Web 3.0 is one aspect of the blockchain and crypto space that has gathered global attention. It is no hidden fact that the Web 3 ecosystem is growing in leaps and bounds. However, this fast-growing ecosystem comes with its fair share of pitfalls.
Soulbound tokens (SBTs) are set to provide radical changes and development to the fast-growing Web 3.0 ecosystem. Prior to its launch, Web 3 dApps had to mostly rely on airdrops, token sales, etc. to build its community. This process, however, opens up the ecosystem to hacks and Sybil attacks, etc. The introduction of soulbound tokens (SBTs) will bring much-needed accuracy and precision to the Web 3.0 ecosystem. Furthermore, propounding a workable solution to issues facing Web 3.
This article covers in detail important facts about soulbound tokens (SBT) and what these tokens mean for Web 3, DeFi, and the entire blockchain and crypto sphere.
According to Vitalik, Soulbound tokens (SBTs) are “the future” of Ethereum.
Earlier this month, he co-authored a 37 page paper describing them and their role for Ethereum.
Here’s a TLDR…🧁 pic.twitter.com/aWmlYjyJlG
— pastry (@PastryEth) May 24, 2022
More on Soulbound Tokens (SBTs)
According to the co-founder of Ethereum, Vitalik Buterin, soulbound tokens (SBTs) are “the future” of the Ethereum chain. In line with this, Vitalik also recently co-authored a paper covering an in-depth analysis of soulbound tokens. The paper also reviewed the possible role of SBTs in the Ethereum ecosystem.
Some of these roles include:
1. Preventing Sybil Attacks
SBTs will bring better security to Ethereum and the entire Web 3 ecosystem by preventing Sybil attacks. To achieve this, SBTs will:
- Delegate more power to souls with more SBT holdings.
- Also, issue “proof-of-personhood” soulbound tokens (SBTs).
- Lastly, will compare SBT holdings with the number of souls supporting a vote.
2. Calculating Decentralization
The importance of decentralization to the Web 3 ecosystem cannot be over-emphasized. However, ensuring dApps and projects are truly decentralized can prove to be a herculean task at times. It is also important to be able to measure decentralization. SBTs, however, will make calculating decentralization easier.
With SBTs, users will be able to:
- Restrict voting to Sybil-resistant SBT holders (souls).
- Provide discount votes for souls with large SBTs.
3. Rewarding C𝐨𝐨𝐫𝐝𝐢𝐧𝐚𝐭𝐞𝐝 S𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 Actions
With SBTs, DAOs can also easily form a community. Furthermore, rewarding community members and developers by soul-dropping SBTs to them.
4. 𝐂𝐫𝐞𝐚𝐭𝐢𝐧𝐠 New Web 3 𝐌𝐚𝐫𝐤𝐞𝐭𝐬
The Web 3 ecosystem has basically been reduced to properties with transferable bundle rights. SBTs will bring new experiments to the Web 3 market. Also, SBTs will be able to represent the property rights of assets either virtually or physically.
Deeper Dive on SBTs
It is important to note that soulbound tokens, once received, cannot be transferred. They are, however, revocable by the issuer. Buterin is of the opinion that all governance tokens should be soulbound. Therefore, ensuring even distribution of governance power among community members. Soulbound tokens (SBT) will come in handy in DAOs, NFTs, Web 3.0 firms, etc.
In the event of losing your SBT token, it can be reclaimed by community recovery. Also, the issuer may be able to reclaim the tokens back.
SBTs are currently not available. However, plans are in place to launch them before the end of 2022. Enthusiasts also expect the tokens to go mainstream by 2024.
In conclusion, the Ethereum ecosystem has been faced with a lot of serious scalability issues. SBTs introduce a new and better-improved way to navigate the DeFi and Web 3 ecosystem. It should therefore not come as a surprise that Vitalik Buterin refers to SBTs as “the future” of Ethereum.
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