ArkStream Capital: A full analysis of the current state and future direction of soul-bound tokens
Larissa
TL; DR
1. SBT is a proof of relationship rather than authority, its value lies in the massive accumulation of data, complexity, richness, and diversity, which will be the core competitiveness of SBT data source.
2. The accumulation of data will give a “soul” to each account. Pre-processing and classifying the information will label and characterize the account, which can greatly enrich the application scenarios of the identity on the chain, and even predict its behavior.
3. Privacy is a luxury, and editable privacy is a track with great demand but full of challenges.
4. 4. The formation of a decentralized society requires natural persons to be strongly bound to on-chain identity, which increases the replacement cost of identity and generates identity dependency.
5. SBT can be applied in decentralized financial scenarios such as loans by building on-chain credit scores and hierarchical KYC.
Contents:
1. Decentralized society and soul-bound tokens
2. SBT and related racing tracks under the OSI model
a. Information collection and processing
b. Transmission and storage
c. Binding
3. Future direction of SBT
Decentralized society and soul-bound tokens
Vitalik Buterin once again mentioned POAP and its future possibilities at ETHCC 2022, saying “POAP will be a way to distinguish real users from the bot in web 3.0”. This is not the first time Vitalik has mentioned POAP, the earliest badge-proof project has drawn Vitalik’s attention since its launch, as of 2022/8/1, 916332 wallets have relevant badges, and many large events have chosen to incorporate the concept of the participant to mint. The “distinction between real people and machines” means that Web3 identities and data are no longer limited to the virtual world of the internet, but rather break the boundaries between the virtual world and reality, and are given “personality” to become comparable to reality. In the Web2 Internet world built in the past decades, characters were virtual, images were fictional, souls were separated from characters and images, and reality and virtual were completely separate. In contrast, in the Web3 construct, characters are real, images are multifaceted, and the soul is bound to the real character image. Reality can be virtual, and virtuality can be real.
The concept of “soul-binding” in Web3 is described in Vitalik’s article “Decentralized Society: Finding Web3’s Soul”, named after World of Warcraft, which paints a detailed picture of a Web3 society. Compared to its description of a Web3 society, our current marketplace is like a train, we are at Web2.5 at most and still far from Web3, with the regulation of Tornado Cash and the DAO voting to liquidate the whale, which all prove that we have drifted away from the original goal of the blockchain. This train is loaded with DeFi, GameFi, NFT, and various ownership restitution concepts, highly financialized and extremely wealth-creating effects to attract countless train chasers, in the long run, we may gradually lose faith in the industry and become blindly profit-seeking under the endless hacking, witch attacks and the lure of money. Especially in a crypto world with strong asset movement and lack of punishment, the pursuit of more profit may become the only pursuit of Web3 residents. Pure financialization will be detrimental to the continued development of the industry as a whole, and another worse scenario is that new technologies will lead to another reshuffling of wealth, i.e., the industrial revolution followed by a centralized system wrapped in the sugar coating of decentralization.
Vitalik chose to lay a new track to this car by adding the solution of Soul Bond Token (SBT), thus guiding the whole Web3 direction from Web2.5 to a true Decentralised Society, DeSoc, Decentralized Society. A truly decentralized society, DeSoc, is highly combinable, and the construction model of society is no longer the top-down model of unified deployment by a centralized government, but chooses to return ownership to the individual as the center to spread outward, thus forming a bottom-up, people-oriented social system. In this social system, wealth is no longer concentrated, individual ownership is recognized and respected, and identity is no longer a black-and-white birth certificate, but a network of relationships consisting of events and related people.
Vitalik believes that to achieve such a society, a publicly visible, non-transferable and wallet-bound token: the Soul-Bound Token SBT — is an essential part of the process that will give each account a “humanity” and thus make a decentralized identity increasingly fleshed out. The SBT is similar to the POAP badge concept mentioned above, but with the added feature of non-transferability. It is a proof of relationship rather than a proof of authority. Let’s use an example to illustrate what “proof of relationship” means: Alice gets an SBT for attending Bob’s birthday party, but this SBT can only be seen as evidence to prove Alice’s participation, it cannot prove that Alice is Bob’s friend. Their relationship can be positive, negative, close, or distant. As Alice continuously participates in the activities where Bob appears, a large amount of data accumulation can lead to the conclusion that they are friends or even lovers. Now, by replacing Alice with an account and Bob with DeFi and GameFi, we can conclude whether the identity behind a certain account is a game master or a senior leek (people being oppressed and exploited).
In the real world, a large number of behaviors constitute word-of-mouth, and word-of-mouth generates raw trust, and such trust is what SBT wants to quantify and achieve through technical means. The non-transferable feature gives SBT certain credibility, and with the passage of time and the accumulation of a large number of SBTs, it can gradually develop into the credibility of the account, thus giving the account a certain characteristic. The solution proposed by SBT is to issue SBTs as proof of participation in every event, whether it’s online or offline so that over time, combined with the transactions and interactions on the chain, each account can be bound to a growing person rather than just a wallet. Perhaps, single events and proofs can be easily faked, but as time accumulates, the more complex features are difficult to be copied, and a large number of features with credibility is enough to constitute a “person” with high authenticity. The emergence of SBT is enough to fill this part of the gap and give more possibilities to the whole crypto industry.
SBT and related track analysis under the OSI model
The OSI model is the most common protocol model on the Internet and is the fundamental step in supporting the interoperability of all parts of the vast Internet. The OSI model corresponds to seven layers: the application layer, the presentation layer, the session layer, the transport layer, the network layer, the data link layer and the physical layer. These corresponding layers can transfer our information to any computer quickly and precisely. If we consider the user at the application end as one end and the receiver at the other end as a virtual identity in the DeSoc society, in order to construct a decentralized identity with complex characteristics, referring to the framework of the OSI model, we try to divide the existing cryptographic industry from the underlying facilities to the application layer as follows:
How many steps does it take to put an elephant in the refrigerator? Just three steps. The first step is to open the refrigerator, the second step is to put in the elephant, and the third step is to close the refrigerator. From a user’s point of view, applying SBT also requires only three steps, which is quite simple. The first step is to use the SBT-related application, the second step is to mint the SBT token, and the third step is to save it to your wallet. These three simplest user actions contain the three most important steps of SBT: 1. information collection and processing 2. transmission and storage 3. binding. By applying each of the seven layers of OSI to the three steps of SBT use by users, the following diagram can be obtained by looking at the existing industry ecology once again:
Next, this article will analyze the whole ecology of the encryption industry from the specific solutions covered by each layer, take the existing SBT-related projects as examples, and propose some common problems in the industry to explore the future direction.
Information collection and processing
The collection and processing of information cover two layers: the application layer collects and sends information, and the presentation layer edits the information into a suitable form for transmission, which are the most focused areas of SBT-related project development. The greatest value of SBT lies in the accumulation of data, especially data that cannot be quantified originally, which will greatly improve the analysis of the behavior pattern of an account. Early SBT projects are bound to encounter strong obstacles, especially before the data accumulation can be scaled up. A large amount of data will only be developed, used and paid for if it can generate commercial value. Let’s take a closer look at the existing market situation:
A. Application Layer
The development of the application side is currently focused on two main areas: proof of participation and segmentation projects based on specific use cases. Projects in this category aim to record relationships: some focus on individual behavior records, others on individual and event records. A large amount of development is currently focused on this branch. A common project in the first category is to issue SBTs to users based on behaviors and transactions already available to the wallet.
The earliest POAP badge program, although not an SBT, was the first relevant program to support project owners in organizing events and using POAP’s platform to offer their own NFTs, which can be transferred; Quest3 is a platform that provides various tasks for DeFi, DAO, and GameFi platforms, allows users to participate in the community by completing tasks and rewards SBTs. Noox analyzes wallet addresses and sets up nodes to collect SBTs accordingly. After reaching a certain achievement, for example, after using Dapp a certain number of times, you can receive an SBT on the platform. Project Galaxy aims to build a data credential network that issues on-chain credentials to users for their on-chain and off-chain behaviors, which helps developers use data credentials to compute user credit scores, find the target audiences, and reward community contributors.
The second category is targeted projects based on specific usage scenarios, such as DeQuest and CarvIO, which are currently focused on GameFi or DeFi. These subdivided tracks already have a large user base.
DeQuest
By studying the knowledge of Crypto and the game to obtain SBT, the game data can also prove their game level, and eventually, the relevant data can become the basis for participating in the whitelist.
Carv IO
Forming reputations based on wallet data, it now supports viewing a variety of chain games, and then a badge in the form of SBT will be issued after reaching certain types of tasks. As for game guilds, they can cooperate in selecting scholars to cultivate based on the platform’s user data.
From the above projects, we can see that the current form of data collection on the application side is quite single, and the starting point of many projects is to try to analyze the behavior of already existing users, lacking some multi-dimensional data in different scenarios, such as offline meetings, or data such as the length of using the platform. We believe that complexity, richness, and diversity will be the core competencies of SBT data sources.
In addition, data credential projects such as POAP and Galaxy, although it was born before the release of the SBT concept, and their data credentials are mostly tradable NFTs, their product forms and ultimate visions are similar to SBT, and we do not rule out the possibility of switching to issuing SBT at a later stage to further enhance the network effect of users.
B. Presentation Layer
The presentation layer is focused on the development of contracts and protocols. These protocols try to establish common rules for SBT, which can be applied to a variety of DApp development.
Marry3
proposes the Paired Soulbound Token protocol, which allows the marriage scenario to appear in Web3, where two accounts can be bound and can be divorced by multiple signatures.
In addition to project-specific SBT contract development, there are also a large number of other contract projects on the market today: EIP-4973 Account-bound Tokens, EIP-6114 Soulbound Badges, and ERC721S Soulbond. These are all ERC-721-based contract types and are essentially logo-based contract types, as represented on the application side. Marker-type contracts can be used to issue proof of participation or graduation certificates, but are not supported for some that need to be accumulated by volume and time, such as reputation. This is the current problem of SBT development in the application and presentation layers:
(1) Almost no one has developed protocols that require a time dimension, a contribution dimension, or a purely quantitative accumulation. In fact, it is the accumulation and time to bring quantitative and qualitative data that is the key to SBT. (2) A large number of protocols are developed using completely different contract formats, which leads to a clutter of data in SBT, and there is no way to merge and accumulate the collected data, which eventually leads to scattered data on the application side, and in the long run, these scattered data are not good for recording and analyzing the behavior of an account. (3) The existing solutions do not have detailed processing and segmentation for SBT data; SBT is a highly personalized application model, and a large amount of data will lead to a mix of useful data and useless data. Like green beans mixed with red beans, it is difficult to filter them by bulk packing. Because of the high degree of liberalization in collecting information, which leads to most of the information is in a format that is not only irregular but also requires human efforts for artificial sorting and filtering. Detailed screening of profitable data is also an essential part of SBT.
For these existing problems, we believe that SBT-related projects can make the following improvements in information collection and processing:
1. Enrich the product structure of the application side
The current products on the application side focus on issuing proofs to others for marking, and the data collected by a single model is often single. Ideally, Application-side products should support the collection of different categories and dimensions of information and target the collection of relevant data according to specific application scenarios. Currently, new rules are being developed for the DAO community’s voting, airdropping, whitelisting, and other behaviors. The market for this part of the development has been very responsive. We are looking forward to new governance methods and participation statistics in the increasingly depressed DAO track, SBT can completely change the model of the DAO community and truly reward deep participants.
DAOU
DAOU uses Soulbound Token and Social Oracle to convert members’ activity data in DAO (Discord activity and participation, forum Q&A, GitHub code contributions, DAO roles, and connections) into verifiable data on-chain.
2. Enrich usage scenarios through account tagging and characterization
Since SBT can build on-chain identity credit, why not anthropomorphize accounts, assign personality traits to each account through data accumulation and analysis, and then predict the reaction in a specific environment based on personality traits? For example, if Bob’s tag is Game Master, then in some games with high difficulty factors, we can predict through machine learning that Bob will probably buy and become a high-end player of this game. If a similar application is combined with lending, it is possible to predict within what amount a particular account will definitely return the money owed. This part of the game is yet to be explored, but tagging personality behavior can facilitate users to build emotional links to accounts. data analytics platforms like Nansen already have tags for addresses such as Smart Money, and this type of tagging can help build on-chain identities. Tags and hashtags can also be linked to each other to make accurate predictions about account behavior. For example, if Bob is a Game Master and an Option Lover, a simple account tag can be used to analyze their behavior of Bob in what price range is the risk taker and the stop loss point in the corresponding game NFT. The behavior of a single account can be classified and predicted according to the label. The characterization and tagging of accounts will not only attract users but also simplify the development of the application side, not only that, because of the highly personalized property of SBT, it can be customized for individuals in the direction of precise push, precise marketing, and personal product design.
3. Incorporate time into the direction of protocol layer development and create more unified protocols and developer tools
The current protocol development does not cover the variable of time. At the same time, the current protocol development is in the state of each playing its own game, and there is no unified protocol. The next direction to explore should be to create protocols that are extremely pervasive and easy to use. Also based on protocols, more mature developer tools are needed. If a more unified protocol cannot appear in the short term, then the protocol developed based on ERC-721 can think about the corresponding data conversion and comparison. As an example, there is a more unified conversion standard between TOEFL and IELTS. Even though the pursuit of fineness is lacking, user profiling can be performed within a generalized scope.
4. Pre-processing and classification of information
A large amount of information and irregular data format will make the whole SBT record processing incredibly difficult. The reason why financial data is the easiest to exploit is that the format is fixed. However, the data format of SBT is highly uncertain. There is no way to screen the data for usefulness in a large amount of data. A more uniform filtering rule can be developed at the application level to roughly classify data according to priority. Data with higher priority, such as transfers or data with higher confidentiality levels, are classified into one category. The less important data, such as attending a meeting, are classified as secondary priorities. Classify data that are not clear as to their usefulness as TBD(to be determined). Target data processing and transmission according to the priority of the data. Rough classification and hierarchy of front-end applications can make data processing much less difficult and allow developers to focus on the maintenance of security and privacy.
Transmission and Storage
In the collection and processing of information, the functions of the application and presentation layers have integrated multiple data. Secure and efficient transmission is very important. The purpose of the session layer is to establish a secure channel to transmit the data, and the purpose of the transport layer is to split a large amount of data for traffic control.
These two layers are the underlying facilities related to SBT. These are also tracks of high interest to the industry, and these tracks are not only relevant to SBT but are also the cornerstones of the entire Crypto industry.
C. Session layer
The keyword for the session layer is security. This security is not only the security of the wallet but also the security of privacy and the pursuit of decentralization. SBT can provide creative security solutions.
Burn My Wallet
A wallet security tagging software that uses casting SBTs to alert other users and protocols to hacked wallet addresses. These SBTs cannot be deleted and are tied to the account and will then be alerted to the risk as soon as they access the project’s API. Compared to existing centralized products that mark risky addresses, the on-chain marking of SBTs can help more people understand the security risks of their wallets.
Such a creative and new playful idea will be the unique surprise that SBT brings to the market. The current security projects in the market are telling the story of stolen and locked wallets or preventing wallets from being stolen. There is a complete gap in terms of recovery of wallet property and contingency measures for discovering the theft. On-chain tagging is a new way to play with what SBT brings to the table. The exploration of this part may bring us a better security-type application.
The technical characteristics of SBT lead to heavy difficulties in trying to achieve decentralized pursuits. Because the information data of SBT is completely open source, even if the wallet is anonymous, the users’ pursuit of security, decentralization, and privacy will become stronger and stronger as the binding between on-chain and off-chain identities becomes deeper and deeper.
From the user’s point of view, privacy, security, speed, and a series of other pursuits vary from person to person. These rights and interests should not be free but should be classified as a service. Since everyone pursues different degrees of privacy openness, security, and decentralization, these luxury goods should be clearly priced and classified. The degree of decentralization, openness, and speed of each data transfer comes from the price paid. Express delivery has a special label, fast label, the service should be able to. The pursuit of privacy should not just be about encrypted transfers and identity hiding. Currently, neither privacy public chains, privacy transfers, nor highly decentralized, centralized public chains are individually designed for privacy. Editable privacy would be a new direction to pursue.
Privacy has three levels of classification: access, editing, and cash flow, i.e., whether data can be accessed, edited, and used for profit, and the three rights should be treated separately. The current classification of privacy is simple and rough, either opting for complete hiding or open source blending, but the rough approach does not allow for efficient use of the data generated by SBT. If privacy were carefully categorized and modularly charged based on different tiers of development and maintenance, privacy projects would attract the market in large numbers. The current market perception of privacy is still at the level of protection, but no one is focusing on the profitability of selling privacy and charging for access. In the future, each person’s level of privacy openness is determined by themselves, priced by themselves, and maintained at their own expense. Consumer privacy will become the mainstream of the future, and giving privacy some profitability will be the only way to stimulate the masses who do not value privacy to take up arms and defend it.
D. Transport Layer
The existing solution for the transport layer is how to process data in large quantities. The act of processing data in large quantities can be understood as whether it can be chained in large quantities, whether it supports data storage, and whether it can screen the chained data as well as the data that needs to be stored. The solution of this layer put into the whole cryptocurrency industry is the problem of scaling and decentralized storage that everyone is discussing, while the corresponding problem of SBT is simpler but obvious: how to screen a large amount of redundant data and how to choose the way of storage. These issues are not standardized and are completely personal. Even with the aforementioned pre-processing of data, the collected data from a practically fully spread application layer cannot be processed at the same time.
Storage is the biggest challenge faced by the SBT track. How can so much data be stored to ensure the authenticity of the situation, arbitrary access and not to get lost? Decentralized storage requires a lot of manpower and resources to maintain, and the efficiency is slow, while centralized storage is not trusted by the market. Based on this situation, Farcaster adopts a semi-centralized storage solution — hybrid storage, which may be a compromise solution for the current situation. Since information hierarchy was mentioned earlier, can the highest level of information be kept on the chain, yet the remaining unimportant data be kept off-chain for individuals, or entrusted to a unified storage service, similar to AWS? Perhaps the combination of the two, the priority and the degree of decentralization against each other, in which to choose the optimal solution is the effective way out.
The problem of transmission and storage is not only a problem faced by SBT but also a common problem in the crypto industry. We believe that the following development directions can accelerate the development of SBT and also bring new thinking to Infrastructure.
1. Customization of rights and benefits and tiered fees
People with high demand for privacy, decentralization, and security can choose to pay high maintenance fees. Those who are less interested in privacy and decentralization will choose a more rough solution. By tiered rights and fees, the revenue generated can be used to reward the maintenance staff, thus ensuring appropriate motivation.
2. Editable privacy
Even privacy, a single pursuit does not satisfy the increasingly complex use of the population. In the future, customization will become the most common feature, with the process of globalization, community hugging, and the popularity of personalization will greatly affect our behavior patterns. Privacy will be the indicator of the next era. Editable privacy will be another convergence of rights and technology.
3. Hybrid storage
Inefficient and expensive decentralized storage will face great challenges, and the mature centralized model cannot be replaced in the short term. The intersection of the two models will produce two scenarios: either decentralized storage can be efficient and large amounts of data will be stored and transmitted, or the entire industry will choose to compromise and opt for hybrid storage until a technological singularity occurs.
Binding
Binding is a point that has been repeatedly questioned in all concepts of SBT. Most people believe that even though SBT can record all actions and give us a second identity as individuals on the chain, however, if the wallet account can be changed at will, it means that “binding” is useless. We believe that the formation of a decentralized society requires a strong binding between the natural person and the identity on the chain, creating “identity dependency”.
Compared with reducing the cost of identity switching, increasing the cost is beneficial to the construction of Web3. If the cost of replacement is greater than the benefit of replacement, then most people will choose to keep their existing status, thus achieving binding. In addition, human nature is lazy, and long-term behavioral habits will once again increase the cost of replacement. Accordingly, there are two “costs” that can affect users: 1. time and 2. money. Increased replacement costs may restrain humanity in the absence of penalties. SBT comes with a time cost, which can force users to invest a lot of time in an account over a long period of time, and users will be rewarded for their long-term efforts. In contrast, the cost of money is greatly weakened by the transferability of crypto assets, which is a problem that needs to be solved.
It is also important to note that increasing the cost of changing “identities” facilitates “binding”, but in no way increases the cost of changing account addresses, which can cause more serious problems. In the “binding” step, we will explore the solution in detail through three layers: network layer, data link layer, and physical layer.
E. Network layer and data link layer
The most important role of the network layer and data link layer on the Internet is to confirm the transmission address and receiving address, which is represented by IP address in Web2, and the most representative binding and receiving address in Web3 is the wallet public key private key system. The current market solutions focus on enhancing the ease of use for the user portal, the public key private key, these irregular hash function greatly reduces the ease of use of the wallet, just as complex as mailboxes, the bank accounts will provide nickname function, led by ENS domain name project to try to increase the ease of use of the wallet to reduce the difficulty of use. The increased ease of use will make the wallet easier to bind and more recognizable.
However, users are powerless against forgetting, theft, and other security risks that lead to wallet replacement and discard. The loss and theft of a private key can result in an “identity” that is no longer trusted, so it is particularly important that the wallet be recovered. SBT can truly achieve waller retrieval, if the authenticity can be confirmed through SBT, then it is also possible to determine whether a person is real through the contributions of a certain account in the community and connections established with community members. In the article Desoc, Vitalik writes that users who lose their private keys can regain ownership of their wallets through community recovery. The most understandable example is WeChat account recovery, where friends and family can help users recover their accounts by sending specific messages to WeChat. SBT would give the same relationship as well as authenticity to the crypto world, a direction of exploration that could add new possibilities to the existing wallet security.
A large number of wallets or user portal-related projects focus on how to make wallets popular and increase their ease of use. For example, Metamask started with a token display and gradually added an NFT display and embedded its own swap system.
Torus
Torus helps users to generate and manage their own private keys, and they can also authorize others to manage their accounts together.
Wallet security and ease of use is a double-edged sword, as the threshold for wallet use does not prevent users from discarding their “identity” at will, and the vast majority of users actively hold multiple wallets and change them at will. The concept of binding is fundamental to the possibility of binding a natural person to the on-chain identity represented by the wallet. In other words, there is a real person behind the on-chain behavior and that person is not profiting from the mass generation of wallets. The two most common project categories are social graphs and DIDs. social graphs, led by Lens Protocol and Cyberconnect, attempt to integrate all actions on the chain and share data within the same system to achieve uniformity of identity on the chain. Many new social graph projects are now trying to combine SBT and the social graph.
Flamingle Labs
Flamingle Labs is a Web3 social product built on offline activities. Users can naturally engage in Web3 social networking to build a distributed social account graph. The project hopes to solve the problem of too few effective Web3 social users, full of fake accounts, and users’ DIDs being too flat by transforming offline activities.
DID is one of the most successful tracks to bundle with SBT, and it is either focused on discovering account attributes by analyzing single addresses or correlating off-chain data with on-chain.
DefNetwork
Def Network is a collaborative tool for creating user tags for wallet addresses. After downloading the plugin, Def Network can Integrate and analyze the on-chain data of addresses and generate tags. Developers and users can index specific tags and query addresses on Def Network.
IdentDeFi
Web3 identity information plugin that allows users to mint a non-tradable NFT by connecting to a wallet, linking to a bank, and obtaining KYC authentication to complete identity authentication. The project uses Zk-proof technology to ensure user privacy.
KNN3
KNN3 is based on a set of behavioral analysis logic to filter and classify the behaviors on the chain, using the address as the unit, adding attributes to the address through behavioral analysis, or defining the relationship between two addresses, so as to understand the relationship between accounts and develop a social graph.
Whether it is the social graph or DID, if it can be combined with the related technology of SBT, we can get twice the result with half the effort. The existing methods of off-chain identity and on-chain identity binding are too crude, and most of them choose less secure methods, such as KYC by uploading documents and binding bank cards. In fact, not all identity verification needs off-chain KYC to be completed, and SBT combined with on-chain behavioral data can replace part of KYC usage. In our opinion, KYC can be used in a hierarchical manner. Some low-security behaviors, such as airdrops, can be fully verified by SBT to screen out in-depth participants. Some behaviors that require high security, such as lending, require identity verification as well as SBT data-assisted verification. The essence of lending is the trust mechanism and how the borrower can ensure that the lender can pay back the money through the trust mechanism. In traditional society, the act of borrowing money is highly tied to social relationships, and a person’s reputation, social status, and economic strength can most influence that a person can borrow money. SBT is characterized by bringing a network of relationships into the chain, and this network of relationships has a cost, when the cost of giving up a wallet is greater than the amount of a small loan, this lending scenario without knowing the real identity of the other party is established. SBT can build the credit score on the chain, and then decide the amount of unsecured lending for different grades of small loans. The accounts with longer time, deeper involvement in the community, and more complex relationship networks can borrow more unsecured or low collateral rates lendings. The exploration of this direction can be linked with NFT, DeFi, and other tracks.
F. Physical layer
The physical layer is a special layer. In Web3, except for mining machines in various senses, we can hardly find objects corresponding to “fibre and cable”, but if we look closely, we will find that Web3 In Real Life is quietly spreading in corners we don’t know.
NFTPlay
NFTPlay takes the NFT picture frame as an entry point to create DID exclusive NFT mobile display device, combining NFT corresponding DID identity with exclusive movable hardware to explore the interaction scenario between digital identity and the real world.
From a series of NFT products such as Artblock which emerged from the fame of NFT exhibition displayers to Solana Mobile Stack’s Android smartphone — Saga, a new message is being delivered to us: Web3 fibre has sprouted and products that meet various application scenarios have started to emerge. As proposed at the Hannover Messe 2013, Industry 1.0 is the era of the steam engine, Industry 2.0 is the era of electrification, Industry 3.0 is the era of information technology, and Industry 4.0 is the era of intelligence. A new industrial revolution is taking place, where intelligence is given to machinery, invisible and untouchable algorithms, computing power, and information flow are loaded to entities, and the barrier between reality and virtual is in danger.
In the future, we may see some products with Web3 identity binding as the application scenario, these products completely serve the on-chain identity and will be deeply bound to the real world. In addition to cell phones, there may be brand new, beyond-anticipated items bound to people: chips, bracelets, and even crystal implants. These products, which are beyond imagination, increase the cost of replacement, thus ensuring that the “soul” of the identity is deeply bound to it and difficult to replace.
In summary, the “binding” step involves the network layer, the data link layer, and the physical layer, which are more closely connected to the physical world. When we extend SBT to the identity layer, wallets, social graphs, and physical devices are some of the directions to be explored. We believe that SBT can only be further deeply bound to people by increasing the replacement cost. Based on such a vision, we summarize some industry problems that can be improved by SBT.
1. Wallet Retrieval
The high cost of replacement ties people more closely to their “identity”, and with that comes the problem of wallet security. With the social connections established through SBT, wallets can be retrieved or replaced with multiple people cross-verifying.
2. Alternative to off-chain KYC for credit lending
SBT combined with on-chain relationships allows each “identity” to have a cost, a leading model that does not require verification of the true identity of other parties is established when the borrowed amount is less than the cost. SBT can be combined with on-chain credit scores to provide different levels of small loans, complementing the vacant scenario in which the KYC identity information is required to be on the chain to lend.
3. physical devices and virtual reality
In the future, we will see some physical devices with Web3 identity binding as the application scenario, completely serving the identity on the chain, so that the “soul” of the identity is deeply bound to the individual.
The future direction of SBT
Compared with the bottom-up Web3 stack theory, we refer to the OSI model, deconstruct the user’s behavior from the user’s perspective, divide the behavior of “soul binding” into three steps, and then explore the industry issues and exploration directions involved in each step. Since Vitalik proposed the concept of SBT, Builders in the industry have been exploring it in various directions. We take this topic of SBT to think about some existing problems of decentralized society and Web3, and also make predictions on the future development direction of the industry:
1. Protocol is king
The first SBT-related projects in the market will focus on setting up rules and unifying protocols. The blossoming of the application layer will occur after the emergence of more unified protocol rules related to SBT.
2. Everything on the chain
More and more offline behaviors and on-chain interactions will be issued with proof of participation in the form of SBT. These proofs do not need to be real or meaningful at the beginning, but only need to be enough. When the volume of data is large enough, effective filtering and classification mechanisms can help on-chain identity to be established effectively
3. Combinability of on-chain credit and DeFi
Even if Vitalik’s original intention of proposing SBT-related concepts is to solve the current Crypto industry’s highly financialized problem, the financial applications brought by credit generation are indeed a more market-acceptable area. Defi is still limited to over-collateralized lending, and if credit lending can be fully introduced, it may explode into a new life.
4. Privacy editing re-empowerment
Privacy is always the most expensive luxury in the pockets of the rich, and even though zk-related technologies are often used for scaling projects that can get higher market attention and valuations, privacy will be an inescapable topic in the next digital days. SBT-related editable privacy research will empower existing privacy products, and privacy tiering will make identity data the hard currency of Web3.
In addition, the way of thinking from user behavior is not only suitable for SBT, all the heavy application sides and the related tracks of users can be substituted into this model. The transport and storage layer is like a huge water purifier. All the data collected at the application side, after formatting the protocol, all enter this huge water purifier, some contents are stored in the chain, some are carefully filtered and processed after passing through the water purifier, and these data are shunted to different pools under the different needs of each party. The small pools contain extremely personal data and information for each person, which can be used by the developers on the application side once again for a different purpose through the intermediate filtering layer. The closed loop is alive and well. Ultimately, we will find that the common issues that the entire industry can’t live without are scaling, storage, security, privacy, and decentralization. A major breakthrough in any of the underlying directions is enough to support the booming development of the application layer, which is the direction that many industry practitioners are chasing night and day.
References:
[1] https://dune.com/dvd819/poap-summary-dashboard
[2] https://zhuanlan.zhihu.com/p/347036222
[3] Decentralized Society: Finding Web3’s Soul
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4105763
[4] https://mp.weixin.qq.com/s/fUxVx9HK8J44HOf6Y1yqKA
[5] Farcaster White book https://www.farcaster.xyz/docs/intro
