An Overview of Vitalik Buterin's New Paper "Decentralized Society: Finding the Soul of Web3"

Author: William M. Peaster, Bankless

Compiled by: The Way of DeFi

This week has undoubtedly been sluggish for the cryptocurrency and NFT markets, but this is merely a reflection of market conditions. In contrast, it seems that our ecosystem's knowledge and research foundation has just made a significant leap forward.

Notably, the core research of this paper revolves around the non-transferable "soulbound" NFTs and their new humanistic possibilities, a topic that Vitalik Buterin has been exploring throughout this year.

After reading this new paper, I was reminded of my feelings when I first discovered Ethereum, filled with hope for a better future and a belief that we have the thoughts and means to truly begin realizing it.

However, perhaps you don't have much time to browse through this 30-page paper, or you might find some of the concepts a bit confusing. Don't worry! Below, we will explain, summarize, and quote some important ideas from the paper's authors so that everyone can quickly grasp the basics of Decentralized Society (DeSoc).

Introduction to Decentralized Society (DeSoc)

Main Ideas:

• Currently, web3 primarily revolves around financialization and transferable assets.
• However, many mainstream economic behaviors (such as "unsecured loans and building personal brands") rely on non-transferable social relationships, which are built on trust and persist over time.
• The authors propose non-transferable soulbound tokens (SBT) held by "souls" (i.e., accounts) as a better way to encode social relationship networks in web3.
• SBTs will encode these relationships by tracking the "commitments, credentials, and connections" of souls on-chain.
• Decentralized Society (DeSoc) will rely on SBTs to allow "souls and communities to emerge together from the bottom up, co-creating various network products and intelligence within a certain scope."
• If this continues, DeSoc could pave the way for new property and governance mechanisms that "reward trust and cooperation while protecting the network from capture, extraction, and domination."
• In summary, DeSoc points the current hyper-financialized state of web3 towards a "more transformative and diverse future where returns increase with social distance" (more information on social distance here).

Souls and Soulbound Tokens (SBT)

1. "Soul" is a synonym for accounts, wallets, etc.
2. "Souls" can hold SBTs, which are non-transferable, potentially revocable, and initially public, while later privacy SBT use cases will become more feasible.
3. SBTs can track "affiliations, memberships, and credentials," such as "educational certificates, work experiences, or […] hashes of works or artworks."
4. SBTs can be self-issued by "souls," but importantly, they can also be verified by other "souls" that are "counterparties to these relationships."

Possible Use Cases for Decentralized Society (DeSoc)

1. Artists

Artists can use their "souls" to publish NFTs, thereby staking their reputation directly on their work in an on-chain manner. Artists can also create their own SBTs for different purposes, such as linking their NFTs to on-chain collections to deepen provenance. Thus, SBTs and the social networks they map can help guard against plagiarism, deepfakes, and more.

2. Unsecured Loans

In the DeFi space of web3, unsecured lending use cases remain clunky, so SBTs can be used to create a "bottom-up alternative to replace top-down commercial and 'social' credit systems."

What is appealing about this idea? SBTs could serve as a means for individuals to use their reputation as collateral for loans without needing to provide collateral upfront.

The authors write:

"Loans and credit lines can be represented as non-transferable but revocable SBTs, thus nested within other SBTs of the soul. Until they are repaid and subsequently burned, or better yet, replaced by proof of repayment."

3. Social Recovery

In web3, you don't want to lose access to your wallet, because in a DeSoc environment, you will lose access to your "soul."

Social recovery wallets like Argent allow you to rely on trusted relationships (i.e., guardians), which is currently the best way to long-term protect your Ethereum account. However, over time, maintaining a closely-knit group of active guardians may become tedious, so "social recovery" through SBTs might be a better option.

Why is that? Because SBTs track the communities you belong to, so if you need to recover your "soul," SBTs can be used to "leverage the broadest real-time relationships to ensure security," rather than just a few guardians. Some implementation mechanisms still need to be devised, but this concept is certainly feasible.

4. Soul Airdrops

So far, airdrops have been a rather imprecise or inefficient way to cultivate new web3 communities. In contrast, SBTs could allow for "gathering communities at unique soul intersections."

The authors point out:

"Soul airdrops are airdrops based on the calculations of SBTs and other tokens within the soul, for example, a DAO wanting to gather a community in a specific L1 protocol could soul airdrop to developers or other tokens reflecting attendee identities (like POAP) who attended 3 out of the last 5 meetings."

5. DAO Defense

Community governance-centered DAOs face the threat of Sybil attacks, where users hold multiple wallets to increase voting power, and SBTs would provide a way to defend against such attacks, as they can more easily separate "unique souls from potential bots" to deny "any soul voting rights that appear to be Sybil attackers."

6. Flexible Property

Today, in most cases, NFTs grant their owners the right to use, destroy, or profit from the asset once. But outside of NFTs, it is hard to find situations where all these property rights are provided to a single owner. Consider how you might use an apartment according to a lease but cannot destroy it, etc. With SBTs, you can not only mimic mainstream property methods but also create novel approaches for web3. For example, the authors mention the possibility of local currency experiments where SBTs could make a currency more valuable to souls residing in a specific area or belonging to a specific community.

Why Decentralized Society (DeSoc) Matters

"Web3 aspires to broadly change society, not just the financial system. However, today's social structures—families, churches, teams, companies, civil society, celebrities, democracy—are meaningless in a virtual world (often referred to as the 'metaverse') that lacks the primitives representing human souls and the broader relationships they support. If web3 avoids persistent identity, trust and cooperation patterns, and composable rights and permissions, we will see Sybil attacks, collusion, and a limited economic realm of fully transferable private property, all of which will trend towards 'hyper-financialization.'

To avoid hyper-financialization while unleashing exponential growth, we propose enhancing and connecting our sociality in virtual and physical realities, empowering souls and communities to encode rich social and economic relationships. But merely building on trust and cooperation is not enough. Correcting biases and tendencies towards excessive coordination (or collusion) between trust networks is crucial for encouraging more complex and diverse relationships that span greater social distances than before. We call this 'Decentralized Society (DeSoc)': a collectively determined sociality where souls and communities emerge from the bottom up as new attributes of each other to produce diverse network products at different scales.

We emphasize that diverse network products are a feature of DeSoc because networks are the most powerful engine of economic growth but are most easily captured by private actors (like web2) and powerful governments. The most significant economic growth comes from increasing network returns, where each additional unit of input generates more output. […] When neither purely public goods nor purely private goods, but rather partially and diversely shared goods, network efficiency is maximized. DeSoc provides the social foundation to decompose and reconfigure rights […] and establish effective governance mechanisms between these rights to enhance trust and cooperation while checking collusion and capture."

Conclusion

Currently, DeSoc remains just a concept and a research area, not something we can dig into in the wild today.

However, with Ethereum and NFTs, we already have the necessary infrastructure, and these technologies will continue to evolve. Through this paper on "Decentralized Society," we already have a basic blueprint, especially as many projects begin exploring soulbound NFTs.

"Ethereum is the Shire of hope. An eternal, programmable, global financial and coordination infrastructure. It is a campfire around which we can gather to create a cyberpunk world and a solarpunk world."

I believe that critics and supporters often focus too much on today's web3, which is entirely reasonable and absolutely worth discussing and striving for, but in the eyes of myself and many other dreamers, we can't help but indulge in and envision what is to come.

Before DeSoc truly arrives, we have a long way to go, but after the release of this paper, we can feel more clearly than ever that the future of NFTs will be broader and more social than many of us previously imagined.