# SBTs explained - DeSoc

**Published by:** [MakC](https://paragraph.com/@makc/)
**Published on:** 2022-05-18
**URL:** https://paragraph.com/@makc/sbts-explained-desoc

## Content

SBTs explained (based on Vitalik’s DeSoc paper):application and conceptual use cases. On 11th May 2022, Vitalik posted a paper on his work with @pujaohlaver explaining the concept of Soulbound tokens (or SBTs). Vitalik has been spending time this year digging deep into the concept and came up with multiple IRL applications for SBTs. Below I breakup the concept into smaller pieces for better “processing”, however few personal views and opinions may be shared. The problem For some applications, a well-known problem of web3 is the anonymity of the wallets and a lack of a decentralized proof of identity in chain. The pitch The main idea behind SBTs is for users to have a social profile of them with records on the blockchain. Think of this profile like an Announcement board where anyone else can come up and post a paper with some information on it. Users of web3 will have a wallet to which protocols/wallets can attach a soulbound non-transferrable NFT. An educational institute will mint your degree on-chain, a bank will mint the proof of you taking a loan on-chain, your workplace will mint the proof of you working with them on-chain. Since the NFTs are non-transferrable they might also act as PoA for events, votes etc. Governance becomes much more democratic if the weight of the vote doesn’t have to depend solely on the voter’s holdings of an asset (even though, I think it should play a certain role in major decisions for a protocol whatsoever). Sybil attacks can be fought off with a lower rate of false positives and negatives. Applications of SBTs in a DeSoc Artists “When issuing a tradeable NFT, an artist could issue the NFT from their Soul. The more SBTs the artist’s Soul carries, the easier it would be for buyers to identify the Soul as belonging to that artist, and thereby also con Wallet recovery Today, if you want to keep your funds secure (and you have a significant amount of your wealth stored on chain i.e. “in crypto”, you might consider the option of using a multisig shared between N people, or social recovery wallets like Argent, which let you lean on trusted relationships. Choosing a reliable circle of friends&family may sometimes be tedious, and the concept of “social” recovery makes sense. Since the SBTs on your profile reflect the communities you belong to, members of those communities can help you recover the private key to the wallet.This, however, “would require a member from a qualified majority of a (random subset of) Soul’s communities to consent”. The exact number of guardians to select and the percentage of the guardians needed to consent are still key security parameters for further experimentation. One-liner use-cases“Souldrops” as a more democratic system of airdrops which consider only wallets with a certain cluster of impractical-to-game SBTs on them.Non-collateralized lending How does lending in web3 work atm ? Using over-collateralized loans for borrowing assets and basically getting a long position on the asset. Let’s ignore the infancy of the system and we can strongly judge that over-collateralized loans are certainly far from efficient way of market-making. Loans and bonds are used in financila markets in order to divert money from “those who have it” to “those who need it” . This is what makes the markets efficient. Obviously in the current state of the space non-collateralized or over-collateralized loans are not possible to be implemented. IRL loans function based on social trust and we have learnt till now, societal reputation can be built by using SBTs. A user’s identity will have SBTs minted to their wallet whenever they will take a loan from some protocol and the status of the loan will be easily tracked on chain. This is somewhat similar to the credit score provided to us by the banks but without the extra layer of dishonest centralization removed. “SBTs offer useful security properties: non-transferability prevents transferring or hiding outstanding loans, while a rich ecosystem of SBTs ensures that borrowers who try to escape their loans (perhaps by spinning up a fresh Soul) will lack SBTs to meaningfully stake their reputation”. Gaming Social-bound tokens in gaming will be angle to track on-chain the progress that the user has made in the past, his experience in playing games on the blockchain, guilds that he has played for etc. Gaming guilds often face a problem of finding this data from the user’s profile in an easy-to-get way. However, with SBTs that are minted to the user’s profile this date becomes available for everyone to analyse. Non-transferability of the tokens ensure that the tokens of “experience in the game” are not bought or acquired in any other way other than actually playing whatsoever. Projects like Respct develop the functionality needed to implement this on-chain. Plural sense-making Application of SBTs to predictive models based on ML&AI is probably one of the least salient yet impressive one. Currently, “the dominant paradigm in AI eschews incentives, instead hoovering up (public or privately surveilled) data feeds and synthesizing them into predictions through proprietary large-scale, non-linear models—harnessing the default web2 monopoly on “usus” without any “fructus” ple sources for outputs and/or doesn’t reward the sources of data which is used for training. These 2 setbacks can be resolved with SBTs in the following way. “Under team deliberation models, members can be weighted based on factors like past performance and peer evaluation, and the team participates in semi-structured discussions to pool information that can’t be encapsulated simply in a buy or sell contract.”. Technically, a more combined effort of several teams will allow multiple sources of output to finally decide the true prediction with a much higher accuracy. If you have ever interacted with Decision trees, you might remember the jump in efficiency of predictions based on a single tree and a random forest. Draw the parallels yourself. SBTs would enable predictive agencies to build a reputation based on previous achievements/work. With the advancement of scaling solutions on chain, implementing AI models makes more sense day by day. If you want to read more on an example implementation of the same you may take a deeper look into Starknet’s approach to applications of AI models to be brought on chain with their technology of zk proofs here. Summary Majority of the use cases described above are conceptual for now and cannot be applied straight away. However, considering the humongous amount of enthusiastic teams working on it, the first used cases of SBTs seem to be not far away (I bet the first ones will be in gaming and finance). Let’s see where it takes us.

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