As the world prepares for a less centralized internet – aka Web 3 – identity verification becomes a hot topic of conversation.
Online platforms like LinkedIn allow people to display their education & professional credentials.
If you have ever interviewed people for a job, you know that sometimes people lie on their resume. Therefore, verifying that someone actually worked at company X can be part of the process.
Soulbound tokens are one way that people could share their credentials in a trustless environment without requiring the other party to verify.
This concept uses NFTs, but unlike speculative NFTs like Bored Apes Yacht Club, this type of NFT is non-transferable.
In other words, you cannot sell a soulbound token, and there would not be a marketplace for them.
If you have ever used a wallet to access a DeFi exchange, you understand that the way we log into websites is changing.
Instead of having a user name & password (which could get stolen if the website were hacked), a 3rd party wallet allows you to login via a more secure protocol.
But digital wallets don’t know much about you, so if a website wanted to ONLY allow access to people who work at a certain company (internal company network) or a certain school (alumni association), a Soulbound NFT would make that possible.
Soulbound NFTs are unique to each individual, similar to a digital ID.
However, you could have multiple “souls” for the various aspects of your life.
For example:
- a “work soul” that houses your professional & academic credentials
- a “gaming soul” with prizes you won & high score awards within games
- a “music soul” with POP NFTs (proof of attendance) indicating which concerts you went to
Within industries like finance, institutional traders could access DeFi trading platforms via their SBT. Project Guardian was a test for institutional bond trading using DeFi, and there would need to be a mechanism to ensure that only licensed bond traders were able to access the exchange.
Like most innovative tech, there are pros and cons. The concerns around SBTs are:
PRIVACY: some groups who are in a minority (ethnic, religious, political) may face discrimination if their associations are public. People should be able to hide that information if necessary to protect themselves from persecution
HACKING: What happens if your SBT is stolen by a hacker? If you have had your identity stolen (I have) there is no simple or effective process to restore ownership (the US Gov will not issue a new SSN).
AUTHORITARIANISM: Centralized governments looking to control citizen’s access to resources (aka a social credit score system) could use SGTs for nefarious purposes. A digital identity bill of rights is important to protect citizens from misuse of this technology, including when its positioned for “your safety”.
Soulbound Tokens could open up new decentralized platforms for people to work, live and play in. However, it’s important to openly discuss the pros and cons to avoid creating a trojan horse that cannot be easily undone.