1. What Are Soulbound Tokens (SBTs) and How Do They Work?
Web3 today has an identity problem. It is missing a critical identity infrastructure layer for the next wave of web3 use cases to thrive. At Masa, we believe soulbound tokens used as an identity primitive is the answer.
SBTs are designed to be the intersection between our unique identities, technology, and how we interact within a decentralized society. They are publicly visible, non-transferable, non-fungible tokens (NFTs) that can serve as a web3 user’s identity that is intrinsically tied to their owners.
Since they are non-transferable, SBTs authenticate the credentials of whoever holds them. First, there was email, then social accounts, and now there are SBTs - linking one's web3 wallet and activities with their identity while protecting privacy on-chain.
At Masa, we wrap SBTs with some magic to allow for holistic identity use cases, including the management of linked data.
2. How are SBTs Different From Decentralized Identifiers (“DIDs”) and Verifiable Credentials (“VCs”)?
Masa is pioneering using SBTs as a composable web3 identity primitive by combining both off-chain (web2) and on-chain (web3) financial data as our go-to-market entry point.
Currently, the two existing identity primitives in web3 are: decentralized identities (“DIDs”) and verified credentials (“VCs”). Fundamentally, SBTs differ from DIDs and VCs by one critical aspect: composability.
Masa’s SBTs achieve composability with web3 smart contracts for correct execution of code, privacy, coercion resistance, and censorship resistance. Masa SBTs are also built on a protocol level, so the code can be integrated across a wide variety of web2 and web3 applications.
3. Can You Talk Us Through Some SBT Use Cases?
Here at Masa, we recently launched the testnet of Masa Soulbound Identity, which will pave the way for the first soulbound identity standardized protocol in web3. There are a plethora of SBT use cases that will make verifying a user’s information easier and more secure.
Soulbound tokens solve the gap between user activity, personal information, authentication, and permissioned sharing.
SBTs can be used for decentralized Single Sign-On tools similar to the web2 social account linking user experiences; verifying DAO (Decentralized Autonomous Organization) participation and voting rights, on-chain KYC (know-your-customer) for digital assets exchanges, preventing fraud and attacks from bots or fake accounts, and establishing users’ financial identity on-chain to unlock the power of decentralized finance.
4. How Can SBTs Promote Financial Inclusion?
One of the first use cases Masa pioneered is utilizing SBTs to create on-chain credit reports, to help users establish creditworthiness in decentralized finance. Currently, 3.3 billion people are “credit invisible,” meaning they are creditworthy.
Still, their credit history is not associated with them in the traditional banking systems. For the first time, an on-chain identity can give the 3.3 billion credit-invisible people access to a global liquidity pool.
We use an amalgamation of 10,000+ web2 and web3 data sources to create on-chain financial identities for users in 78 countries.
With a Masa Soulbound Identity, users may establish their web3 financial identity, allowing them to access decentralized credit loans, and unlock credit and other financial products on-chain, which they previously would not be able to access.
Financial identities are the bedrock of decentralized finance. With users’ financial identities, lenders can start implementing risk-based underwriting and access a global liquidity pool in decentralized finance.
This ultimately breaks down the BlackBox and barriers from traditional finance, leveling the financial playing field and creating a more financially equitable world.
5. What Are Some Challenges When It Comes to SBTs?
SBTs are a new and innovative technological solution that are still finding their way into the fintech and web zeitgeist.
At Masa, we see tremendous potential in SBTs as the foundational identity layer to deliver real-world utility, through the use cases we laid out above.
It’s incredibly exciting to play a role in developing SBT technology and building a developer community to utilize them.
We’re rapidly launching new products and programs that make it incredibly easy for developers and partners in the web3 and DeFi communities at large to start building and using SBTs.
However, the largest hurdle we need to overcome is widespread adoption due to a lack of education about soulbound tokens. Once the foundation for SBTs is set, we are confident that the technology will become a standard across web3.
We see SBTs and true utility fueling the next crypto bull run.
6. When Will SBTs Become Available for Use?
Developers and users can already mint their Masa SBTs, .soul names, and web3 credit reports on Goerli testnet. Close to 70,000 users have experienced minting SBTs firsthand through Masa. Over 800+ developers have shown interest in building web3 projects using Masa Soulbound Identity.
Masa will be deploying our Soulbound Identity and SBT mainnet on Ethereum in November of this year, while onboarding a wide variety of projects and dapps to implement our SBT, SDK, and APIs.