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Bankless | Vitalik Buterin's paper summary: Decentralized Society - Finding the Soul of Web3

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Bankless | Vitalik Buterin

Last week, Ethereum co-founder Vitalik Buterin, economist Glen Weyl, and Flashbots researcher Puja Ohlhaver jointly released a lengthy paper titled "Decentralized Society: In Search of the Soul of Web3," which mainly explores their vision of a decentralized society, along with its use cases and importance.

The cryptocurrency research institution Bankless has summarized the key points of this paper. This translation is provided for reference, and any uncertainties should be verified with the original text.

Introduction to Decentralized Society

Key Ideas

  • Currently, Web3 primarily focuses on financialization and transferable assets.
  • However, many mainstream economic activities such as unsecured loans and building personal brands rely on non-transferable social relationships built on trust that persist over time.
  • The author proposes "soulbound tokens," SBTs, held by "souls," which are essentially accounts, as a better way to code social relationships in Web3.
  • By tracking commitments, certifications, and connections on these soul chains, soulbound tokens will encode these relationships.
  • Decentralized Society, DeSoc, will allow souls and communities to gather together from the bottom up, as emerging properties of each other, to collectively create various network goods and intelligences within a certain scope through soulbound tokens.
  • If needed, Decentralized Society can also pioneer new intellectual property and governance mechanisms by rewarding trust and cooperation while protecting the network from exploitation, extraction, and domination.
  • In summary, DeSoc points web3 from its current state of over-financialization towards a more transformative, diversified future that increases returns through bridging social distances.

Souls and Soulbound Tokens

  • "Souls" are synonymous with accounts, wallets, etc.
  • Souls can hold "soulbound tokens," which are non-transferable, potentially revocable, initially public tokens. As they evolve, use cases for private soulbound tokens will become more feasible.
  • Soulbound tokens can track contact relationships, membership, and certifications, such as educational credentials, work experience, or hashes of writings and artworks.
  • Soulbound tokens can be issued by souls themselves. However, importantly, they can also be validated by other souls, i.e., counterparties in these relationships.

Possible Use Cases of Decentralized Society

Artists

Artists can use their souls to issue NFTs. In doing so, they can pledge their reputation directly on their work on-chain. Artists can also create their own soulbound tokens for different purposes, such as linking their NFT to an on-chain NFT series to emphasize provenance. Therefore, soulbound tokens and their established social networks can help resist plagiarism, deepfakes, etc.

Unsecured Loans

In the DeFi space of web3, uncollateralized loans remain somewhat of a heavy issue. Thus, soulbound tokens can be used to create a top-down business and social credit ecosystem resistant to censorship and a bottom-up alternative.

The above statement implies what profound meanings? It means that soulbound tokens can serve as a way for individuals to use their reputation as collateral for loans without having to pre-collateralize funds.

"Loans and credit limits can be represented as non-transferable but revocable soulbound tokens, thus locked within other soulbound tokens of the soul until the funds are repaid and subsequently destroyed, or replaced by better means, by repayment proofs." the paper states.

Community Recovery

In web3, losing access to your wallet is equivalent to losing access to your soul.

Social recovery wallets like Argent allow you to rely on trusted relationships, known as guardians, the best choices for long-term protection of our Ethereum accounts today. However, maintaining a closely knit active guardian team over time can become tedious, so achieving community recovery through soulbound tokens may be a better alternative.

Why is this so? Because soulbound tokens track the communities you belong to, so if you need to recover your soul, soulbound tokens can ensure security by depicting the broadest real-time relationships, not just a few guardians.

Note: The concept of social recovery wallets is based on "guardians," and Vitalik Buterin recommends having at least three guardians. However, there is still one signing key used to approve transactions, operated just like any other crypto wallet. Some implementation mechanisms still need to be devised, but this concept is achievable.

Soul Airdrops Souldrops

Airdrops have long been an imprecise or inefficient way to cultivate new web3 communities. In contrast, soulbound tokens allow communities to be summoned at unique soul intersections.

"Soul airdrops are based on the calculation of soulbound tokens and other tokens within souls. For example, a DAO wanting to convene a community on a specific Layer 1 protocol can distribute soul airdrops to developers holding 3 out of the last 5 meeting-attending soulbound tokens, or other tokens reflecting attendance status, like POAP," it explains.

DAO Defense

DAOs centered on community governance face threats of Sybil attacks, where users hold multiple wallets to increase voting power. Soulbound tokens will offer a method to defend against such attacks, as they can more easily distinguish unique souls and potential bots to reject any seemingly robotic soul voting rights.

Note: A Sybil attack is an attack on computer network services where the attacker disrupts the reputation system of the service by creating numerous pseudonymous identities, gaining disproportionately large influence with these identities.

Flexible Assets

In most current cases, NFTs grant their holders rights of one-time use, destruction, or profit from assets. But outside NFTs, it's hard to find cases where all these property rights are granted to a single holder. For instance, you can use a rented apartment but cannot destroy it. By using soulbound tokens, not only can mainstream property uses be mimicked, but new methods can be created for web3.

For example, the paper mentions the possibility of conducting experiments with local currencies, where the currency holds more value for souls residing in specific regions or belonging to specific communities.

Why Decentralized Communities Matter

Note: This paragraph is excerpted from the paper.

"Web3 aspires to change society broadly, not just financial systems. However, today's social structures — families, churches, teams, companies, civil societies, celebrities, democracies — in a virtual world known as the metaverse without representing human souls and their broader relationships are generally meaningless. If Web3 avoids persistent identities, i.e., their trust and cooperation models, and composable rights and permissions. We will see witch attacks, conspiracies, and limited economic domains with fully transferable private properties — all tending towards over-financialization.

To achieve exponential growth while avoiding over-financialization, we propose enhancing and connecting our sociability to the virtual and physical realities and empowering souls and communities with the ability to encode rich social and economic relationships. However, building on trust and cooperation alone is not enough. Correcting biases and tendencies towards over-coordination or conspiracy in trust networks is essential to encourage relationships that span greater social distances and are more diverse.

We call it Decentralized Society: a socially determined nature of common decision-making, where souls and communities gather together from the bottom up as emerging properties of each other to produce various network goods at different scales.

We emphasize diverse network goods as a feature of Decentralized Society, as networks are the most potent engine of economic growth but are also most easily captured by private participants like web2 and dominant governments like the Chinese Communist Party. The most significant economic growth comes from increasing the network's rate of return, generating more output for each additional input.

A network with increasing returns is most efficient when it is considered not purely public or private but as a partially and plurally shared good. Decentralized Society provides a social foundation for splitting and reconfiguring rights and enables effective governance mechanisms on these rights, thereby enhancing trust and cooperation while checking conspiracies and usurpation."

Bankless' Conclusion

Currently, Decentralized Society is still a concept and a research area rather than something we can delve into in the wild today.

However, with Ethereum and NFTs, we already have the essential infrastructure needed, and these technologies will continue to evolve. Through this "Decentralized Society" paper, we now have a basic blueprint, and many projects are beginning to explore soulbound NFTs.

Bankless believes critics and supporters often overly focus on the current state of web3, which is entirely fair and definitely worth discussing and striving for, but many here are dreamers who can't help but be immersed in and envision what's to come. There is still a long way to go before Decentralized Society truly arrives, but after this paper, we are clearer than ever that the future of NFTs will be broader and more social than many of us previously imagined.