Earlier this month, Vitalik Buterin, founder of Ethereum, co-authored a 37-page paper on the future of Ethereum and what he calls Soulbound Tokens (SBTs).

For obvious reasons, when Buterin calls something “the future” of Ethereum, we listen.

So today, we’re going to give a quick breakdown of SBTs and why they’re important for, as the paper puts it, a “decentralized society.”

It begins with the question of how we make Web3 safer, more secure, and more useful.

The usual answer, according to the developers, is simple: build more advanced technology with more advanced cryptography with more advanced utility.

While true, Ethereum is taking a step back and questioning the assumption that more advanced cryptographic methods are a cure-all.

Though necessary, there’s another aspect that needs attention: what many cryptonauts call “Layer Zero,” or the human layer.

And perhaps big solutions are simpler than most suspect.

Why Web3?

Ultimately, Web3 is about digital ownership. It’s about having control over your data, social network, investment portfolio, personal identity, etc.

Economic activities are financial in nature, but they’re also built on relationships. And relationships are built on identity.

Currently, Web3 identities are made up of 16-digit addresses and Ethereum domain names.

Not good enough.

Web3 still relies on centralized entities — like Twitter and Opensea — to verify identity.

Not good enough.

SBTs are one way to solidify the relationship layer of blockchains.

In real life, we look for people who have specific experience, skills, or knowledge. SBTs are a way to show those things in Web3.

They can be used to establish provenance and reputation. But they can also be used for more advanced things like community wallet recovery, decentralized governance, and markets for shared rights and royalties.

It’s an idea that could change the way we seek opportunities, collaborate, and even build businesses in the future.

So What is an SBT, Really?

Yeah, it’s a weird name.

Crypto doesn’t often do itself any favors in this department.

The name “soulbound” comes from World of Warcraft’s “soulbound items” — items that, when picked up in the game, can’t be transferred or sold to other players.

Brass tacks, SBTs are non-transferable NFTs. You can’t transfer or sell your SBT, but the issuer, in most cases, can revoke it.

Therefore, SBTs can be used to represent commitments, real-world credentials, certificates, work history, rental contracts, and a lot more.

In other words, your collection of SBTs can act as a Web3 resume.

But it goes further than that.

According to Buterin, any market built on scarcity, reputation, and authenticity could be made better through the SBT model.

It also revives the reputation-based economy, allowing you to flex your skills and cutting down on scammers.

If SBTs become as big as Vitalik thinks, they represent a massive opportunity for those who act fast.

We’re currently on the lookout for ways to invest in this trend before the herd.

Chris Campbell
For Altucher Confidential