Several Interesting Use Cases for Soulbound Tokens
Different SBTs refer to different financial service licenses, so these wallets can build and possess different types of smart contract financial services, such as lending, decentralized exchange services, etc.Author: James QU@Tokyo
Can you tell the difference between twins? I think, of course, it’s not a problem, even if they are identical twins with the same DNA. Why? Because from the very beginning of life, they absorb energy separately, act independently in different ways, receive feedback differently, process the same and different inputs separately, and gain completely different experiences. All these different experiences shape their distinct personalities, ultimately making them different individuals.
Today, I want to talk about "Soul Bound Tokens" (SBT). I imagine my body as a virtual wallet, with daily experiences flooding into my wallet like tons of SBTs—some trivial, some significant, some I can control, some I want to keep, some I dream of getting rid of, some I might want to keep confidential, some completely out of my control, and some I want to make public. These are all characteristics or requirements of SBTs.
Before delving into the details of SBTs, I want to share a somewhat vague memory here. I think it was a boring afternoon in 2020. A few of us gathered in a conference room at WeWork in Shanghai. David ZOU was also there; he graduated from Harvard University and is a well-known blockchain economist, while I was the oldest among us, practically ancient.
We were discussing how to establish a regulated decentralized exchange on a public chain, thereby opening a wormhole between public chains and traditional financial services. After several hours of intense brainstorming, and later with the participation of LatticeX Foundation founder Sun Liling, we created a new keyword ACT, which stands for "Authorization & Certificate Token." After that, David published at least three papers. In early 2021, I also proposed a high-level technical design for ACT tokens on the Alaya public chain, a pioneer of the PlatON network. Now I realize that ACT tokens are actually a type of soul bound token, and according to my classification, they belong to the first category below.
SBT Categories
Here, I attempt to describe it using three element groups, thus covering a broader scope than the original paper.
Here are three elements \
Where issuer belongs to {self , other } this set
owner should also be {self , other } this set
ControlMode indicates that SBTs should have multiple similar ways, with the following four types
- issuer has complete control, which we can call the IC mode
- owner has complete control, which we can call the OC mode
- no control at all, which we can call the simple NC mode
- algorithm control, which we can name the AC mode
The term "controlMode" (IC, OC, NC, AC) indicates the operations that can be performed on the minted SBT, with revocation, expiration, and transfer operations defaulting to be out of scope, as we are discussing SBTs.
Based on the above scope, we can summarize the following different types of SBTs:
- \<issuer, other, IC>: issuer mints SBT for other, issuer has complete control
- \<issuer, other, OC>: issuer mints SBT for other, other has complete control
- \<issuer, other, NC>: issuer mints SBT for other, no control
- \<issuer, issuer, AC>: issuer mints SBT for self, algorithm control (e.g., expires when certain conditions are met)
- \<issuer, other, AC>: issuer mints SBT for other, algorithm control (e.g., expires when certain conditions are met)
Now ignore the following two cases, as they are very simple
- issuer mints SBT for self, issuer has complete control
- issuer mints SBT for self, no control
Where complete control means revocation, expiration, and any other operations you might think of (depending on the protocol).
ACT Tokens for Regulated Financial Services
ACT tokens actually belong to the first category mentioned above (\<issuer, other, IC>), in which the issuer has complete control over the SBT after "minting" it for the target wallet. Let’s look at the application scenarios for regulated financial services.
In this scenario, as we intensely discussed that afternoon, the issuer is an institution or government department that becomes the regulatory body in the traditional financial services sector through KYC certification. The issuer can mint a special SBT, thereby announcing on-chain and off-chain that it is that regulatory body.
Then, the issuer mints different types of SBTs into a set of wallets, which must go through the issuer's KYC process; in other words, these wallet groups are equivalent to licensed financial service providers.
Different SBTs refer to different financial service licenses, so these wallets can build and possess various types of smart contract financial services, such as lending, decentralized exchange services, etc.
Medical Application Scenarios
Similarly, certified public hospital entities can use the first category (\<issuer, other, IC>) to mint different types of SBTs into patients' wallets. Information such as medication history and allergy history will follow and protect the patient for life. When patients participate in symptom-sharing programs (of course, all data will be protected by privacy-preserving AI platforms, such as the joint protection of Datum and PlatON), pharmacies that have undergone KYC certification can mint participant SBTs into the patients' wallets. These SBTs will provide benefits such as discounts on new medications.
Education, Military Service, Charity, and Work Experience
For education, military service, charity, and work experience, I recommend using the second category (\<issuer, other, OC>). Certified universities, military institutions, NGOs, charitable organizations, training institutions, and companies can mint SBTs with rich metadata attributes. Individual users can control the portion disclosed externally. I might want to destroy records of exams I failed, highlighting my outstanding educational experiences. To prove military service, I can use those tough experiences to demonstrate my mental strength.
Sports Membership, Entertainment Membership, etc.
Any entertainment group or sports club can design various SBTs; I might want to obtain an SBT for the MVP title, for example, which could grant me a three-year free golf membership. In this application scenario, this history remains history, while the benefits have an expiration date. These can be realized using either the first or second category.
Decentralized Social Networks Enabled by Soul Binding
I believe we can imagine many interesting application scenarios. The key is that SBTs can establish a complex, cross-verified social network. Individuals will be more independent, unbound by enterprises, with greater freedom and potential for creativity. This is the healthy decentralized society I want to enjoy.
Donating to high-quality projects based on SBTs (digital identities or wallets) will become true charity, and you might receive an SBT in return, proving your contribution when the project succeeds. I indeed see opportunities for free and open collaboration here.
Algorithm Control Mode
The fourth category (\<issuer, issuer, AC>) and the fifth category (\<issuer, other, AC>), especially the fifth, help shift the role of AI from dominance to a democratic approach, with PlatON and LatticeX moving towards the latter. If I have more ideas, I will share them in the next article.
Binance's Approach
Binance's approach is more like an implementation of ERP-4973. Community activities are very rich, and I will closely follow the long-term development of Binance's plans.
Challenges Faced
Digital identity is as simple as a digital wallet, but it is not yet suitable for everyone. Many people still cannot enjoy the digital metaverse and are far from entry.
Next time, I will explore more details about ACT design, reminiscing about the past and envisioning the future.
References:
- ++Decentralized Society: Finding Web3's Soul++
- David ZOU: How Can Public Chains Support Compliant Financial Applications? ------ Based on ACT Solutions
- David ZOU: Blockchain Research 2021, Issue 13 (Total Issue 110) FT and NFT in Compliant Financial Applications and Insights on "Alaya+ACT"
- David ZOU: Blockchain Research 2021, Issue 12 (Total Issue 109) Requirements of Compliant Financial Applications for "Public Chain+ACT"
- Binance: ++What are SoulBound Tokens++
- ++ERP-4973++
