What needs to happen for Soulbound Tokens to take off
In the last article (The Current Landscape of Soulbound Tokens), we left off with the main insight - the SBT space has a “chicken and egg” problem.
“In order for users to seriously collect SBTs, they need to get value from it. But in order for individuals, DAOs, and corporations to start providing value to SBTs, there needs to be an existing ecosystem of meaningful SBTs and users collecting it.”
Here is what I think needs to happen in order for SBTs to take off.
1. SBTs need to be more meaningful
In order for this space to take off, the SBTs of the future need to be meaningful and provide insight into the holders of SBTs.
So what exactly does this look like?
Nansen
One example is Nansen’s wallet tag. Nansen is a blockchain analytics platform, that generates a lot of useful insights. Part of their product is tagging wallets with various terms that help makes sense of all these on-chain actions.
By looking at this user’s tags, I can easily tell this user is an active DEX trader based on their “Elite Dex Trader” tag, or they hold some rare NFTs based on their “Rare NFT collector” tag.
While these are simply tags on Nansen’s platform, they are a perfect example of what SBTs should be: insightful and meaningful.
Flipside Crypto
Another example comes from Flipside Crypto. Flipside is a crypto analytics platform that releases SQL bounties. These bounties are then completed by their community of analysts in return for some crypto. In this model, Flipside’s employees are the ones judging each submission and determining if it’s worthy of getting paid.
Currently, accomplishing a bounty would only show up on their platform; but they are another example of a meaningful SBT.
Having them as SBTs enable Flipside’s community of analysts to easily showcase their skills in SQL and their “expertise” in that subject area. This could then serve as data points to job recruiters looking for SQL analysts or firms looking for researchers in that particular topic.
Spotify
If you’ve noticed, the first two examples were companies in Web3. This means this could easily be implemented showing you meaningful SBTs aren’t far ahead. Here’s another example of a potential SBT a Web2 company like Spotify could issue.
If you’re an active user of Spotify, you’re probably familiar with “Spotify Wrapped”. It’s their yearly reflection feature that provides you with various insights as a listener. These data points are more examples of what SBTs could be.
For example, an SBT that represents “I’m a top 0.001% listener of The Weekend” essentially means you’re a super fan of The Weekend.
This data point could then be used by The Weekend to reward his most loyal fans in a number of ways. He could release exclusive merch to SBT holders or give them a chance to first buy tickets at his next sold-out concert.
This data point could also be useful for other artists looking to target hardcore Weekend listeners. The possibilities are endless once this data point is open to everyone as an SBT.
2. Who issues the SBTs matter
While having meaningful SBTs is important, the issuer of SBTs is just as important. In a future with countless of SBTs, the ones separating the signal from the noise will come from the credibility of the issuer. In this case, being able to verify the issuer will be extremely important.
Before continuing, it’s important to clarify that SBTs can be broken down to represent on-chain and off-chain data. SBTs that represent on-chain data include issuers like RabbitHole and Noox World. SBTs that represent off-chain data include issuers like POAP.
This is an important distinction because SBTs that represent off-chain data will rely heavily on the credibility of the issuer. This is because “trust” now falls on the issuer instead of being able to verify on-chain data in a permissionless manner.
3. Standardization of metadata
For value to be found in SBTs, they need to be easily discoverable. While this can take place on the application level, it also takes place on the metadata level. Having some sort of standardization among metadata will allow individuals, DAOs, and corporations to easily filter through SBTs.
While it’s still early to tell how this could look, standardization will most likely take place on a category level instead of SBTs as a whole. This is because SBTs and NFTs in it’s simplest form are tokens that can represent anything and everything.
4. Tools & Infrastructure
While there are many pieces of tools and infrastructure that need to be built, some of the most notable ones include aggregators and minters.
Aggregators are important because they also help in the discoverability of SBTs. This allows users to easily manage and display their SBTs in a meaningful way. It would also allow individuals, DAOs, and corporations to quickly identify SBTs that matter to them.
Minters are also important as they allow anyone to issue SBTs easily. While there are a few players that are trying to monetize this, this should ideally be a public good that benefits the whole space.
Conclusion
As you can tell, we are still extremely early for SBTs to get to where it needs to be. While some of the points above are notable, they are by no means the only ones that need to take place for this space to take off. Some other ones include privacy, which is already being worked on by projects like Sismo.
Like everything else in Web3, there are countless things that still need to be built. But the end goal of what SBTs could bring forth is a vision worth building towards.
Stay tuned for my next article on how I think SBTs enable a new business model.