it. That will expose some sensitive information to risk. In a situation for an instance where a patient stores personal information about him or her concerning particular damning sickness. A person can have access to it and use it to discriminate against the patient. This will also pitch the soul against the General Data Protection Regulation. Therefore are there mechanisms to ensure Protection of personal information from breach?

[Ulysses]

@Samuel94 your observation looks similar to James’ question below.

@jmcgirk

Should tokens be revocable and how might that best be implemented, particularly with respect to GDPR?

If yes, this reply by dwither proposes some interesting perspective you might consider.

@dwither

There has also been further discussion between Puja and Kate Sills on the topic of privacy. Sills argues that the papers authors are just “hand-waving away privacy as future work”, while she sees this as a show stopper for the idea. While I am in complete agreement with Sills on the importance of privacy, I do this see this as a solvable problem.

For example, an SBT or profile might hold private information that one does not generally want to share with the public (we could use basic demographic data such as age, gender or address as an example). At the same time, there might be significant value in understanding the demographic profile of a community. It should be technically possible (either now or very soon) to build a ZK system where this data can be securely transmitted from an SBT with a verified identity that holds this information, and then aggregated with all other members of the community. The only data publicly available would be the aggregation, which is made up from the private data of individuals. I’d describe this as micro level privacy, and macro level transparency.

This is just a simplistic example, however, there are a lot of complexities and nuances that would need to be explored to ensure privacy. For example, if a group of individuals is too small, some info might be individually identifiable if their data is enough of an outlier. There’s a whole field of academic research which explores these problems in real world research, which should be applicable in this context as well.

[Samuel94]

Very well.

Data Protection and Privacy is an issue here

[Cashkid18]

Nice discussion post with lots contributions already.
For me, i believe that Soulbound tokens will be very beneficial in a community where there is a lack of trust and distrust because they may help establish provenance and reputation, so alleviating the problem of trust in Web3.Soulboundtokenss will help to assist Web3 advance by reducing reliance on centralized Web2 architecture. It points out, for instance, that a lot of users store their cryptocurrency in custodial wallets run by centralized organizations like Binance, and that NFT creators rely on centralized marketplaces like OpenSea to sell their creations.
Soulboundtokens also aim to prevent the “hyper-financialization” of cryptocurrency and the usage of NFTs as status symbols.By building socially verifiable reputations, Soulboundtokens can also aid in navigating Web3’s distrustless and mainly pseudonymous nature. let’s take for an instance, anyone can claim to have graduated from University of Nigeria, but having a Soulboundtoken from the institution can be used to validate the person academic background on Web3.

In conclusion, Although the idea of Soul and SBT seems promising, people have wondered what would happen if you misplaced the keys to your Soul? Does that mean your SBT is irretrievably lost? But the good news is that on the basis of the white paper, a solution called “community wallet recovery” was proposed. The keys can be found with the aid of the soul community. Soulboundtoken is an intriguing invention with numerous uses both inside and outside of the cryptosphere.

[ivanplazacic]

Around two weeks ago (Oct. 18th), Roofstock real estate company sold its first property in form of an NFT, on Etherium. Tokenizing real-world assets (or real estate for that matter) is not a novel concept, but what makes it relevant to the topic is how they approach privacy/compliance issues in a market that heavily relies on extensive checks. Supposedly, they use KYC to mint an SBT in order to be onboarded on their NFT marketplace, as well as to their community. For this reason, there’s no need for escrow or good faith in general because the good standing is already proved through the SBT.

Here is the transaction, if anyone is interested.