BGIN SR 008

Soulbound Tokens (SBTs) Study Report
Part 1: Building and Embracing a New Social Identity Layer?

This study is a work product of IAM, Key Management and Privacy Working Group of BGIN.
©2022 BGIN (Blockchain Governance Initiative Network) is registered as BN Association, a Japanesegeneral association with its principal place of business at Shiba Building, 704, 4-7-6, Shiba, Minato-ku,
Tokyo. All right reserved.

1© BGIN – All rights reserved

Abstract
This research paper examines the implications of Soulbound Tokens (SBTs), a
novel smart contract primitive introduced by E. Glen Weyl, Puja Ohlhaver, and Vitalik
Buterin (2022) “Decentralized Society: Finding Web3's Soul”, to curb Web3’s “hyper
financialisation” and lack of tooling to enable social coordination. Web3 has lacked thefacilities for social coordination undermining the potential for rich-social context,
permitting a counter-productive cycle of plutocratic governance and superficial
pseudonymous interactions. NFTs, despite being considered a possible solution, havealso seen problems arising from its anonymous and transferable features. We are
intrigued by the implications of a token capable of storing and creating composable
non-capital value, which we refer to as “reputation value”. The possible application ofsoulbound tokens ranges from, community badges, memberships, credentials,
accolades, and attestations.
In this research paper, we have constructed a comprehensive overview of SBTs,
analyzing SBT’s principle characteristics, features and implications. We discuss thevarious technical, social, and ethical considerations when tokenizing “reputation value”.
We have evaluated the principles and rationale imparted by Weyl et al. (2022), in
relation to fundamental academic literature, practical technical examples, and thephilosophies of digital identity; ranging from Nick Szabo (1996; 1997), James Cameron(2005), Nat Sakimura (2021), and EIPs relating to SBTs.
While we hope our work catalyzes further research internationally, we equallyintend to draw attention to cautionary warnings to ensure SBTs are deployed in a safeand responsible manner, including the discussion on whether they should be deployedat all. Since SBTs are closely related to consequential matters, for one digital identity, awide range of multi-stakeholders should come together and progress discussions
surrounding privacy, ethics, implementations and standards.
This is an early stage discussion and we hope to extend our discussion further infuture BGIN works. We welcome diversity of thought, and invite anyone interested to bepart of the discussion.

2© BGIN – All rights reserved

Introduction“The Internet was built without a way to know who and what you are connecting to. This
limits what we can do with it and exposes us to growing dangers. If we do nothing, we
will face rapidly proliferating episodes of theft and deception which will cumulatively
erode public trust in the Internet.”
Kim Cameron (2005) “The Laws of Identity”
In 2005, Kim Cameron published “The Laws of Identity,” where he stated that “[t]heabsence of an identity layer is one of the key factors limiting the further settlement ofcyberspace”. He explains the difficulty of adding the identity layer in the internet“[m]ainly because there is little agreement on what it should be and how it should berun”.
Over recent decades, the implementation of an identity layer to the internet has become
an essential topic for academic research and technical development, achieving
progress incrementally.1 Globally, active discussions and philosophical movements havebeen established to come to a consensus surrounding the international standardizationof digital identity. The classical question of maintaining anonymity but with accountability
has yet to be solved but remains vital to the future of the internet. This question is a key
pillar to establishing a decentralized society and defines the core foundations of such aplural society.
In this paper, we endeavor to provide a detailed framework for understanding thepotentials, design principles, limitations, challenges, problems, and risks associated withsoulbound tokens (SBTs), a concept introduced in the “Decentralized Society: Finding
Web3's Soul” (Weyl et al., 2022). We have critically examined SBTs and discussed theconsequences of such technology, both at a societal and individual level, evaluating thebenefits and detriments of SBTs if they were to be implemented. We believe that SBTs
could have significant societal implications and at the same time we also emphasize theneed to address various questions in advance, including privacy, global standardization
and responsible development. It is essential to continually evaluate the properties thatcharacterize SBTs, understanding potential use cases, and the risks associated.
Throughout our research, we have sought out the key consequences of SBTs, and1

It remains important to question whether the “missing identity layer” is simply mythical. Sheldrake (2022)
argues that “[w]hen the SSI community refers to an ‘identity layer’ its subject is actually a set of algorithms
and services designed to ensure the frictionless transmission of incorruptible messages between multiple
parties; well, between identifiers. This involves some clever mathematics and neat code that willundoubtedly prove of some value in the world with appropriate tight constraints, and it will certainly impact
the operation of various conceptualizations of identity, but I think few people would argue that this ishuman identity per se, or even the digitalization of human identity. Far from it.”3
© BGIN – All rights reservedapplied rigor to evaluate whether adopting tokens capable of storing reputation value
and social credentials is necessary or desired both individually and socially.
We plan to adapt our report as the market context evolves, to ensure regulatory bodies
can address their concerns whilst maintaining SBT innovation grows at a stable pace.
We will continue to publish new reports and recommendations on SBTs, to ensure abalance between innovation regulation. This report is based on the information available
as of February 2023, but some conditions may have changed since the time of
publication. A follow on research paper is being planned for 2023, which takes anextensive analysis of SBTs, contributions are currently open - please contactbgin-admin@mail.bgin-global.org.
Lastly, this report is a collaborative effort. In the process of making this paper, we havemade it open, allowing anyone to comment and suggest. We thank everyone for their
feedback which was all very valuable. Furthermore, in Appendix A. we list all of those
involved in authoring, contributing and reviewing this research paper. Again we pay
thanks to those and their involvement.
Disclaimer: The views expressed in the document are personal views of theparticipating members of the BGIN community and should not be seen as the official
views or recommendations of the institutions with which they are affiliated.

The technology described in this document was made available from contributions
from various sources, including members of the BGIN and others. Although the BGIN
has taken steps to help ensure that the technology is available for distribution, it takes
no position regarding the validity or scope of any intellectual property or other rightsthat might be claimed to pertain to the implementation or use of the technology
described in this document or the extent to which any license under such rights mightor might not be available; neither does it represent that it has made any independent
effort to identify any such rights. BGIN and the contributors to this document make no(and hereby expressly disclaim any) warranties (express, implied, or otherwise),including implied warranties of merchantability, non-infringement, fitness for aparticular purpose, or title, related to this document, and the entire risk as toimplementing this document is assumed by the implementer. The BGIN Intellectual
Property Rights policy requires contributors to offer a patent promise not to assert
certain patent claims against other contributors and against implementers. BGIN
invites any interested party to bring to its attention any copyrights, patents, patentapplications, or other proprietary rights that may cover technology that may berequired to practice this document.

4© BGIN – All rights reserved

Table of contents
Abstract

2

Introduction

3

Table of contents

5

1. Scope

6

2. Normative Reference

6

3. Terms and Definitions

6

4. Abbreviations and Symbols

8

5. Current Problems and Risks

9

6. Characteristics of the SBTs

19

7. The Design on SBTs and the Ecosystem
7.1 Introduction
7.2 Fundamental Design for “Social Coordination”
7.3 Lifecycle Management
7.4 Proof of Concept
7.5 Coexistence with Other Digital Identities

37
37
38
48
51
52

8. SBTs Lead Potentials

52

9. Further Considerations of SBTs

59

10. Conclusion

62

Appendix A – Acknowledgement
A.1 Editors and Co-editors
A.2 Contributors
A.3 Reviewers

64
64
64
64

Appendix B – Informative reference

66

Appendix C – BGIN Block #6 Session Notes(With E. Glen Weyl, Puja Ohlhaver, Shrey Jain)

74

Appendix D – BGIN Block #7 Session Slides

84

5© BGIN – All rights reserved

1. Scope
The intended audience for this document includes developers, businesses, regulatory
bodies, academic institutions, and any individual seeking to expand their understandingof soulbound tokens.
This paper aims to provide an overview of the current challenges facing decentralized
innovation, specifically soulbound tokens. We then proceed to analyze the defining
characteristics of soulbound tokens, the core design considerations and a summary of
the broader soulbound token ecosystem. Furthermore, we will examine the potentials
and limitations of soulbound tokens, before concluding with recommendations for future
research and development, envisioning a decentralized society underpinned bysoulbound tokens.

2. Normative ReferenceThis document has no normative reference.

3. Terms and Definitions
This document uses the following terms as the shortcut for more complete wording
provided as the definition. When the term appears within this document, it should beread as being replaced by the definition.
3.1
decentralized autonomous organization
DAO
a voluntary association with the operating principles of digital cooperativism. As
voluntary associations, they are a cross-jurisdictional way for strangers, friends, or
unlikely allies to pseudonymously come together toward common goals, supported by atoken model, incentives, and governance. Members of a DAO can have representativeownership of its digital assets through a token, which often simultaneously acts as agovernance right and network utility.
[Source: Kei (2021)]

3.2
decentralized financial technologies
technologies that may reduce or eliminate the need for one or more intermediaries orcentralized processes in the provision of financial services
6© BGIN – All rights reserved

[Source: FSB (2019)]
3.3
decentralized financial system
new financial system that could be the result of decentralized financial technology[Source: FSB (2019)]
3.4
decentralized financeDeFifinancial application that could consist of a part of a decentralized financial system[Source: Ushida and James (2021)]
3.5
decentralized society
DeSoc
co-determined sociality, where Souls (defined in 3.9) and Communities convenebottom-up, as emergent properties of each other to produce plural network goods
across different scales[Source: Weyl et al. (2022)]
3.6
non-fungible token
NFT
tokenized representation of an asset (or anything really) that provides some rights to theowner[Source: BGIN (2022)]
3.7
privacy enhancing technologies
PETs
technologies that covers the broader range of technologies that are designed forsupporting privacy and data protection[Source: ENISA - The European Union Agency for Cybersecurity]
3.8
scarlet letterthe forced display, and disclosure of a negative sentiment about oneself to others at all
times against their will.
[Source: Jain et al. (2022)]

7© BGIN – All rights reserved

3.9
soul
account, or wallet, that hold publicly visible, non-transferable (but possibly
revocable-by-the-issuer) tokens[Source: Weyl et al. (2022)]
3.10
soulbound token
SBT
publicly visible, non-transferable (but possibly revocable-by-the-issuer) token held by
the soul[Source: Weyl et al. (2022)]
3.11
self sovereign identity
SSI
digital movement that recognizes an individual should own and control their identity
without the intervening administrative authorities[Source: Sovrin Foundation (2018)]
3.12
verifiable credential
VC
tamper-evident credential that has authorship that can be cryptographically verified[Source: World Wide Web Consortium (2022 a)]
3.13
decentralized identifier
DID
identifier that enables verifiable, decentralized digital identity[Source: World Wide Web Consortium (2022 b)]

4. Abbreviations and Symbols
In this document, the following abbreviations and symbols are used.
AML: Anti-Money Laundering
BGIN: Blockchain Governance Initiative Network
CDD: Customer Due Diligence
CTF: Counter Terrorism Financing
8© BGIN – All rights reserved

DAO: Decentralised Autonomous Organisation
DeFi: Decentralised Finance
DeSoc: Decentralised Society
DID: Decentralized Identifiers
EIP: Ethereum Improvement Proposals
ERC: Ethereum Request for Comments
JFSA: Japan Financial Services Agency
KYC: Know-Your-Customer
ML: Money Laundering
NFT: Non-Fungible Token
NTT: Non-Tradable Token
PII: Personal Identifiable Information
SBT: Soulbound Tokens
SDO: Standards Development Organisation
SSI: Self-Sovereign Identity
TF: Terrorist Financing
VASP: Virtual Asset Service Provider
VC: Verifiable Credential

5. Current Problems and Risks
In this section, we will examine six major problems that have emerged fromdecentralized financial systems and NFTs; these include fraud schemes, money
laundering and terrorist financing, wash trading, tax evasion, and governancechallenges.2
In this paper, we will begin by exploring the limitations of NFTs, defined bytransferable and non-recoverability attributes, to better illustrate the key distinction
between NFTs and SBTs, which are defined by non-transferable and initially revocable
traits; SBT recoverability and programmable privacy features are planned post-productmaturity.
As outlined in Ethereum’s NFT documentation, (https://ethereum.org/en/nft/), theprimary function of NFT’s is to represent distinguishable ownership of unique digital orreal-world assets, which can be atomically tracked, similar to a deed; another initially2

According to BGIN (2022), NFTs “differs from other VAs used as currencies where fungibility is instead avery important and fundamental characteristic of the assets. An easy way to picture an NFT is a
blockchain-based asset that has only one indivisible unit available and no possibility for further issuancein the future”.

9© BGIN – All rights reserved

proposed term for NFTs.3 The identification of NFT holding is “managed through theunique identifier and metadata that no other token can replicate”.4 The holder of an NFT(1) “can easily prove you own it”, (2) “no one can manipulate it in any way”, (3) “can sellit, and in some cases this will earn the original creator resale royalties”, and (4) “canhold it forever”.5
NFTs were created to address the technical limitations in the Ethereum ERC-20“Token Standard” contract when attesting distinguishable ownership of a unique digitalasset.6 Early examples of NFTs, such as Cryptopunks and CryptoKitties utilized custom
smart contracts based on the standard flexible and multi-purpose ERC-20 contract.
These early forms of NFTs served as a catalyst for the development of a new smart
contract standard, creating demand for an optimized smart contract capable of attesting
to unique assets and their corresponding holder.
Focusing on the core feature of NFTs being the distinguishable connection
between owner and digital or real-world asset, there is little room for assets that are
non-transferable as an NFT use case. A motivation outlined in the original EIP-721“Non-Fungible Token Standard”, was to “have a standardized interface that allows forcross-functional asset management and sales platforms”. NFTs, beyond being atechnically insufficient standard to represent personal, social or unique reputation value,
are equally limited by the financial use case specifications outlined initially. Similarly, toaddress the deficiencies of the fungible ERC-20 token in expressing distinguishable
ownership of unique digital assets, the ERC-721 standard was proposed and approved.

3

Here, “deed” refers to a legal document that is signed and delivered, especially one regarding theownership of property or legal rights.
4
Care should be taken in using the word “ownership” in this context when no property rights arerecognised with NFTs unlike the general case. According to Reutlaw “NFTs and Property Rights”, “[w]henbuying an NFT, the buyer typically only acquires the right to transfer the NFT to a third party but not therights to the original work. This means that the holder of the NFT is free to dispose of the token but would
not be allowed to reproduce or otherwise exploit the underlying intellectual property”(https://www.reutlaw.com/en/insights/nfts-and-property-rights). An NFT, of itself, does not convey orconstitute ownership of anything. Ownership is only ever conveyed by a separate legal document. The
critical point is “can” i.e. "can represent", which can be interpreted as “can represent subject toaccompanying legislation to support the fact or in the absence of such legislation some separate legal
contract that binds ownership of the NFT to ownership of the corresponding real world asset”. This“ownership” is an area for further legal discussion.
5
See Ethereum “Non-fungible tokens (NFT)” for more. (https://ethereum.org/en/nft/ )6“ERCs (Ethereum Request for Comments) are technical documents used by smart contract developers
at Ethereum. They define a set of rules required to implement tokens for the Ethereum ecosystem. These
documents are usually created by developers, and they include information about protocol specifications
and contract descriptions. Before becoming an standard, an ERC must be revised, commented andaccepted by the community through an EIP (Ethereum Improvement Proposal)”(https://docs.ethhub.io/built-on-ethereum/erc-token-standards/what-are-erc-tokens/ ).
According to Ethereum, ERC-20 “introduces a standard for Fungible Tokens, in other words, they have aproperty that makes each Token be exactly the same (in type and value) as another Token. For example,
an ERC-20 Token acts just like the ETH, meaning that 1 Token is and will always be equal to all the other
Tokens”. (https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ )10© BGIN – All rights reservedThis creates a precedent to address token deficiencies, innovating upon the initialdesign and creating functionalities that enable a seamless transition..
● “There are many proposed uses of Ethereum smart contracts that depend on
tracking distinguishable assets. Examples of existing or planned NFTs are LAND
in Decentraland, the eponymous punks in CryptoPunks, and in-game items using
systems like DMarket or EnjinCoin. Future uses include tracking real-world
assets, like real estate (as envisioned by companies like Ubitquity or Propy). It is
critical in each of these cases that these items are not “lumped together” as
numbers in a ledger, but instead each asset must have its ownership individually
and atomically tracked.”(EIP-721: Non-Fungible Token Standard (ethereum.org))
The emergence of NFTs whilst providing the blockchain ecosystem with newtechnical solutions, unfortunately, introduced a variety of new risks and negative use
cases as a consequence. The problems associated with NFTs are well-documented in
BGIN’s 2022 “NFT Study Report'' (BGIN, 2022) and other studies examining NFTs. It is
important to recognise that these issues stem from a lack of transparency in theidentification of individuals and entities involved in NFT transactions. This is a new
example of a common problem that has persisted throughout generations of digital
environments, as there is a lack of “a way to know who and what you are connecting to”(Cameron, 2005). Equally, to progress closer to viable identification mechanisms within
decentralized environments, NFTs properties of transferability and non-recoverability
suggests that it is ill-suited to hold sensitive information such as social credentials, PII,or government-issued identity documents. By design, the described social coordination
tools are unsuitable to be transferable or unrecoverable.
Non-transferable NFTs, defined by the smart contract’s singular non-transferable
attribute, have emerged as a patchwork solution to NFTs deficiencies in storing
reputation value and social credentials. Jain et al. (2022) outlined that non-transferable
NFTs are limiting in scope and approach to representing an SBT, as there is no
specification nor standard beyond a singular programmable value; non-transferability. If
in isolation, this singular value token may not be considered to be an SBT, and could
open the non-transferable NFT use cases to “scarlet letters”, which are malicious formsof smart contracts. While non-transferable NFTs are limited and insufficient to holdsocial credentials, they may serve as a starting point for basic or proto-SBTs, storing
non-informing information. A recommendation is for issuing platforms to either embed
cautionary warnings to inform issuers or creators or at least monitor token issuance as acase of last resort.
With the exception of “flash loans”, which are a novel financial product native to
DeFi, it should be acknowledged that the issues discussed below are not unique to11© BGIN – All rights reserved

NFTs. As an example, there are conflicting incentives in the art market in the first place,not just for NFT marketplaces or the greater DeFi market. Simply put, incentives that
promote opacity artificially inflate the asset's value through perceived scarcity andprovable providence, thereby establishing credibility; leading to value inflation. However,
because of NFTs unique features and utility, many of the examples studied pertain
specifically to NFTs, and contextualize the potential for SBTs which is covered in clause
8.
1 Fraud Scheme (Inauthentic Replicas)● “There are a number of risks to consumers in the NFT ecosystem, andsome NFT marketplaces and digital wallets lack basic features to protect
consumers from fraud and misleading or deceptive practices.”(Congressional Research Service. 2022. “Non-Fungible Tokens (NFTs)”)● “While anyone can find the NFTs trade history and the address thatcreated the item, NFTs can be difficult to verify if you do not know theowner or the creator.”(BGIN. 2022. “SR 005 NFT Study Report Part 1: Introduction and Use
Cases”)● The challenge in verifying the true owner or the creator of NFTs stems
from the inherent features of decentralized markets, including
pseudonymity/anonymity, lack of authentication mechanisms but also fromthe broader environment of opaque providence and control of theunderlying data layer and the utility behind unique high-value transferable
assets. Additionally, there are difficulties in establishing a unanimously
agreed standard, rather than a system which acts as the de facto
custodian of token or the underlying metadata essential to the NFT; which
poses significant centralisation risks and undermines the purpose ofdecentralized markets.
● NFTs present a number of risks to consumers in the form of fraud anddeceptive practices. Furthermore, some NFTs, NFT marketplaces anddigital wallets lack basic consumer protection features, leading toconsumers being vulnerable to fraudulent replicas, phishing scams andsimilar imperceptible schemes. Therefore, it is imperative to explore
authentication mechanisms that provide consumers with clear verificationof the NFTs ownership and creator. Further authorisation of the
stakeholders will at least enable the consumer to make an informed
decision, additional measures can be taken by the marketplace bydisplaying cautionary warnings or implementing methods of sociallyagreed proofs of origination and smart contract authorship.

12© BGIN – All rights reserved

● It is also worth noting that ownership of an NFT does not automaticallyconfer legal or copyright ownership of the digital or physical assets
embedded and/or linked with the NFT.
2 Wash Trade● “One can own as many of these wallets as they would like. This meansthat one can sell an NFT to their own address, with the only loss of value
in the network fee. This is a problem because NFT sellers can make theirtoken appear much more valuable than it truly is.”(BGIN. 2022. “SR 005 NFT Study Report Part 1: Introduction and Use
Cases”)● “The 110 profitable wash traders have collectively made nearly $8.9 million
in profit from this activity, dwarfing the $416,984 in losses made by the 152
unprofitable wash traders. Even worse, that $8.9 million is most likely
derived from sales to unsuspecting buyers who believe the NFT they’repurchasing has been growing in value, sold from one distinct collector toanother”(Chainanalysis. 2022. “The Chainalysis 2022 Crypto Crime Report”)
3 Money Laundering (ML) and Terrorist Finance (TF)
● “The US Treasury identified six qualities of the high-value art market thatmake it enticing for money laundering: high-value, opaque nature,subjective valuation, transportability, law enforcement’s difficulty inmonitoring transports, and the use of third-party intermediaries to keep
clients anonymous.”(BGIN. 2022. “SR 005 NFT Study Report Part 1: Introduction and Use
Cases”)● “NFTs possess the ability to self-launder. Self-laundering is where
criminals create an NFT themselves with one address and then buy the
NFT with a different address. The NFT is then sold to the open market in
exchange for clean funds.”(BGIN. 2022. “SR 005 NFT Study Report Part 1: Introduction and Use
Cases”)● “With NFTs and centralized/decentralized exchanges, the transactions arehandled not only by the marketplace, but also by the seller of the NFT.
This seller has no obligation to ensure the legitimacy of the exchange.”77There was a suggestion about the statement in the existing “NFT Study Report”. First, there should be
two parts to address decentralized and centralized separately. Second, in a decentralized exchange it is atrustless system. By signing the transaction, you are agreeing that you understand what you are doing.
The onus is placed on the wallet User Interface (UI) and subsequently the user. In a centralized exchange
the user is signing some end-user license agreements (EULA) or providing a credit card. By doing so they13
© BGIN – All rights reserved

(BGIN. 2022. “SR 005 NFT Study Report Part 1: Introduction and Use
Cases”)● “NFTs may be particularly susceptible to money laundering since they areeasily sent across geographic borders without incurring the financial or
regulatory costs of physical shipping. Additionally, the price of digital art ishighly variable, which enables money launderers to set the desired value
with little historical context in which to compare prices.”(Congressional Research Service. 2022. “Non-Fungible Tokens (NFTs)”)● “Cybercriminals have laundered over $33 billion worth of cryptocurrency
since 2017, with most of the total over time moving to centralizedexchanges.” 8(Chainanalysis. 2022. “The Chainalysis 2022 Crypto Crime Report”)● “Value sent to NFT marketplaces by illicit addresses jumped significantly inthe third quarter of 2021, crossing $1 million worth of cryptocurrency. The
figure grew again in the fourth quarter, topping out at just under $1.4
million.”(Chainanalysis. 2022. “The Chainalysis 2022 Crypto Crime Report”)
4 Flash Loans● “Flash loans are a new financial product - "While many of the financial
products and services arising from DeFi resemble traditional financial
products and services, blockchain technology has supported the creationof entirely new financial products and services, such as “flash loans.””(OR01/2022 IOSCO Decentralized Finance Report)● “Flash loans as a means to obfuscate value by increasing the floor price ofan NFT "A seller took out a flash loan – a loan that must be repaid within
one block transaction – and purchased their own Cryptopunk #9998 for$532 million using a new wall"(Elliptic. 2022. "NFTs and Financial Crime" )● The ability for users to borrow significant sums of money within a shortperiod of time (a block time), to artificially inflate asset prices would disrupt
key market metrics such as an NFTs collection floor price or an individual
NFTs last sold price. In addition, flash loans, much like traditional loans,are still required to be repaid within the specified time - flash loans areagree they've validated the vendor. Otherwise anyone could claim fraud on every transaction saying they
now consider the vendor illegitimate.
8
There was a suggestion that accurate figure that illustrate the amount that was laundered would be
useful for further research. However, it is not easy as the Financial Action Task Force (FATF) states that“[d]ue to the illegal nature of the transactions, precise statistics are not available and it is therefore
impossible to produce a definitive estimate of the amount of money that is globally laundered every year.
The FATF therefore does not publish any figures in this regard”.

14© BGIN – All rights reservedrequired to be repaid within the same block time (~15 seconds), which
does serve as a mitigant to malicious uses but does not eliminate the risk.
● Flash loans have the potential to undermine trust in a natively trustlessenvironment, therefore it is essential to create accessible and convenient
tooling to mitigate the negative externalities that arise from unregulated
complex financial tools like Flash loans.
5 Tax Evasion● “Virtual currencies continue to present a significant risk to tax
administration, particularly since one of the attractions to their use is theanonymity of transactions. ”(U.S. House of Representatives. 2020. “Understanding The Tax Gap And
Taxpayer Noncompliance” )● “Cryptocurrency investors are collectively not paying the IRS at least halfof the taxes they owe on their virtual-currency trades, according to new
analysis from Barclays Plc.”, “[e]xtrapolated from a 2017 IRS calculation tofind the current tax gap would be around $50 billion per year -- accounting
for about 10% of all unpaid taxes.”9(Bloomberg. May, 2022. “Crypto Investors Likely Paying IRS Less Than
Half the Taxes They Owe - Bloomberg”）
6 Governance● Governance tokens can be bought in the digital asset marketplaces andregularly voting power is bought up by those who have more resources/
the wealthy, leading to an overwhelming number of plutocratic governancesystems. In addition, by default, there are no inherent guarantees for theprotection of minority interests. Without a system that solicits opinions, thestructure goes against the stated goal of many protocols claiming equality
and fairness.
● Pseudonymous voting has a positive aspect, for example, independent
decision making. It is important to note that since DAOs are anorganization, there might be a scenario where holding a participant
accountable for a vote is beneficial; as a way to ensure legitimacy.
● Below are the risk factors or possible risk factors in governance that was
mentioned in the JFSA (2022) “Report on Distributed Financial Systems in
Trust Chains Research on Technology Risk”.
○ Governance Voting Control

9

There was a suggestion that the lack of tooling on the IRS side could be one aspect.

15© BGIN – All rights reserved

■ Voting is dominated by a small number of major governancetoken holders with enough votes to constitute a quorum forpassage.10■ Voting is controlled by the community and developers, whohold large amounts of governance tokens, including thosefor system use.
■ Governance tokens are bought and sold on the crypto-asset
market, which is structured so that those with the money get
more votes (DAO decision-making is not decentralised).
■ Unlimited number of governor tokens.11○ Governance Voter Pseudonyms■ Governance voting is conducted under pseudonyms, which
may make it impossible to identify the party to be held
accountable for the outcome of the vote.12■ There is a lack of mechanisms to link user accountaddresses to individuals.13○ Quorum to vote is not high■ Quorum for governance voting is low and decisions are
made by a minority opinion (very low quorum of 1 - 4% formajor DeFi projects).
■ Low turnout for Governance Vote likely means fewer
quorums to pass proposals.14○ Low voter turnout 15■ Low turnout for governance voting, with decisions being
made by a small percentage of voters (extremely low turnout
for major DeFi projects, about 2 - 9%).
■ Governance tokens are valuable and speculative in thecrypto asset market, so speculative token holders are lesswilling to vote.
10

This would also apply to Proof-of-Stake (PoS) and most variants. However, Proof-of-Work (PoW) andothers address this with computational work. The consensus can still be corrupted, but becomescomputationally prohibitive.
11
In the original text, it is written as “governor tokens” but we assume it to be “governance tokens”. For
further research, quantifying the number of governor tokens/governance tokens is important.
12
This point is on how pseudonymity and the impact of governance decisions made under such identities
is a “risk” towards governance. This also applies to anonymity as well.
13
In other words, it is a lack of mechanism to link user accounts that accurately correlate public address
ownership and their legal identity. Services such as Ethereum Name Service (ENS), Proof of Humanity,and Twitter connections provide a means to selectively disclose information. However, these tools are notutilized by the majority of users.
14
This can be framed as a user experience (UX) and community issue, not a governance problem.
15
This may not necessarily be true. While many protocols promise rewards, ultimately the motivation tovote is related to your motivation to hold the token in the first place.

16© BGIN – All rights reserved

■ Governance token holders are not motivated to vote (there isno mechanism to motivate them).
○ Verification of malicious proposals 16■ In the event of a malicious proposal, since verification isdependent on the cooperation of community members, there
is a concern that no one will be able to detect a malicious
proposal because the role of conducting verification is notclear.
■ In decentralised organisations, communities are free toparticipate and roles are not specified. It is not clear whether
verification of malicious proposals will be ensured.17○ Dependency on smart contract modifications■ When a governance voting proposal modifies a smart
contract, most governance voting participants do notunderstand the content of the smart contract code andassume that it will act correctly according to the proposal.
■ Only a small percentage of governance voting participants
are technically capable of interpreting smart contracts; themajority are for profit.
■ Insufficient disclosure of information on smart contract
modifications, and no assurance of the validity of comments
presented in community forums, etc.18○ Organisation of DAOs19■ DAOs have unclear representatives and boards of directors,
making it difficult to hold them accountable when problems
occur.
■ DAO has no organisation to pursue.
■ The DAO is an organisation of non-trusting participating
members and has no representatives.
■ There are no laws and regulations applicable to DAOs, andthe shape of the organisation is not yet defined.
It is not important who proposed the change but necessary to know what the change is. People canread their proposal and code alongside it in the new EIP. However, the problem is that many people cannot
understand the proposals fully because of complexity, lack of background, lack of time, etc.
17
As of 2022 it is more accurate to state that “roles are often not specified” as to “roles are not specified”.
18
In general, smart contracts are immutable in a public network. Therefore they can't be modified. It
would be more accurate to describe this “smart contract modifications” in the original text as "add smart
contract updates via proxy methods".
19
There are cases such as in the State of Wyoming where a DAO can be registered as a legal entity(DAOs_FAQs.pdf (wyo.gov)). Additionally, many countries treat undefined organizations as
unincorporated associations. There is no limitation of liability for those associations such as in the
Commodity Futures Trading Commission (CFTC) v Ooki DAO case(https://storage.courtlistener.com/recap/gov.uscourts.cand.400807/gov.uscourts.cand.400807.11.1.pdf).
16

17© BGIN – All rights reserved

○ Location and membership of DAO■ The location of the DAO is unclear.20■ DAO members are dispersed throughout the world andcannot be regulated or pursued across national borders.
■ DeFi protocol terms of use (user's own responsibility) are notmade available to users before using the service.21(JFSA. 2022. “Report on Distributed Financial Systems in Trust Chains
Research on Technology Risk”)
Various ventures are developing and testing solutions to address the lack ofidentification and social credentials within DeFi. For instance, GoldFinch, adecentralized credit protocol, has transitioned methods of KYC. GoldFinch iterated froman ecosystem-managed incentivised KYC mechanism to now leveraging
non-transferable NFTs, that represent the result of users’ KYC, Know-Your-Business
and/or sophisticated investor accreditation credentials. The issued NFT is labeled as a
Unique Identity (UID); no PII is shared on-chain, only the result of the KYC check.22
While not specific to NFTs, Pauwels et al. (2022) proposed a zkKYC, an off-chain
encrypted data objected generated by the holder based on elements of the KYC
verifiable credential they hold, which can only be revealed to specific parties whose
public key signed the token initially. While there are possibilities to patch additionalfeatures into NFTs to attempt creating an NFT capable of storing reputation value andsocial credentials, the standard still falls technically deficient as features oftransferability and non-recoverability are ingrained into the NFT standard. In addition,
this analysis considers the value proposition of NFTs, understanding the Ethereumcommunity determined the rationale for NFTs stemmed from the desire for a token
standard capable of holding unique capital value assets such as property, shares andtradeable-collectables. The previously discussed points on the function and purpose of
NFTs form part of the argument to suggest that NFTs are inadequate in storing social
credentials and reputation value. However, this has presented the opportunity to

20

The risk to location matters in the case of anonymous on-chain voting for a local impact or law. For
example, an individual can post a proposal for a park that anyone in the world could vote on unaffected.
That park could be a law. So we need a way in some cases to limit access based on current
geo-location. However, this should be approached with caution as it would impact those living abroad withvoting rights and could threaten the possibility of a digital sovereign nation/society.
21This should be carefully considered since it is not necessarily accurate such as relying on IP
geolocation.
22
GoldFinch presents an intuitive method to tokenize a user’s KYC/KYB/sophisticated investor result,however it should be noted the UID is in ‘Alpha’(https://docs.goldfinch.finance/goldfinch/unique-identity-uid/for-developers) and moreover, the level of
KYC/AML needed per jurisdiction may create further complications if other protocol attempt to leverage
GoldFinch’s UID. https://docs.goldfinch.finance/goldfinch/unique-identity-uid

18© BGIN – All rights reservedintroduce a new smart contract to the blockchain typology that addresses NFTs
deficiencies in storing reputation value or social credentials on-chain; the SBT.
Further discussion is warranted to answer questions of “what is reputation value”
and “who or what determines reputation value”, which are examined in clause 7.2.
These questions should be explored with exceptional caution, and consider the potential
dangers of quantifying and digitizing such information, this includes self-issuance, plural
determination and especially top-down arbitrated issuance; blockchain’s immutable
nature and state of finality shouldn’t be forgotten during this evaluation.

6. Characteristics of the SBTs
In this section, we examine the defining characteristics of SBTs as cited in“Decentralized Society: Finding Web3’s Soul” (Weyl et al., 2022), co-authored by Vitalik
Buterin, Puja Ohlhaver and E. Glen Weyl, whilst also drawing from insights developed
from during our research and discussions with the various contributors listed inAppendix A.
Before defining SBTs, the focus of this paper, it’s essential to define the walletand means of holding SBTs, the Soul. According to Weyl et al. (2022), “Souls” are“accounts, or wallets, that hold publicly visible, non-transferable (but possibly
revocable-by-the-issuer) tokens” and “Soulbound Tokens (SBTs)” are “tokens held by
the accounts”.23 The authors also suggest that the SBTs may correspond to a range ofaffiliations, memberships, and credentials, and users could possibly self-certify and/or
be certified by other Souls. Furthermore, “there is no requirement for a Soul to be linked
to a legal name, or for there to be any protocol-level attempt to ensure ‘one Soul perhuman.’” (Weyl et al., 2022).
One way to describe the initial concept of SBTs is to think about them as
non-transferable NFTs; this short-hand definition can serve to be limiting when
considering the long term vision of SBTs (Jain et al., 2022).24 While NFTs and SBTs
share some similarities, there are several critical features that distinguish SBTs from
NFTs, the most significant design feature is NFTs transferability versus SBTs
non-transferability. It is essential to recognise that the characteristics of NFTs have led

23

It is important to be cautious when using the term “Souls”. Although it is an intuitive term, It has a risk of
introducing an unnecessary lexicon more than it is meant. In general, the “soul” is widely understood to beephemeral, spiritual, and intangible. There were suggestions that Weyl et al. (2022) focus on sybil
resistance i.e. dedication to the corporeality of the human, rather than informational identities andtherefore a term such as “wallet tied to an individual” should be appropriate for usage.
24“The first caveat is that non-transferable NFTs are the most primitive form of SBTs—which today lack a
specifications. In particular, the singular property of non-transferable NFTs is non-transferability, and theylack any of the nuanced socially programmable privacy or community recovery aspirations sketched in the
DeSoc paper— pathways which theoretically may enable community mechanisms to counter certain
forms of malicious tagging.” (Jain et al., 2022)

19© BGIN – All rights reserved

to some of the negative consequences and limitations outlined in clause 5, catalyzing
the necessary pressure to theorize SBTs.
Another method of determining the characteristics of SBTs is by analyzing thedefinition prescribed by Weyl et al. (2022), which defines SBTs as “publicly visible,
non-transferable (but possibly revocable-by-the-issuer) tokens.” From this definition,
four distinct features can be discerned 1) publicly visible; 2) non-transferable; 3)
possibly revocable; 4) issuer-arbitrated. These SBT characteristics are further
elaborated by Weyl et al. (2022) throughout the aforementioned paper on each features’individual significance and rationale:
The Four Features of Proto-SBT contract design:
1 Publicly Visible● “We initially assume publicity despite our deep interest in privacy
because it is technically simpler to validate as a proof-of-concept,
even if limited by the subset of tokens people are willing to publicly
share.” page 2 (Weyl et al., 2022)
2 Non-transferable● “non-transferability prevents transferring or hiding outstandingloans, while a rich ecosystem of SBTs ensures that borrowers who
try to escape their loans (perhaps by spinning up a fresh Soul) willlack SBTs to meaningfully stake their reputation.” page 4 (Weyl etal., 2022)● “the emphasis on transferability has been to web3’s detriment,
making it incapable of representing and supporting some of thesimplest and ubiquitous property contracts today, such asapartment leases.” page 10 (Weyl et al., 2022).
3 Possibly Revocable● “Revocable, transferable tokens are a kind of proto-SBT—serving
supportive, placental functions before Soul birth. These tokens buytime both for wallets to gestate secure, community recovery
mechanisms and for a person to succinctly accumulate proto-SBTs
that can eventually be burned and re-issued into non-transferable
SBTs.” page 28 (Weyl et al., 2022)
4 Issuer-Arbitrated● “In their simplest form, these SBTs can be “self-certified,” similar to
how we share information about ourselves in our CVs… SBTs held
20
© BGIN – All rights reserved

by one Soul can be issued—or attested—by other Souls, who arecounterparties to these relationships. These counterparty Souls
could be individuals, companies, or institutions.” page 2 (Weyl etal., 2022)● “A token is revocable if an issuer can burn the token and re-issue it
to a new wallet. Burning and re-issuing would make sense when,for example, keys are lost or compromised, and the issuer has aninterest in ensuring the tokens are not financialized and sold off to a
party—in other words, when the token signals authentic community
membership.” page 28 (Weyl et al., 2022)25
Whilst feature “4) Issuer-Arbitrated” is not explicitly defined by Weyl et al. (2022),
the authors do suggest that the issuer is the authority for the issued-SBTs revocation
and re-issuance functions, equally the feasibility for a Soul to also self-issue,‘self-certify’ an SBT (Weyl et al., 2022).
It is crucial to understand that the definition provided by Weyl et al. (2022), isintended as theoretical and to only guide early proof-of-concept SBTs26, and is intended
to be limited by technical complexities rather serve as a comprehensive and persistentdefinition for SBTs.The decision to define SBTs with the four characteristics identified
earlier in this section was based on the smart contract functionality available at the timeof writing, the ease of development and the potential significance of each feature (Weylet al., 2022). Weyl et al. (2022), elaborate on this decision in a footnote at the beginningof the paper, quoted below this paragraph. While there is a lack of written or technicalexamples of SBTs in the market, it is an open question to understand if developers,
researchers and other market participants are aware of Weyl et al. (2022) footnote on
the rationale behind the prescribed SBT definition and it’s sole purpose for aiding
proof-of-concept SBTs.
● “We have chosen this set of properties not because they are clearly themost desirable collection of characteristics, but because they are easy to
implement in the current environment and permit significant functionality” page 2 (Weyl et al., 2022)
Given the absence of a comprehensive SBT definition, it is imperative to continue
discussions and establish a working definition that can clearly guide technical25

We chose to move this quote under ‘4) Issuer-Arbitrated’ rather than ‘3) Possibly Revocable’ because
viewed this quote as more specific to the issuer’s ability to revoke by burning, and re-issue - as the quote
is primarily defines the relationship between the issuer and the token, extending beyond just revocation
qualities but also re-issuance qualities. An additional point to add for this decision, is the ‘arbitration’illustrated in the Issers ability to authoritatively decide on core SBT decisions at all points of the SBTs
lifecycle.
26
Also known as proto-SBTs.

21© BGIN – All rights reservedimplementations and unify market terminology. To inform a broad SBT definition, a
subsequent BGIN SBT research paper is planned for 2023, with a section on SBTfeatures, split into: core, expected, potential and avoided features. To differentiate
proof-of-concept SBTs from future iterations, it is necessary ‘proto-SBTs’ (refer clause
7.4) are capable of revocation and superseded by SBTs with recoverability features.
● “Revocable, transferable tokens are a kind of proto-SBT—serving
supportive, placental functions before Soul birth. These tokens buytime both for wallets to gestate secure, community recovery mechanisms
and for a person to succinctly accumulate proto-SBTs that can eventually
be burned and re-issued into non-transferable SBTs.” page 28 (Weyl et al.,2022)
This section focuses on SBTs in relation to digital identity standards and thedesign principles behind the digital identity standard. SBTs have the potential tocomplement digital identity primitives, which is further explained in clause 7. 27 SBTs
differ from established forms of digital identity such as DID/VC and serve as acomplementary tool to existing digital identity primitives. In this context, digital identity
primitives extend the notion of “property rights” to encompass personal data and privacy
since it is inherently owned by myself (“I own my data”), not by anyone else or any
institution (Weyl et al., 2022).28 SBTs on the other hand, take a unique approach bytreating personal information and privacy as programmable, creating a pluralistic value
network instead of a siloed, self-contained privacy asset. SBTs flexible approachprovides an opportunity to create composable or permissioned access to the underlying
information, which might be social credentials, affiliations or Government-issued identity
documents.
● “Rather than privacy-as-transferable-property-right, a more promising
approach is to treat privacy as a programmable, loosely coupled bundle ofrights to permission access, alter or profit from information. Under such aparadigm, every SBT—such as an SBT that represents a credential oraccess to a data store—would ideally also have an implied programmableproperty right specifying access to the underlying information constituting
the SBT: the holders, the agreements between them, the shared property(e.g., data), and obligations to 3rd parties. For example, some issuers
There was a comment that digital identity would be the soul, not the SBT, and that SBTs provide someform of verification of a "Soul", specifically as stated, verification of: affiliations, memberships, andcredentials. This is to be discussed further.
28
There are discussions limited to grassroots communities on whether to treat personal data and privacy
as “private property” but among identity and privacy professionals this question is settled that they should
not be viewed as property right.
27

22© BGIN – All rights reserved

would choose to make SBTs wholly public. Some SBTs, such as a
passport or health record, would be private in the self-sovereign sense,with unilateral rights to disclose by Souls who carry the SBT.” page 15,(Weyl et al., 2022)29● “Plural intelligences raise important questions about data privacy. Afterall,to build such powerful intelligences requires pooling data acrossindividuals from large data sets (e.g., health data), or capturing data that
isn’t interpersonal but shared (e.g., a social graph). “Self-sovereign
identity” advocates tend to treat data as private property: data about thisinteraction is mine and so I should be able to choose when and to whom
to reveal it. However, even more than in the physical economy, the data
economy is poorly understood in terms of simple private property.” page15, (Weyl et al., 2022)
In this clause, we will examine the SBTs as a tool for social coordination andapply rigor to understand the characteristics that contribute to this novel utility (SeeAppendix C for more detail on “social coordination”). SBTs provide a means to optimise
aspects of coordination for various social groups and structures, such as local
communities, school alumni association, and shared interest groups. It is worth notingthat the smallest community unit could be as small as a family or a couple (insociological terms, a “dyad”). Furthermore, human identity is established within acommunity, rather than a sudden singular occurrence; concepts of sudden social
connection are often popularized by Nietzche’s concept of the "overhuman" from “ThusSpoke Zarathustra”.30
A unique aspect of SBTs lies in its ability to coordinate in a decentralizedbottoms-up manner. Why is this so important? The current world order often relies on
Government-issued identity documents to achieve complex multi-directional social
coordination, generally across millions of individuals. Government-issued identity
documents such as driver's licenses, passports or social welfare cards are theincumbent tool for social coordination and proof of legal identity. It is true that in many
jurisdictions, Government-issued IDs may have digitally signed data and tamper
Nat Sakimura discusses that while Weyl et al posit it as a new concept, contextual and directional
identity and selective disclosure actually is pretty much the consensus in the identity and privacy
community. What's new is embodying them in the form of Tokens as a multilateral conduit and social
coordination tool. In the traditional ways, they are embodied just as a combination of basic human rights,
laws, contracts, industry standards, etc. implemented as access control policies at the policy decision
endpoint. This comment suggests that further analysis needs to be conducted to establish a faircomparison of the digital identity management community and the SBTs community.
30“Self sovereignty is an illusion, we are social creatures and we have a social membership andaffiliations. It might not come into the same form for everybody but at a very least we are born into afamily and a region. Even language is a social phenomenon. Zarathustra way is not a view of individuality
now or ever” (See Appendix C).
29

23© BGIN – All rights reserved

proofing design choices, making it effortless to identify a fake ID but not really identify
the owner by possession alone nor complex enough to stop the generation of new fake
IDs31. How would the restaurant serving alcohol know whether the well-made ID they
are shown is fake or not? Weatherford et al. (2021) found that “neither length/type of
professional experience nor length/type of training experience affected ID verification
performance” based on experiments. This suggests that these Government-issued IDs
may not be a perfect way for identity proofing, suggesting a need to question topics on“what is your identity?”. Furthermore, what are the attributes that ‘define’ you, as you
and equally how could these attributes assist in commercial transactions, social
coordination or in simple practical situations like purchasing alcohol.
Given SBT’s function as a flexible plural-purposed social coordination tool, SBTs
differ from other forms of social identity in many ways.32 Jain et al., (2022) compares
SBTs to decentralized identifiers (DIDs) and verifiable credentials (VCs). They also
examine the trade-off challenge between abstraction and composability when mappingout different digital identity primitives such as SBTs, DIDs, and VCs (Figure 1).33 They
state that “[t]he challenge is to ensure that solutions work across as many platforms as
possible while maintaining the composability within each ecosystem”.34
31

Nat Sakimura, points out that Government-issued digital I.D. can be fake-safe are trivial to verify andvalidate it technically though the wide adoption of the verification technique is yet to be seen. He also
points out that even if the verification technique become ubiquitous, as the data set that a government
issued I.D. can provide is quite limited, it will not be able to meet varying needs of use-cases . For
example, a government issued I.D. typically only shows that the person with that name and gender wasborn at a certain date; limiting the individuals real-context or social value. Further to the point, Nat
discusses that in many cases, Biometric binding is extremely weak: in Japan, it is self-attested and that asa society we need much more in our life. A Government I.D. in isolation is incapable of expressing
employment status or other rich social context, where the authoritative source varies based on data point
and third-party attested information, not always the government.
32
There were opinions that all social identity exists in our species to assist individual and social
sense-making in order that we can in fact socialize. The opinion follows that if SBTs differ from otherforms of social identity, it's not because they are designed to form a social coordination tool. SBTs are insome ways biomimetic, and in a good part they are not. SBTs may be biomimetic in some ways, andheuristically where one can match the qualities of a given feature to an analogue equivalent, there is likely
less cause for concern than when and where some quality does not correspond to an analogue
equivalent. This is to be discussed in future.
33
Abstraction solutions work across as many platforms (Jain et al., 2022). Composability is “combining
distinct components to create new systems or outputs”. It is also explained that “in software development,
composability means developers can reuse existing software components to build new applications”(Smart contract composability | ethereum.org).
34
There were opinions concerning the interpretation of Jain et al. (2022). If abstraction and composability
are in trade-off, abstraction may be represented with an arrow going left to right and composability with anarrow going right to left. The orthogonal representation offered in Figure 1 indicates that the individualdrawing the image has already concluded that they do not necessarily have a trade-off. The authors aresaying there are hundreds of DID methods while accepting that there are zero SBT methods (at present),and so claiming the former lacks composability while maintaining the latter is, I guess, because they
believe the SBTs idea will ultimately manifest singularly as one method? If so, this seems odd in a paperon pluralism. The authors indicate they argue for a third way between standardizing too early / too late,but it's unclear what that third way is. It is still in an early stage of digitizing identity and should be
discussed with caution and care before advocating it.

24© BGIN – All rights reserved

Figure 1 – Current Identity Solutions in the Composability and Abstraction Tradeoff
Matrix(Source) Jain et al. (2022)
In this section, we evaluate fourteen Ethereum Improvement Proposals (EIPs)
and Ethereum Request for Comments (ERCs) proposed by the Ethereum development
community35. We have analyzed these proposals as another set of practical examples
to ascertain key features characterizing SBTs. As of January 2023, two ERC standards
have reached “Final” status by the Ethereum Foundation, namely ERC-5192 “Minimal
Soulbound NFTs” and ERC-5484 “Consensual Soulbound Tokens”.36 ERC-5192 was thefirst SBT ERC to achieve “Final” status, marking a historical moment as SBTs officiallyentered into ERC status. ERC-5484 reached “Final” under a month after ERC-5192.
Both standard contracts share the core feature of non-transferability, however,
ERC-5192 includes technical parameters to detect the state of transferability, while
ERC-5484 focuses on mutual consent between issuer and recipient. Despite twosoulbound-centric ERCs achieving final status, further SBT EIPs may inform SBT
characteristics, features and standards. A range of proposed ERCs and a diversity ofavailable features would be valuable to formulating distinguishable technical35

Nat Sakimura notes that an ERC is not equivalent to a recognised International Standard, but rather
shares similarities to a DoC (Disposition of comment) or, in IETF and OIDF, it is a "merged PR" into adraft standard.
36
According to Ethereum.org, “[a] Final EIP exists in a state of finality and should only be updated tocorrect errata and add non-normative clarifications”. (https://eips.ethereum.org/EIPS/eip-1)

25© BGIN – All rights reservedcharacteristics for SBTs. This aids in mapping a list of viable criteria to define SBTs incomparison to other digital identity primitives, specifically DIDs, VC and possibly NFTs.
Without any universal standard contract, it is valuable to build a framework that
could incorporate the features present in the various EIPs listed below.
List of Soulbound token-related ERC-EIPs:
1 EIP-4671: Non-Tradable Tokens Standard● Status: Draft (as of January 18th 2023)● Created: January 13th 2022
● “A non-tradable token, or NTT, represents inherently personal possessions(material or immaterial), such as university diplomas, online training
certificates, government issued documents (national id, driving license,
visa, wedding, etc.), labels, and so on.”● “We have seen in the past smart contracts being used to deliver university
diplomas or driving licenses, for food labeling or attendance to events, andmuch more. All of these implementations are different, but they have acommon ground: the tokens are non-tradable.”(EIP-4671: Non-Tradable Tokens Standard (ethereum.org))2

EIP-4973: Account-bound Tokens● Status: Review (as of January 18th 2023)● Created: April 1st 2022
● “The Ethereum community has expressed a need for non-transferrable,
non-fungible, and socially-priced tokens similar to WoW’s soulbounditems. Popular contracts implicitly implement account-bound interaction
rights today.”(EIP-4973: Account-bound Tokens (ethereum.org))3

EIP-5114: Soulbound Badge● Status: Draft (as of January 18th 2023)● Created: May 30th 2022
● “Soulbound tokens are meant to be permanent badges/indicators attached
to a persona. This means that not only can the user not transfer
ownership, but the minter also cannot withdraw/transfer/change ownershipas well. This includes mutating or removing any remote content as ameans of censoring or manipulating specific users.”(EIP-5114: Soulbound Badge (ethereum.org))4

EIP-5192: Minimal Soulbound NFTs26
© BGIN – All rights reserved

● Status: Final (as of January 18th 2023)● Created: July 1st 2022
● “The Ethereum community has expressed a need for non-transferrable,
non-fungible, and socially-priced tokens similar to World of Warcraft’s
soulbound items. But the lack of a token standard leads many developers
to simply throw errors upon a user’s invocation of transfer functionalities.”(EIP-5192: Minimal Soulbound NFTs (ethereum.org))5

EIP-5484: Consensual SBTs
● Status: Final (as of January 18th 2023)● Created: August 17th 2022
● “This EIP defines an interface extending EIP-721 to create soulboundtokens. Before issuance, both parties (the issuer and the receiver), have toagree on who has the authorization to burn this token. Burn authorization
is immutable after declaration. After its issuance, a soulbound token can’tbe transferred, but can be burned based on a predetermined immutableburn authorization.” 37(EIP-5484: Consensual Soulbound Tokens (ethereum.org))6

EIP-5727: Semi-Fungible Soulbound Token● Status: Draft (as of January 18th 2023)● Created: September 28th 2022
● “An interface for soulbound tokens (SBT), which are non-transferable
tokens representing a person’s identity, credentials, affiliations, reputation,and private assets. Our interface can handle a combination of fungible andnon-fungible tokens in an organized way. It provides a set of core methods
that can be used to manage the lifecycle of soulbound tokens, as well as arich set of extensions that enables DAO governance, privacy protection,
token expiration, and account recovery. This interface aims to provide a
flexible and extensible framework for the development of soulbound token
systems.”(EIP-5727: Semi-Fungible Soulbound Token (ethereum.org))7

EIP-5516: Soulbound Multi-owner Tokens38● Status: Review (as of January 18th 2023)● Created: August 19th 2022

37

This would enable key use cases to the expiry revocation discussed above.
How is it different to the current multi-party computation (MPC) wallet implementations or smart contract
wallet solutions being built out must be researched further.
38

27© BGIN – All rights reserved

● “This EIP proposes a standard interface for non-fungible double signature
Soulbound multi-tokens. Previous account-bound token standards face
the issue of users losing their account keys or having them rotated,
thereby losing their tokens in the process. This EIP provides a solution tothis issue that allows for the recycling of SBTs.”(EIP-5516: Soulbound Multi-owner Tokens (ethereum.org))8

EIP-5633: Composable Soulbound NFT, EIP-1155 Extension● Status: Draft (as of January 18th 2023)● Created: September 9th 2022
● “This standard is an extension of EIP-1155. It proposes a smart contract
interface that can represent any number of soulbound and non-soulbound
NFT types. Soulbound is the property of a token that prevents it frombeing transferred between accounts. This standard allows for each token
ID to have its own soulbound property.”(EIP-5633: Composable Soulbound NFT (ethereum.org))

9 EIP-3525: Semi-Fungible Token● Status: Final (as of January 18th 2023)● Created: December 1st 2020
● “This is a standard for semi-fungible tokens. The set of smart contract
interfaces described in this document defines an EIP-721 compatible
token standard. This standard introduces an <ID, SLOT, VALUE> triple
scalar model that represents the semi-fungible structure of a token. It also
introduces new transfer models as well as approval models that reflect thesemi-fungible nature of the tokens.
● This proposal contains an EIP-721 equivalent ID property to identify itself
as a universally unique entity, so that the tokens can be transferred
between addresses and approved to be operated in EIP-721 compatibleway.”(EIP-3525: Semi-Fungible Token (ethereum.org))
10 EIP-5252: Account-bound Finance● Status: Draft (as of January 18th 2023)● Created: June 29th 2022
● “This EIP proposes a form of smart contract design pattern and a new
type of account abstraction on how one’s finance should be managed,
ensuring transparency of managing investments and protection with
self-sovereignty even from its financial operators.”

28© BGIN – All rights reserved

● “This EIP enables greater self-sovereignty of one’s assets using apersonal finance contract for each individual. The seperation between an
investor’s funds and the operation fee is clearly specified in the personalsmart contract, so investors can ensure safety from arbitrary loss of funds
by the operating team’s control.”● “This EIP extends EIP-5114 to further enable transferring fund to otheraccounts for mobility between managing multiple wallets.”(EIP-5252: Account-bound Finance (ethereum.org))
11 EIP-4972: Name-Owned Account● Status: Draft (as of January 18th 2023)● Created: April 4th 2022
● “This ERC proposes a new type of account - name-owned account (NOA)
that is controlled by the owner of the name besides existing
externally-owned account (EOA) and contract account (CA). With the new
account type, users will be able to transfer/receive tokens using thename-derived address directly instead of the address of the name owner.”● “A NOA can be as a social identity with all states on-chain even under
3rd-party or self custody. It also simplifies porting the social identity fromone custody to another.”(EIP-4972: Name-Owned Account (ethereum.org))
12 EIP-5539: Revocation List Registry● Status: Draft (as of January 18th 2023)● Created: August 26th 2022
● “This EIP proposes a set of methods and standards for a role-based
registry of indicators aimed for usage in revocations.”(EIP-5539: Revocation List Registry (ethereum.org))
13 EIP-5851: On-Chain Verifiable Credentials● Status: Draft (as of January 18th 2023)● Created: October 18th 2022
● “This proposal introduces a method of certifying that a particular address
meets a claim, and a method of verifying those certifications using
on-chain metadata.”● “Claims are assertions or statements made about a subject having certain
properties that may be met conditions (for example: age >= 18), and are
certified by issuers using a Soundbound Token (SBT).”(EIP-5851: On-Chain Verifiable Credentials (ethereum.org))

29© BGIN – All rights reserved

14 EIP-6147: Guard of NFT/SBT, an Extension of EIP-721● Status: Draft (as of January 18th 2023)● Created: December 7th 2022
● “This standard is an extension of EIP-721. It separates the holding rightand transfer right of non-fungible tokens (NFTs) and Soulbound Tokens(SBTs) and defines a new role, guard. The flexibility of the guard setting
enables the design of NFT anti-theft, NFT lending, NFT leasing, SBT, etc.”(EIP-6147: Guard of NFT/SBT, an Extension of EIP-721 (ethereum.org))
15 EIP-5058: Lockable Non-Fungible Tokens● Status: Draft (as of January 23rd 2023)● Created: April 30th 2022
● “We propose to extend the EIP-721 standard with a secure locking
mechanism. The NFT owners approve the operator to lock the NFT
through setLockApprovalForAll() or lockApprove(). The approved operator
locks the NFT through lock(). The locked NFTs cannot be transferred until
the end of the locking period. An immediate use case is to allow NFTs toparticipate in smart contracts without leaving the wallets of their owners.”(EIP-5058: Lockable Non-Fungible Tokens (ethereum.org))

The proposed EIPs and ERCs related to SBTs indicate that non-transferability
and a focus on SBTs as stores of social or reputation value are fundamental
characteristics; these features consistently appeared throughout our examination of the
proposals. While some EIPs may seem disparate or arbitrary to the purpose of thisexamination, EIPs such as EIP-5539 “Revocation List Registry” were included toprovide the reader gestalt visibility of directly relevant and auxiliary proposals. EIP-5539
was included not to overlook the importance of having a revocation registry for SBTs.
SBTs defined by revocation features would find a revocation registry complementaryand valuable to ensure transparency. A registry has additional significance particularly
to early-proof-of-concept SBT’s feature “3) possibly revocable”; features of SBTs are
examined earlier in this clause. The exercise of compiling the list of SBT EIPs has
proved valuable. As an organization, BGIN will continue to monitor SBT-related EIPs
and ERCs, gauging the development community’s perceptions of SBTs and equally
surveying prevailing attributes included in SBT proposals. We believe this activity willaid in mapping the capabilities of SBTs and their community-driven purpose.
Our analysis of current SBT EIPs assisted in establishing a framework toevaluate smart contract primitives and draw superficial comparisons to digital identity
solutions. Having reviewed the SBT EIPs, we will now proceed to analyze the NFT
30© BGIN – All rights reservedstandard proposal, followed by an analysis of the original smart contract fundamentals
proposed by Nick Szabo (1996). We expect that by examining practical and theoretical
documentation on SBTs, NFTs and Smart Contracts, the output will inform distinct
characteristics and provide a framework for comparison.
We first examine the EIP-721 “Non-Fungible Token Standard” to understand therationale and utility behind NFTs.
● “NFTs are distinguishable and you must track the ownership of each one
separately.”● “We considered use cases of NFTs being owned and transacted by individuals aswell as consignment to third party brokers/wallets/auctioneers (“operators”). NFTs
can represent ownership over digital or physical assets.”● “It is critical in each of these cases that these items are not “lumped together” as
numbers in a ledger, but instead each asset must have its ownership individually
and atomically tracked. Regardless of the nature of these assets, the ecosystem
will be stronger if we have a standardized interface that allows forcross-functional asset management and sales platforms.”(EIP-721: Non-Fungible Token Standard (ethereum.org))
We observed in the proposed standards for NFTs in EIP-721, that NFTs aredefined by five key characteristics including:
Five observed characteristics of NFTs39:
1 Distinguishable ownership
2 Transferability rights
3 Indivisible
4 Publicly visible
5 Store of capital value
Lastly, we examine Nick Szabo’s seminal work “Smart Contracts: Building Blocks
for Digital Markets” (1996), which establishes four basic objectives of smart contract
design40. These principles will serve as a foundation for comparing the various smart
contract primitives and have the potential to inform a framework for comparing smart

39

These characteristics should be explored in the BGIN NFT working study paper
BGIN_PWI_SR005_NFT Study Report_Part1 - Google Docs (bgin-global.org) or in a new paper.
40
The authors are aware that Nick Szabo’s work on Smart Contracts was primarily theoretical andpredates current smart contract applications by 20 years - however, it is important to note the significant
impact Nick Szabo has had on the blockchain ecosystem. Revisiting Nick Szabo’s work has beenmonumental, and can be attributed throughout this paper as playing a significant role in progressing the
research established in this paper and hope that presenting Nick Szabo’s concepts in modern context will
give his work a second life.

31© BGIN – All rights reservedcontract-enabled digital identity primitives. These are the following four basic objectivesof smart contract design (Szabo, 1996):
Four basic objectives of smart contracts:
1 Observability“The first of these is observability, the ability of the principals to observe eachothers' performance of the contract, or to prove their performance to otherprincipals.”
2 Verifiability“A second objective verifiability, the ability of a principal to prove to an arbitrator
that a contract has been performed or breached, or the ability of the arbitrator tofind this out by other means. The disciplines of auditing and investigation roughly
correspond with verification of contract performance. Observability andverifiability can also include the ability to differentiate between intentional
violations of the contract and good.”
3 Privity“A third objective of contract design is privity, the principle that knowledge andcontrol over the contents and performance of a contract should be distributed
among parties only as much as is necessary for the performance of that contract.
This is a generalization of the common law principle of contract privity, whichstates that third parties, other than the designated arbitrators and intermediaries,
should have no say in the enforcement of a contract.”
4 Enforceability“A fourth objective is enforceability, and at the same time minimizing the need for
enforcement. Improved verifiability often also helps meet this fourth objective.
Reputation, built-in incentives, "self-enforcing" protocols, and verifiability can allplay a strong part in meeting the fourth objective. Computer and network security
also can contribute greatly to making smart contracts self-enforcing.”(Nick Szabo -- Smart Contracts: Building Blocks for Digital Markets (uva.nl))
Given the distinction between SBTs, SSI with DIDs and NFTs, we propose aframework for evaluating their relative utility and applicability without implying any
inherent superiority or deficiencies. This framework also does not intend to suggest thatthese concepts are equivalent or easily interchangeable but rather seeks to provide ameans for understanding these concepts' relative attributes and affordances. In

32© BGIN – All rights reservedaddition, this comparison aims to understand SBTs in relation to familiar andwell-established concepts.The proposed criteria for comparison is as follows:
Proposed criteria for comparison:
1 Motivator: What is the main motivation behind it?
2 Transferability: Can ownership be redesignated via a transfer or other means?
3 Fungibility: Can it replace or be replaced by another alternative and treatedexactly the same?
4 Privity: Third parties unless designated, should have no say.
5 Social Recovery: Upon losing the access credential, could it be recovered by
the majority of consent from the qualified member of the community?
6 Standardized at an SDO: Is there consensus on the standard?
Using these criteria, we compare the difference between the self-sovereign
identity (SSI) with DIDs, NFTs, and SBTs (Table 1).

33© BGIN – All rights reserved

Table 1– Comparison between the SSI with DIDs, NFT, and SBTs
SSI with DIDs

NFTs

SBTs

Motivations

Decouple entity
authentication from
centralized registries,
identity providers,and certificate
authorities41

Tracking
distinguishable
assets42

Encode real economy
trust networks toestablish provenanceand reputation within
decentralized
environments.43

Transferability

Some custody of the
DIDs are transferable

YES

NO

Fungibility

Depends on the DIDs
and its ecosystem

NO

Based on the use
case, can be both
fungible,non-fungible, andsemi-fungible44

Privity

YES

NO

YES

SocialRecovery

Depends on the DIDs
and its ecosystem

NO

YES

Standardized
at an SDO

DIDs arestandardized at W3C

Standardized through
Ethereum EIP.
However, theimplementation of thestandard is different
across chains andcontracts.

Not standardized(In the process ofadding standards
through Ethereum
Improvement
Proposal (EIP))(Source) Prepared by the authors.
It is essential to understand the distinct motivations, which leads to afundamental difference in their characteristics.

41

According to the official standard “Decentralized Identifiers (DIDs) v1.0” adopted by the World Wide
Web Consortium (W3C), “DIDs have been designed so that identity may be decoupled from centralized
registries, identity providers, and certificate authorities” and “the design enables the controller of a DID toprove control over it without requiring permission from any other party” (W3C, 2022).
42
The Ethereum Improvement Proposals “EIP-721: Non-Fungible Token Standard” states that “NFTs are
distinguishable and you must track the ownership of each one separately”.
43
There was an opinion that it is the decentralized verification of the attributes, i.e. the affiliations,membership, and credentials. These may or may not establish an identity, though they may lend
credibility of identity in some part to the soul that holds them.
44
The fungibility of SBTs remains a question but the true value of SBTs would lie when it is non-fungible.

34© BGIN – All rights reserved

One of the salient features of future SBTs and Souls, is social recovery
mechanisms. While the concept of ‘Soul’ is not explored in great detail within this paper,
the authors have decided to use this term to elaborate on the relationship between an
SBT being a single data point or token, and the Soul being the container of these data
points or tokens. The Soul can be representative of a wallet (as prescribed by Weyl etal., 2022), an individual, an entity or even a group. The authors of this paper are curious
to explore souls in greater detail, as it would be valuable to understand why wallets are
insufficient in holding both capital value assets and reputation value assets, or toquestion if the challenge is technical but moreover informative for the holder of the souland those interacting with the soul; could it be preferential to separate the value
dichotomy so that soul interactions are based on merit rather than capital?
Buterin (2021) suggests in the article “Why we need wide adoption of social
recovery wallets” and that “the whole point of digital technology, blockchains included, is
to make it easier for humans to engage in very complicated tasks without having toexert extreme mental effort or live in constant fear of making mistakes” and therefore aSoul wallet design which satisfies the following three key criteria is necessary:
Three Soul Wallet Design Objectives:
1 No single point of failure: there is no single thing (and ideally, no collection ofthings which travel together) which, if stolen, can give an attacker access to yourfunds, or if lost, can deny you access to your funds.45
2 Low mental overhead: as much as possible, it should not require users to learn
strange new habits or exert mental effort to always remember to follow certain
patterns of behavior.
3 Maximum ease of transacting: most normal activities should not require much
more effort than they do in regular wallets (eg. Status, Metamask...)(Why we need wide adoption of social recovery wallets (vitalik.ca))
Weyl et al. (2022) note that “[b]y embedding security in sociality, a Soul canalways regenerate their keys through community recovery, which deters Soul theft (orsale): because a Seller would need to prove selling the recovery relationships, any
attempt to sell a Soul lacks credibility”.46
Social or communal recovery is not novel to souls/SBTs. In fact, it was leveraged
by Facebook as a “Trusted Contact” in 2013 as a way to recover a Facebook account.
According to Facebook (2013), it was aimed to “give you more control over youraccount security, you can now choose and manage your trusted contacts anytime from45
46

A single point of failure goes much deeper than the carrying of the wallet.
There was a discussion on whether it is the soul that needs to be socially recoverable, not an SBTs.

35© BGIN – All rights reserved

your Security Settings, instead of only when you're having trouble accessing youraccount”. It assures that “[w]ith trusted contacts, there’s no need to worry about
remembering the answer to your security question or filling out long web forms to prove
who you are. You can recover your account with help from your friends”. The process is
as follows.
Example of social recovery: Facebook Trusted Contacts:● [Setting Up Facebook Trusted Contacts]○ Choose people you trust, like friends you would give a spare key to yourhouse.
○ Choose people you can reach without using Facebook, ideally over thephone or in person, since you’ll need to contact them when you cannot log
in.
○ Choose more people to help you. The more friends you choose, the more
people who can help you when you need it.
● [Using Facebook Trusted Contacts]○ Once you have set up your trusted contacts, if you ever have trouble
logging in, you'll have your trusted contacts as an option to help. You justneed to call your trusted contacts and let them know you need their help toregain access to your account. Each of them can get a security code foryou with instructions on how to help you. Once you get three security
codes from your trusted contacts, you can enter them into Facebook torecover your account.
(Facebook| Introducing Trusted Contacts)
However, Facebook stopped supporting this “Trusted Contact” in 2022
(Facebook, 2022). The case of Facebook’s “Trusted Contact” feature highlights thelimitations and risks associated to centralised systems in terms of social recovery.
Despite this initiative promising greater autonomy and giving users additional control of
their account security, it still remained vulnerable to a single point of failure and thecentralised authorities arbitrating the revocation of the entire social recovery
mechanism. This examples shows that social recovery as a centralised system’s
promise of “give you more control over your account security” could be easily forfeitedand naturally discounted. In contrast, SBTs offer a decentralised approach to social
recovery by distributing points of authentication and recovery, removing a single-point
centralisation risk.
At the same time, although not publicly stated, the intention behind stopping this“Trusted Contact” system was because of security breaches that could result in the loss
36
© BGIN – All rights reserved

of user’s accounts and theft of personal data. Users were easily fooled into setting
malicious actors as trusted contacts and thus, entire accounts were taken over by thesocially engineered contacts.
Another core SBT feature is “programmable privacy”. The programmable privacy
feature allows for a flexible and customisable approach to managing data visibility andaccess controls of the SBT. This feature is meant to supersede the early
proof-of-concept SBTs or proto-SBT’s first feature “1) publicly visible” mentioned
previously in clause 6. Publicly visible features are expected to discontinue, aspreference for programmable privacy. Privacy-preserving features such as
zero-knowledge proofs may make fixed features such as publicly visible redundant.
Currently, it is an idea “to treat privacy as a programmable, loosely coupled bundle ofrights to permission access, alter or profit from information” (Weyl et al., 2022). Effective
programmable privacy and social recovery are closely intertwined since visible
information may vary depending on the sensitivity of the data within the SBT. Practicallyan SBT could contain the social status of a soul alongside their affiliation to acommunity, or another soul or not - potentially obfuscating irrelevant or requiring a levelof reputation value before composing the SBT (adverse selection is explored in clause
7.2).
The Verifiable Credentials (VCs) are conceptually in a different layer to the SSI
with DIDs, NFTs, and SBTs and, therefore, inappropriate to compare side-by-side. VCs
do not require to be on a blockchain or decentralized applications, nor do DIDs. Since
VCs is an umbrella term which does not define the technical design, they have thepotential to be both SSI and SBTs.

7. The Design on SBTs and the Ecosystem
7.1 Introduction“While blockchain inclusion enables us to trace the time a particular work was made,SBTs would enable us to trace the social provenance” page 3 (Weyl et al., 2022)
This section discusses the detailed design of SBTs and the Soul as a tool forsocial coordination. The structure of this section is as follows. First, we start byexamining SBTs fundamental design for social coordination and the principles essential
to consider. Followed by a discussion on the life cycle management of both SBTs andthe Soul communities. Lastly, we will reflect on proto-SBT; the early iterations of SBTs.

37© BGIN – All rights reserved

7.2 Fundamental Design for “Social Coordination”
Taking into account the characteristics of the SBTs described in clause 6, thissection delves deeper into the practical design features of SBTs with a focus on theproperties and principles that contribute to their function for social coordination. It isfundamental to elaborate the “social coordination” aspect of SBTs and equallyemphasize the need for appropriate discussion on the safety and governanceconsequences throughout our research.
Exploring SBT’s essential features, Weyl et al. (2022) outlined that SBTs could be
self-certified. Understandably, issues surface and challenges can be made to verify theauthenticity of an SBT. The issue compounds if multiple people issue and self-certify thesame SBT. If multiple students self-certify a SBT of their bachelors degree, the value ofthe token may be called into question and without verification from an authoritative
source47; the university. To address this issue, authoritative sources such as universities
may choose to either: 1) attest to the authenticity of a self-certified SBT or; 2) issue an
SBT that supersedes any previously held or self-certified SBT.
Expanding upon this example, the University may retrospectively approve an
education SBT that a student has self-issued and self-certified. Equally, the University
may proactively issue the education SBT to the same student. In both cases, thestudent has an authenticated University SBT.
Universities can be recognised as ‘high-status’ institutions, so the possible
reputation stored in a university issued SBT can be considered to be high or the ‘heavy’.
University-issued SBTs have the potential to serve as a foundation to a decentralizedsociety, where recognised intelligence is valued digitally without requiring a superficial
capital value. In order for SBTs to effectively aid in social coordination, the authenticityof the SBT should be considered as an essential criterion. Concepts of authenticity are
explored and expressed as a key issue “Provenance is established by calling up the 3rdparty for a confirmation.” (Weyl et al., 2022). Authenticity is vital if an SBT attests to or
implies value that only an authoritative source could verify, with the number of ‘relevant’authoritative sources attesting exponentially increasing an SBTs integrity48. Authenticity
is an attribute aligned to the interaction or affiliation between an SBT and another Soulor issuer that proves the relationship or utility. Additionally, the trustworthiness of all
stakeholders involved in an SBTs lifecycle should be carefully considered. Relevant
47

Nat Sakimura comments that “in the field of identity management, it is common to introduce the notionof an authoritative source. For university degrees, the university is the authoritative source. For one's foodpreference, then the person is the authoritative source, while what Facebook guesses, while it may be athird-party attested claim, is not authoritative. So, the level of trust that can be derived andfirst-party/third-party is actually orthogonal.”
48
Nat Sakimura comments that “The hard part is to find if the signer/issuer is actually authoritative.
Usually, it is done in Top-down fashion. Trust chain is formed from the root authority in the country National accreditation agency etc. That obviously is not very decentralized. It is known as PKI. An
alternative scheme is through the network of peer evaluations. This is where SBT would potentiallyshine.”

38© BGIN – All rights reserved

stakeholders in the ‘soulsystem’49 could include the issuer, holder, contract creator,
verifier, authoritative source and potentially the witnesses or guardians involved in Soulor SBT lifecycles. Authenticity and stakeholder trustworthiness are issues closely
related to the early-proof-of-concept SBTs or proto-SBTs. These proto-SBTs underpin
the beginning of a decentralized society, which will be explored further in the follow on
BGIN SBT part 2 research paper planned for 2023.
In our discussions we have outlined how the value of an SBT could be relative tothe attestation by multiple authoritative sources, a single authoritative source or
no-authoritative source. Understandably, the value of an SBT could be calculated by N
authoritative sources multiplied by the average trustworthiness of each authoritative
source. The authors of this paper plan to explore a reputation formula commonly usedin management consulting, called “The Trust Equation”50 in the following BGIN SBT
paper part 2. We found this equation to be effective in peer-to-peer situations, but wehave not tested this formula at scale.
An authentic SBT could be assumed to be a neutral-status SBT that has animplied purpose or reputational value that can only be derived by the issuance orapproval by an intermediary, primarily an authoritative source. Self-certified SBTs thatlack an authoritative source’s attestation could potentially be labeled as a ‘superficial
SBT’ or low-status SBT. This also presents an opportunity to impart high-value to SBTs
attested by multiple authoritative sources leading to the SBT to be considered‘comprehensive’. It is important to recognise the challenges that arise out of “trusted”
parties arbitrating authenticity - especially within decentralized ecosystems. One of theissues considered by the authors and suggested by Sakimura in the course of our
discussion, is on issues of “one-directional third-party attestation”. The first issue ofsuch a system is determining if a signer or issuer is actually authoritative, which comeswith its own issues since the method of determining an authority is top-down andarbitrated by another authority, generally the state. As suggested by Nat Sakimura infootnote 48, exploring networks of peer-evaluation may prove valuable and be an
opportunity for SBTs, meeting decentralized requirements and maintaining the integrityof an SBT. The second issue from one-directional third-party attestation, is that the
top-down system that initially empowered an authoritative source is generally difficult for
an individual to fight against, suggesting that the implementation of these authoritative
sources within blockchain may lead to its own demise. The third issue is if an“authoritative source” unilaterally attests reputation value and the receiving party is
49

The authors of this paper have attempted to establish soulbound token and soul-relevant terminology.
The authors define Soulsystem, as the collection of stakeholders relevant to the lifecycle of an SBT and
Soul. The necessity to create new terminology specific to Soul related activities, stakeholders, token andsoul management and categorisation of terms, are to help separate terminology that may prove
confusing or diminishing.
50
The Trust Equation is a commonly used formula in management consulting, created by Charles H.
Green (Maister et al., 2001). The trust equation: Trustworthiness = (Credibility + Reliability +Intimacy)/Self-orientation; or T=(C+R+I)/S.

39© BGIN – All rights reservedunable to dispute or challenge the attestation. For example, if an individual isconsidered high-status because they are a celebrity, or recognised within an industry, alow-ranking university may want to claim affiliation and issue a certificate51. If theindividual is required to consent to the creation of the certificate, reputation exploitation
like this becomes increasingly challenging to attempt. Furthermore, a system of pluralpeer-determination could disincentive bad actors such as the university in the previous
example attempting to inflate their reputation, could have their reputation affected by theplural network voting against the university.

(Source) Weyl et al. (2022)
Another fundamental design choice to aid social coordination is SBTs future
recoverability features, specifically through the ability to socially or communally recovercredentials (or even authenticate). The recoverability feature still allows the ‘possibly
revocable’ feature initially explored in clause 6 and with the aided potential to ‘waning
SBTs’, or ‘diminishing SBTs’. Where revocable-based features insinuate centralized
arbitration and ‘removal’ or re-issuance of an SBT, recoverability features align todecentralized based values, valuing the distributed mechanism to communally‘recovery’ an SBT that is out of place (Weyl et al., 2022). Recovery is in principle,
nominated by the soul and achieved by a social community (potentially but not
51

Nat Sakimura suggested that “Another problem of the one-directional third-party attestation in the
traditional top-down trust chain is that it is relatively hard for an individual to fight against an organizationthat tries to unilaterally attest. Suppose you became a celebrity. A low-rank university may want to claimthat you are an alumnus and issue a certificate for M.A. or something. If such a "certificate" requires thecooperation of the person to create, then this kind of attack becomes much harder to launch. Also, whensuch activities are found, the peer review would result in a lower reputation for the university.” This point
was further elaborated and a second issue was also added.

40© BGIN – All rights reserved

necessarily inclusive of the issuer). In comparison, revoking is requested by the soul orthe issuer and arbitrated by the issuer and/or the soul. The distinction between
recoverability and revocability lies in decision-making powers and the defined arbitrator.
An SBT design that prioritizes only revocability features without recoverability raises
concerns about the sovereignty of the soul and the control issuers have over this layer.52
The difference between recoverability and revocability is where the choice lies, whether
with the issuer or both the issuer and the Soul.
In addition, for SBTs, the identifiers are assumed to be initially publicly visible toallow for a proof of concept, with plans to enable programmable privacy for “complex setof expectations and agreements” (Weyl et al., 2022). The level of transparency is
co-determined by the community the “Soul” is associated with. This is important as theconcept of privacy and tolerance varies between cultures and communities, whereby
the rich-context of relationships and communal structures give guidance on thetechnological affordances available or potentially even visible. Privacy is expected tovary between cultures and communities, and individual's plural affiliations andparticipation. For example, the level of confidence in privacy differs in a secondary
school setting (name and year is open, but grades private) versus to the context of a bar(whether or not you are above age to be allowed entry is apparent, but other informationsuch as names, date of birth, occupation is usually kept private). SBTs allow for“programmable privacy” based on the consensus of the social group that is issuing thetoken.53 Figure 2 depicts the image of what kind of choice the community would likely
have for the purpose of better understanding.

52

It is worth acknowledging that “recoverability” and “reissuance'' are different. SBT community can
prevent recoverability for immutability, but reissue a new SBT to supersede the old.
53
To achieve privacy in the SBTs, Weyl et al. (2022) mentions zero-knowledge proof, but how totechnically achieve “programmable privacy” still remains a question.

41© BGIN – All rights reserved

Figure 2 – Examples of Community’s Social Group and Preference(Source) Prepared by the authors.

42© BGIN – All rights reserved

Although we have mentioned that their privacy preference differs in each socialgroup, there are principles that must be considered. For example, the ISO and IEC haveframed “11 Principles of Privacy” as follows in the ISO 29100 (Table 2).
Table 2 The Privacy Principles of ISO/IEC 29100(Source: ISO/IEC(2011))
The basic principles of digital identity should be applied to SBTs (Figure 3). It is
important to consider how these principles could be embedded in the design and usage.

Figure 3 – Basic Principles(Source) Cameron (2005), Sakimura (2021)
Cameron (2005) identifies the “The Laws of Identity” which the identity system
has to obey as follows.

43© BGIN – All rights reserved

1 User Control and Consent:
Technical identity systems must only reveal information identifying a user
with the user’s consent
2 Minimal Disclosure for a Constrained Use:
The solution which discloses the least amount of identifying information
and best limits its use is the most stable long-term solution.
3 Justifiable Parties:
Digital identity systems must be designed so the disclosure of identifying
information is limited to parties having a necessary and justifiable place ina given identity relationship.
4 Directed Identity:
A universal identity system must support both “omni-directional” identifiers
for use by public entities and “unidirectional” identifiers for use by private
entities, thus facilitating discovery while preventing unnecessary release ofcorrelation handles.
5 Pluralism of Operators and Technologies:
A universal identity system must channel and enable the inter-working ofmultiple identity technologies run by multiple identity providers
6 Human Integration:
The universal identity metasystem must define the human user to be acomponent of the distributed system integrated through unambiguous
human-machine communication mechanisms offering protection against
identity attacks
7 Consistent Experience Across Contexts:
The unifying identity metasystem must guarantee its users a simple,
consistent experience while enabling separation of contexts throughmultiple operators and technologies.
Sakimura (2021) suggests “The Seven Principles of Digital Being” necessary to
make our digital life safe.
1 Accountable Digital Being:
Anyone can establish and re-establish a digital presence where they
themselves are held accountable for their actions.
44© BGIN – All rights reserved

2 Expressive Digital Being:
Each person can express themself through their digital existence, using
data attested by others and self-expressed data about their own nature.
3 Fair Data Handling:
Ensure that all participants adhere to the principles of privacy with respect
to the handling of data concerning each individual and that the purposes
for which the data is handled are not harmful to the individual concerned.
4

Right NOT to be Forgotten:
Technical measures are taken to ensure that digital existence is notpretended or attributes are not rewritten.

5

Human Friendly:
The system shall take into account the asymmetry of information between
individuals and legal entities, the limited rationality of individuals, and thesocially vulnerable.

6 Adoption Friendly:
Technology is open, leverages existing infrastructure as much as possible,
and is continually tested to ensure interoperability.
7 Everyone Benefit:
Individuals, businesses, and governments benefit from this system.
Otherwise, the system would not be implemented, for it would not stand asa system.
In relation to the SBTs, it is inseparable from the Soul. With the premise that Soul
has the right to reveal SBTs and certain subsets of their data, “4) Right NOT to be
Forgotten” and “right to be forgotten” similarities could be drawn that these features
originate from the same token. “Right to be forgotten" is about the erasure of any of
you're underlying data, the “Soul” burning the underlying SBT. “Right not to be forgotten”
is about not changing the state of the underlying data or duplication to anotherdatabase. The latter is in conflict of data erasure.54“Les Misérables” a 19-century novel written by Victor Hugo depicts this problem.
Jean Valjean is living a respectable and successful life, is suddenly shadowed by
54

The “right NOT to be forgotten” might be implemented for example as an “once-only” policy, in which
the state is not allowed to ask citizens for the same information twice. The Estonian government
introduced this principle in 2007 ('You can't use 18th century law for a digital world' (euobserver.com) ).

45© BGIN – All rights reserved

Inspecteur Javert who reveals Jean Valjean’s past history to the public. As a result,Jean Valjean’s life and career are ruined. The novel might have had a different ending
much more had Inspecteur Javert or the community “forgot”, or in other words, had thepast history faded. This is why there are cases in identity where “right to be forgotten” isa principle that should be recognised.
The concepts of “right to be forgotten” and “right not to be forgotten” haveparallels in the General Data Protection Regulation (GDPR), specifically in Recital 65(right of rectification and erasure), Recital 66 (Right to be forgotten), and Article 17(Right to erasure). In light of these legal considerations, a fundamental design featurefor SBTs should reflect the principle of “the right to be forgotten”; ensuring that
individuals have the ability to exercise control over their SBTs; especially SBTs
containing personal data, to mitigate the negative consequences of data leaks. In
addition to the “4) Right NOT to be Forgotten” should be applied as an SBT’s designprinciple.
It is a topic of further research to study the tension between a Soul, and a socialgroup. This paper does not provide a philosophical judgment on SBT use cases nor
frame the normative ethics of SBTs. However, to apply rigor in examining the functional
relationships that Souls seek or avoid with social groups, (at all scales and vice versa),
we have analyzed how a binary value system of SBTs may lead to rich social
economics. For simplicity, and with great caution, we will elaborate on this social
economic model by presenting the existence of a 1) positive SBT, and a 2) negative
SBT, in which the binary value is determined by the Soul holding the SBT but validated
by society; either in centralized fashion with an authoritative source or in decentralizedfashion with a plural peer evaluation mechanism. Superficially, a positive SBT isbeneficial, and desirable, and the Soul desires the SBT to persist infinitely andpotentially desires the SBT to be publicly visible. Whereas a negative SBT is detrimental
and undesirable, and the Soul desires that the negative-SBT ceases to exist or at theminimum remains hidden. Where these attributes are in the interest of the Soul,potentially oppose the interests of a social group - where context and relevance
prevail55. A social group may desire for positive SBTs to fade over time to ensure theSoul maintains the SBT to continue being worthy of the positive SBT. A social group
may also desire for negative SBTs to persist or, at the minimum, remain publicly visible
to inform others of the Soul's negative credentials. While the section does not seek toprovide a practical system to define the binary value of SBTs, it does however explore

55

While one group or a soul considers an SBT to be ‘positive’ another group or soul may consider thesame SBT ‘negative’ - attempts to censor may dismantle decentralized society. Instead, allowing plural
networks of social groups to co-determine normative behavior attributes and affiliations considerednegative by the wider populace may disincentive owning that specific SBT leading to grassroots social
determination. This may be considered slow at first but beneficial in the long term as the decentralizedsociety determines ethics without the need for a single authority to arbitrate a top-down decision.

46© BGIN – All rights reservedthe possibility of tension that can arise from conflicting interests to evaluate future SBT
research and development.
Three variables to evaluate reputation economics in pseudonymous
environments were proposed by Nick Szabo in “Formalizing and Securing Relationships
on Public Networks” (1997), which are: operating value, throw-away value andreplacement value. Nick Szabo also cites Peter Swire’s (1997) work that suggests two
additional variables that arise from reputation economics concerning loans that are
insufficiently secured by capital or reputation: adverse selection, and the endgame
problem (Szabo, 1997; Swire, 1997). Together a simple five-point framework isestablished to evaluate reputation economics, and in the context of this paper, the listed
concepts provide a means to evaluate reputation value stored in SBTs in relation to theSoul. These are the five variables of reputation economics:
Five variables of reputation economics:
1 Operating value:● Expected future profit, given the reputation
2 Throw-away value:● Profit from cheating, which ruins reputation
3

Replacement cost:● Cost of recreating reputation● Combine costs - initial cost, replacement cost, loss of operating
value

4

Adverse selection:● Entrants without positive reputation can be rejected● This could also include minimum positive reputation requirements● From the perspective of other entities

5

The endgame problem:● The replacement cost has to be greater than the throw-away value
or positive reputation accrued can systematically profit.
● From the perspective of other entities

There are dozens of nuanced variables to consider in evaluating reputation, andfor the purpose of this paper, we chose to explore this model in the subsequent BGIN
Soulbond Token Paper planned for 2023. In the following paper, we evaluate the valueof a bachelor degree SBTs by posing each variable as a question, answered by a low,47
© BGIN – All rights reservedmedium, or high measure. Examples of reputation models and formulas are of greatinterest to the authors of this paper and contributions to this controversial side of SBT
research is greatly valued.
To build a robust ecosystem that benefits all stakeholders, including individuals,
businesses, and governments, it is essential that SBTs and the soulsystem56 adhere to
the principles of “The Laws of Identity” and “The Seven Principles of Digital Being”.
These principles serve as the foundation for the function of SBT adopted by social
communities and promote positive inter-social-community relationships, facilitating
co-determined, positive plural social economies. While individual social communities are
empowered to implement additional rules and internal guidelines creating frameworks
on socially acceptable behaviors, it will be up to the social communities to govern
whether to apply further rules and resolutions beyond these principles, provided thatthey comply with applicable laws and ordinances. Furthermore, to safeguard the rights
and interests of “souls”, it is necessary to develop a system built with programmatic
societal guardrails that provide access to these principles. To this point, the mentioned
principles are understood, deployed and operated effectively by the community. This
recommendation seeks to provide digital communities considering SBTs as a solution
for social coordination, a framework that treats each soul with dignity and respect, while
equally affording innovation and plural network implementation.

7.3 Lifecycle Management
It is without surprise that SBTs do not appear spontaneously, nor evaporate
randomly. A comprehensive understanding of SBTs must consider SBTs inherent
characteristics and features as discussed in clause 6, but also motivations that facilitatesocial coordination in decentralized societies. In order to achieve this monumental goal,
it is essential to look beyond short-term horizons and adopt long-term perspectives. In
this context and direction, considerations around a SBTs lifecycle are critical to thedesign process. This includes taking into account the various stages, definitions, issuingand depreciation of SBTs that Souls and and the Soul communities may encounter
during development. Below is the framework mapping the different stages SBTs and
SBT communities would have to take into account.
[The lifecycle of SBTs]
1 Generate:● SBT is issued and belongs to a social community. SBTs could be
self-issued and retrospectively authenticated, or SBTs could be issued by
56

The authors define Soulsystem, as the collection of stakeholders relevant to the lifecycle of an SBT or
Soul.

48
© BGIN – All rights reserved

a trusted third party or party whose reputation propagates the value of theissued SBT.
● The trusted third party has to be defined and means of verifying‘trustworthiness’ or “proof of reputation”. Equally, it is important to consider
the potential risks associated with reputation being tied to one’s
connections, as being well connected does not necessarily equate tobeing trustworthy.
● A SBT can potentially “represent” or “express” the affiliation or relationshipto a reputational value by the self-determination of the soul or thecommunity, whereby self-determination will generally not hold high-value
without the substantiation by another third-party or means that can confirm
a proof of reputation; such as an authoritative source.
● A negative reputation could be encompassed within a social community
but generally, according to Nick Szabo (1996) "that party would prefer not
to reveal a negative credential such as a bad credit rating”.57 From this we
can infer that negative SBTs will be difficult to determine on face-value andto the detriment of the Soul would assist a community if the negative SBT
was natively publicly visible as discussed briefly in clause 7.2.
2 Update:● Append the information when necessary to account for the current identity.
● Dynamic SBTs may prove to be useful in SBT development to account forthe dynamic and multi-dimensional features of social credentials andreputation value● Digital identity solutions have used offline biometrics localised to users
phones to refresh credentials, a similar method could be used to ensure
the Soul and the underlying SBTs remain in possession of the intended
holder by biometrically unlocking SBTs or initiating composure of the SBT
3 Fade:● The antithesis to “update”. If an SBTs value is correlated to a variablevalue (potentially timestamp related), the distance between the two values
would understandably affect the value of the SBT. Potentially similar to“forgetting”. This is reflecting the “right to be forgotten” design principles.
This expiry is similar to a burn mechanism.
● Possible methods of achieving this is as discussed timestamp movement,
half-life depreciation or transaction signing.
57

You wouldn't reveal that you have bad or good credit. You would only answer yes or know you havesufficient credit. The requestor or network doesn't need to know the actual score or in reality the act of notproviding additional information may inform negative reputation.

49© BGIN – All rights reserved

● Blockchain’s core feature of immutability creates complications for
reputation value that fades over time. Potentially negative SBTs could
have a half-life until finally the negative SBT is burnt - these features
should be considered.
4 Revoke58:● Revoke the SBTs once unnecessary or inappropriate (e.g., no longer
associated with the social community, death of the owner or the issuanceof upgraded SBTs).
● Soulbound Tokens (SBTs) are defined by Wyle et al. (2022) as “publicly
visible, non-transferable (but possibly revocable-by-the-issuer) tokens heldby the soul”. They also mention that “[b]urning and re-issuing would
make sense … when the token signals authentic community membership”.
● The revoke part of the life cycle may be superseded by recoverability
features, although revocability may be grandfathered in with recoverability
features● Emphasis on communal recovery over issuer revocation will occur.
5 Revival:● Enable the SBTs to revive using for example community recovery
methods.59● This is equally applicable to the Soul containing the SBT[The lifecycle of SBT Community]
1 Generate: SBT community is generated.60
2 Develop and Manage: Build and manage community guardrails which sets up
trust and guidance and measures such as the level of privacy, and develop acommunity.
3 Dissolute/Terminate: The community is dissolved or terminated either byquorum, consensus, or by having nobody left.61
58

In this case, “revoke” is appropriate, not “delete”. You could summarize in a Merkle Tree or azero-knowledge proof but not delete or tamper with data.
59
If somehow the SBTs could be revived, it would have to overcome a guardrail put in place when the
SBTs were revoked. How the revival and recovery is different is not clear yet and is for further discussion.
60
What would be the minimum number of SBTs to form an SBT community remains a question. The
minimum might be one SBTs, or reflecting the fact the smallest unit of a community is a family or a couple
as mentioned in the earlier clause, it might be two. It might be an odd number to have quorum. How theSBT community will be generated remains a question.
61
Whether we need time-bound nobody left remains a question. The community would predefine theserules, i.e. if the community is abandoned for x epochs then revoke all access. In theory the data would stillbe there, but inaccessible. It could be summarized into a Merkle Tree or zero-knowledge proof to reduce50© BGIN – All rights reserved

4 Revival: Enable the social community to revive using for example, community
recovery methods.
The management of SBTs and the corresponding social community must be
tailored to the needs and motivations of each community, determining the frequency of
updates and renewals of SBTs, potentially new ERCs guide these principles or at least
set the framework to create highly accessible interfaces. Before deploying an SBT,
governance mechanisms should assist communities in determining the necessary
characteristics and requirements of SBT updates. Universal or one-size-fits-all
approaches may not be applicable, preferable, or even available. While there is a lackof SBT standards, and clarity on SBT lifecycle management, it is recommended that
communities adopting SBTs develop comprehensive guidelines and processes for
managing SBTs and the community leveraging these tokens throughout each life cycle
stage.62 Blockchains state of immutability is raised throughout this paper to caveat any
deployment of SBTs storing reputation value. All development of this technology shouldbe rigorously tested and interrogated as to avoid any premature or carelessimplementation of untested SBTs.

7.4 Proof of Concept
In addition to the lifecycle of SBTs, it is important to acknowledge that SBTs startfrom a primitive form, a proof of concept stage. As previously discussed in the
subclause (7.2 Fundamental Design for “Social Coordination”), and in clause 6, public
visibility of the SBTs is assumed for the SBT in the proof of concept stage for simplicity
alongside revocation based features. These initial features start the conversation but do
not end it. The ultimate goal is to achieve “programmable privacy” and “Communal
Recovery”. The desire to implement these two core features suggests that the featuresof proto-SBTs are not necessarily expected to continue past product maturity. We
expect to see programmable privacy and recoverability features in the long-run. Weyl etal. (2022) differentiate the features of a proto-SBT and future SBTs depicted as follows.
● “We initially assume publicity despite our deep interest in privacy because
it is technically simpler to validate as a proof-of-concept, even if limited by
the subset of tokens people are willing to publicly share. Later in thespace and still provide cryptographic verifiability of the underlying data. It may be worth getting into therevival of the community as well then. Presumably these are historical records that could add value tosociety. We wouldn't want to encourage that to be locked away. So how do you safely declare agatekeeper? These could be predefined at the start and become public at a certain date.
62
Detailed discussion on the guidelines for each lifecycle stages are necessary as a future step.

51© BGIN – All rights reservedpaper, we introduce the concept of “programmable privacy” for richer use
cases.” page 2 (Weyl et al., 2022)● “Although the hallmark of SBTs is non-transferability, SBTs may also haveanother property which may prove more useful in bootstrapping:
revocability. It’s possible that SBTs first gestates as revocable, transferable
tokens, before growing into non-transferability. A token is revocable if an
issuer can burn the token and re-issue it to a new wallet. Burning andre-issuing would make sense when, for example, keys are lost or
compromised, and the issuer has an interest in ensuring the tokens are
not financialized and sold off to a party—in other words, when the token
signals authentic community membership.” page 28 (Weyl et al., 2022)● “Revocable, transferable tokens are a kind of proto-SBT—serving
supportive, placental functions before Soul birth. These tokens buytime both for wallets to gestate secure, community recovery mechanisms
and for a person to succinctly accumulate proto-SBTs that can eventually
be burned and re-issued into non-transferable SBTs. Under this pathway,
the question is not, “what happens first: SBTs or community recovery?”Rather, SBTs and community recovery instantiate simultaneously, birthing
a Soul.” page 28 (Weyl et al., 2022)

7.5 Coexistence with Other Digital Identities
As we have discussed in clause 6, the purpose and the characteristics of SBTs
and other digital identity solutions such as SSI with DIDs are substantially different.
Furthermore, non-transferable NFTs do not make them immediately an SBT, nor aneffective token for social coordination or decentralized identity. SBTs represent a new
option, rather than a replacement of existing forms of SSI, DIDs or NFTs. Therefore, theproblem setting is not a question of substituting existing solutions with SBTs, but rather
determining the suitability of SBTs for specific use cases; preference may overlay thisas well. It is highly likely that SSI with DIDs and NFTs will coexist with SBTs, and that
individuals will be the ultimate authority on their use cases.

8. SBTs Lead Potentials
Cameron (2005) states that “[t]he absence of an identity layer is one of the key
factors limiting the further settlement of cyberspace” and that the difficulty of adding theidentity layer in the internet is “[m]ainly because there is little agreement on what itshould be and how it should be run”. However, as previously examined in clause 7,
52© BGIN – All rights reserved

SBTs do not necessitate a universal agreement for novel SBT specific identity principles
or to overhaul existing identity standards. Instead, SBTs allow for the replication ofexisting identity principles and frameworks, with an added focus on “programmableprivacy” and “recoverability”; privacy being a core feature of GDPR and digital identity
frameworks. “By having these features of being able to know who and what you areconnecting to” (Cameron, 2005), with certain privacy each stakeholder will be
comfortable with the level of autonomy to express, reject and equally compose SBTs. If
future iterations of SBTs are defined by programmable privacy features, Souls andcommunities could self-determine and co-determine appropriate guidelines to enable asafer and more cohesive plural social network of values.
Weyl et al. (2022), explains that with SBTs, it will “skirt hyper-financialization —yet unlock exponential growth—we propose augmenting and bridging our sociality
across virtual and physical realities, empowering souls and communities to encode richsocial and economic relationships”.
In this section, we explore the possible implications of SBTs on society byexamining five potential outcomes that have the propensity to address and potentiallymitigate the financial risks and problems previously outlined in section 5 regarding
NFTs.
1 Counter Illicit Economic Activities
In clause 5, we have outlined various forms of illicit economic activities,
primarily fraud schemes and wash trading. These selected problems are
non-exhaustive of the larger range of activities under the umbrella of illicit
economic activities, including but not limited to child abuse, darknet market,
cybercriminal administrator, ransomware, stolen funds and Sybil attacks(Chainalysis, 2022). While current measures to prevent these activities include
investigation and sanctions, the coverage of these activities are minimal, and true
value transacted within decentralized permissionless and pseudonymous
markets creates an additional smoke screen to dampen law enforcement
activities. For comparison, for every $1,000 of illicit funding, only $1 is recovered
according to Pol (2020) and according to Chainalysis’s 2022 ‘Crypto Crime
Report’ (2022), citing UN statistics: criminals using fiat, annually laundered 42.4
times more cash than ‘cybercriminals’ laundered over a five year period using
cryptocurrency. This comparison does not seek to diminish the magnitude ofmoney laundered by digital assets, but presents a rational explanation to the lackof incentives in resources allocated to mitigating money laundered using digitalassets. This includes the additional challenge of monitoring money laundering indecentralized, permissionless and pseudonymous digital markets.
Understandably, addressing these issues requires robust technology andmulti-jurisdictional collaboration to accurately identify, measure and mitigate illicit
53© BGIN – All rights reservedfinancial activities within the blockchain. With these issues in mind it becomes
clear that current measures, such as investigation and sanction, are insufficient
to combat these illicit activities within blockchain environments.
In the context of SBTs, SBTs could serve as an effective tool, adding
further functionality to the incumbent regulation technology stack in countering
illicit economic activities. SBTs allow “souls” to create plural social connections,dynamically forming rich on-chain social contexts, and embedding blockchainswith reputation-informing tokens and potentially publicly visible affiliations. This
novel technology could work as a social mitigant, as Souls correlated to theseillicit activities could cause reputation risks in the SBT ecosystem which could
inform affiliated communities of their activities; the action's ethical evaluation mayvary across different social groups. The reputation risk could generate a strong
disincentive making the action undesirable to perform, and undesirable for others
to be associated with.
2 Promote Regulatory and Tax Compliance
Regulators face challenges applying AML/CTF to digital assets on
Blockchains, primarily due to the lack of available solutions capable of providing
accurate identification of the entity transacting on the blockchain network or, at
the minimum, evaluating the entity’s risk. The current system relies on recording
and analyzing on-chain activity such as transactions, addresses association,
addresses relationships to the transaction and a plethora of data points publicly
available that could create insights on the entity and potentially identify theholders. Additionally, tax compliance is also hindered by lack of entity
identification tools to correlate evasive activity on-chain to a specific tax resident.
Both regulatory bodies struggle to investigate, prevent and enforce cases. SBTs
could provide a blockchain-native solution to meet KYC or CDD obligations, withprivacy-preserving SBTs such as zk-SBTs to obfuscate the underlying PII orsocial credentials. This could provide a two-way access point, as traditional
financial institutions could leverage the composability and security of SBTs forcustomers, and decentralized ecosystems could mature by implementing
recognised KYC and CDD requirements. By providing information with past
reputation/records, it might make the identification process and risk assessment
more sophisticated and reliable. This creates an opportunity to update processes
that primarily rely on PII and Government-issued ID in isolation. A range ofcomposable SBTs could build a comprehensive collection of social credentials
that go beyond arbitrary Government-issued credentials, expressing rich social
context and bridge on/off-chain use cases.
3 Diminish Unintentional Information Asymmetry
54© BGIN – All rights reserved

SBTs present a potential solution to the challenge of unintentional
information asymmetry, in the context of lending and credit systems. Weyl et al.
(2022) states that “[a]n ecosystem of SBTs could unlock a censorship-resistant,bottom-up alternative to top-down commercial and “social” credit systems,” which
could empower under collateralized lending within DeFi. While access to undercollateralized lending would be a monumental advancement for decentralized
ecosystems, the paradox of credit provision without available credit scores isessential. Without mechanisms to build credit scores individuals or a community
cannot build a reputation/history whether good or bad and the counterparty
cannot assess the risk necessary to distribute credit without ascertaining
creditworthiness. Even when one is willing to provide their reputation for the otherto assess, without a sufficient and credible means of building and expressing thenecessary information to be evaluated would only create inefficiencies andmarket failure risks. The issue of unintentional information asymmetry, presents
this paradox clearly, although all parties benefit from sharing information toestablish a viable credit relationship, the absence of reputation-building orpresenting infrastructure, result in both parties abstracting from the conversation.
The lender will not originate borrowable funds without a method of evaluating theborrower nor the business case to rationalize the commercial opportunity withoutborrowers capable of acquiring credit. Borrowers will not be able to borrow funds
without a credit score, nor the opportunity to start building a credit score withoutborrowing credit. Pushing the lender and borrower back into over-collateralized
credit.
To address unintentional information asymmetry, it’s important tounderstand that SBTs are individual data points, the Soul is the database and acollection or ‘constellation’63 SBTs is a dataset. SBTs could be programmed torepresent education, achievements, accolades, income, PII, veteran status anddozens of unique data points. SBTs create the potential to have composable
credit scores, where currently fully under collateralized lending is primarily
philanthropic or subsidized by governments, future social credit solutions may
accept your education SBT, income SBT and a friends Soul to stake their total
reputation held to acquire credit. SBTs could enable financial products andmarket opportunities previously believed to be impossible. There is the potential
for any use case within the same structure; where one willingly wants to prove or
use their reputation and the other will use that for accurate assessment. The only
caveat is that social credit will only be possible overtime, once SBTs are created

63

This is another definition the authors of this paper have included. A constellation of souls or soul
constellation is a collection of SBTs related to one another. Similarities can be drawn from NFTs that havea NFT collection, whereas Souls would have a constellation of SBTs. Suggestions on these terms arewelcomed.

55© BGIN – All rights reservedand distributed and infrastructure is built around formulating scores acceptableby lenders.
4 Fair, Transparent, and Accountable GovernanceIn clause 5, we examined various risks and limitations in digital asset
governance structures, highlighting the potential pitfalls of a majoritarian andplutocratic voting system, whereby voting power is relative to quantity of
governance tokens held. This approach may seem archaic, but thisboot-strapped governance system enabled complex multi-party coordination, withsocial, industrial and commercial stakeholders co-determining resolutions acrossborders and, in most cases, absolutely anonymously. This plutocratic governancesystem has been sufficient in catalyzing basic governance requirements, and insome circumstances still be considered preferable. However, it lacks therich-social context that exists natively in traditional governance systems. If thesemajoritarian systems were to transition or even partly-implement new social
coordination tools such as SBTs to improve the decentralization of voting andproposals, would they want to adopt these tools; or could they even pass the
proposal to vote for these tools? DAOs are widely recognised as the primary
governance system in distributed governance voting structures. The term
decentralized is understandably often associated with DAOs, and equally DAOs
are selected as the governance system for DeFi dApps for the same reason.
However, on closer examination of these organizations, it becomes apparent that
there is a significant concentration of voting power within a significantly small
minority of token holders. To adequately evaluate the benefits of SBTs for a DAO
use case, the authors of this paper struggled to find the appropriate language toaccurately illustrate the full extent of centralisation in these so-called“decentralized” autonomous organizations.
Chainalysis published an informative report on the “State of Web 3”(2022), in June of 2022, whereby Chainalysis analyzed the wealth distribution often major DAO tokens, finding that “less than 1% of all holders have 90% of
voting power.”. The potential impact of this was further illustrated that “ if just asmall portion of the top 1% of holders worked together, they could theoreticallyoutvote the remaining 99% on any decision” (Chainalysis, 2022). To provide areal-world comparison of web3’s lack in wealth equality, we have used
DAOitright.xyz, a public goods calculator that evaluates various DAO governancemetrics specifically the Gini-coefficient, a commonly used metric to evaluate acountry’s wealth inequality (Zhao, 2022). Lido, the largest Ethereum 2.0 liquidstaking provider, an address can stake (deposit) Ether to participate in Ethereum
2.0 consensus mechanism and receive staking rewards without locking staked
Ether up. According to DAOitright.xyz, Lido has a Gini-coefficient of 0.931, for56© BGIN – All rights reserved

comparison, the country with the highest Gini-coefficient in the world is South
Africa, with 0.63 (DAOitright, 2022; World Bank 2023). Lido’s score would make it
the most inequitable place in the world. So how would SBTs bring thedecentralization back into DAOs and distributed governance systems?
SBTs afford DAOs a novel means of securely distributing voting rights andaligning accountability mechanisms when members attempt to act maliciously.
Potentially SBTs are used in isolation initially, and only in instances where theoutcome has impacted the whole community or its members disproportionately.
To ensure these crucial governance votes are conducted in a fair, distributed andunbiased manner, SBTs could represent a single vote and be distributed basedon a minimum number of governance tokens to avoid adverse selection as
described in clause 7.2. The authors of this paper are also considering an
ERC-EIP for an alternative SBT primitive specific for governance voting, this SBT
variation is a ‘Soulbound Governance Token’ (SBGT). We describe a SBGT as afungible SBT, whereby users are able to generate this token through similar
methods used today such as staking and dApp activity. Where the SBGT would
differ from standard governance tokens is the SBGTs are non-transferable andhave revocability features. Users can generate this token but cannot trade thetoken for speculative financial returns. Additional fair voting mechanisms such as
quadratic-funding would still be possible and afford another layer to equitablevoting processes (Weyl et al., 2022). Additionally, transparency will play a crucialrole in ensuring that decisions are made in the interests of the community, andwhere any governance system that allows members to delegate voting power is
not pooled to control voting outcomes at the expense of the majority. SBTs could
also align ownership, action and relative consequence if members attempt to act
maliciously.
The implementation of SBTs holding programmable privacy andcommunal recovery features, presents a novel method of conducting governancevoting. SBTs and variations such as SBGTs could address the ‘anonymity butwith accountability’ problem statement, this paper initially highlighted during theIntroduction. SBTs could ensure transparency within the voting process isadequately addressed, to DAO members confidence on voting practices andparticipants, without needing to expose the underlying PII. SBTs creates
accountability, by incentivising fair, honest and purposeful governance voting,whilst making consequences against the DAOs voting guidelines undesirable bylayering the five variables of reputation economics outlined in clause 7.2. DAOs
could go further by implementing ‘one-SBT, one-vote’, similar to Satoshi
Nakamoto’s ‘one-CPU, one-vote’ a decision that served as part of the foundation
to ensuring a fair distribution of network mining for the Bitcoin Blockchain(Nakamoto, 2008). Furthermore, using SBTs as a novel, gamified badge to57© BGIN – All rights reservedimpart positive reputation gained by positive work actioned, while no capital value
could be derived - tools such as proof-of-attendance protocol (PoAP) havebecome popular in incentivising participation beyond financial rewards (Weyl etal., 2022). Holding other Souls accountable may be another incentive, and could
be a powerful tool when wanting an action; or could sow distrust withincommunities. Although these features are not recommended to be deployed bydefault until SBTs are readily accepted, tested and the community has voted - itis, however, recommended for DAOs to plan for future upgrades and theimplementation of SBTs to assist in creating fair governance systems. By
incorporating SBTs as a new tool for social coordination in governancestructures, SBTs have the potential to facilitate fair, transparent and accountabledecentralized governance.
5 Opportunities for Innovation
SBTs have the potential to transform digital identity infrastructure, bothfrom DID/VC standards and the top-down arbitrated approach conducted bygovernments and intermediaries. This includes how developers implement
different digital identity standards for real-world applications and how developers
implement new functionality within decentralized ecosystems. Enabling Souls
and communities afford to determine their own digital identities, with additional
means of privacy, recovery and utility. Currently, mainstream identity structure,and limited stakeholders can determine which form of digital identity should be
implemented, including how the digital identity is managed. SBTs open thepossibility for more stakeholders to participate in co-determining standards,
features and utilities, and novel innovation in both development and use case.
The purpose of SBTs is to aid in creating a decentralized society, so that
individuals and communities from all levels compose the digital identity that best
represents them in a given context. This shift towards a bottom-up approach todigital identity infrastructures could open up opportunities expanding the range ofparticipants involved in under collateralized lending, social credit systems,
equitable governance voting or privacy in highly-integrated global markets. This
paper has endeavored to highlight the extent of possibilities so that researchers
can progress theory, enabling developers to innovate on the concepts ultimately
so that the market can benefit from new technology that addresses real market
inefficiencies.

58© BGIN – All rights reserved

9. Further Considerations of SBTs
In the previous section, we presented the potential for SBTs, outlining how SBTs
can counter financial crime, meet regulatory requirements, address market failures,
improve governance systems and create opportunities for innovation. In this section, wewant to discuss SBTs limitations, risks, challenges, and open up on questions for the
future of SBTs and Souls. It is important to understand that SBTs are not a silver bullet
and if not cautiously analyzed and carefully implemented, new risks are bound to rise.
As it is important to examine the advantages and use cases of SBTs, we must equally
discuss the potential limitations and carefully calculated aspects to consider the extent
of these possibilities. Among the key considerations to safely, and effectively implement
SBTs, includes concerns surrounding the storage and management of PII on-chain; oneof the exasperating concerns. Blockchain’s core feature of immutability does not allow
for PII concerns to be addressed retrospectively, and will have to be discussed far
before the development stage of SBTs. Any SBTs looking to interact with PII, will require
solutions that meet privacy requirements and reassure Souls that identity standards are
sincerely addressed.
All stakeholders participating in SBT-related discussion should be mindful andconsider the questions we raise as follows; Innovation, Design, Privacy andTransparency, Responsibility, and Implementation.
1 Further Innovation● Innovation in communal authentication, attestation, and recovery in a safe
and sound way is necessary.
● There will be at least a need for creating a platform to issue proto-SBTs /proto-soul issuers as another layer before rolling out.
● How can research communities, developers and commercial entities alignfor the benefit of creating public-good social coordination use cases?
● How do you commercialize non-transferable assets in a natively hyper
financialised decentralized market?
● In what ways can definitions surrounding non-transferable NFTs and SBTs
be clearly outlined and decided?
● How can we avoid using the term ‘web3’ to define the ecosystem thatleverages both blockchain and smart contracts? A proposed term by anauthor of this paper is “decentralized innovation”, “decentralized
technology” or “decentralized ecosystems”.
2 Design● Programmable privacy reflects the general view of privacy in thecommunity. However, even in the same community, confidence for59© BGIN – All rights reserved

●
●

●

●

●

●

●

●

disclosure varies between the “souls”. How do we ensure individual
confidence while maintaining a functioning mechanism as a community?
What are the mechanisms necessary to eliminate improper usage of
SBTs?
How to ensure that the SBTs and its ecosystem function efficiently andeffectively? What is necessary to maintain credibility and trust in the SBTs
other than the initial agreement?
Reputation works because it is relatively compared and enables
assessment simply if it is good or bad. Even with programmable features,
one might need to unintentionally disclose reputation or association
perceived negatively. This is as efficient as AML/CTF and other regulatory
measures. But it might be used for assessing credit scores when applying
for a loan. To some extent, this is necessary to reduce unintentional
information asymmetry. However, we must keep in mind the possibility thatit might lead to social exclusion or stigma. How do we deal with thesecases of negative characteristics or outcomes?
Sakimura (2021) has framed that “Trust” is to “answer to expectation” and“Brand” is to “promise to answer expectations”. SBTs and SBT
communities will each build their own trust and brand. They should
consider and have an agreement within the community to build trust andbranding, regardless of whether or not they will actually adopt it.
Even with SBTs, it will not fully be a solution to governance voting
problems as mentioned in clause 5. For the problems that are notaddressed by SBTs alone, could it be solved in combination with othersolutions? Potentially quadratic funding, as proposed by E. Glen Weyl.
Community recovery and revocability is closely related. That is, recovery
has its value because it is revocable. How could it be aligned with thecommunity recovery system?
For some communities it is easier to revoke a soul. Those examples arecommunities for current employees in an organization, current students,
etc. On what basis does revocability function and how to ensure
governance remains a question. Burning one’s soul, even if it could berestored, will have great consequences on the holder and the community.
How would revocability work as aimed in less apparent cases.
Without a good design on the revocability, it could lessen the trust andfunctionality of the whole SBT ecosystem or the SBT community. Szabo(1997) has nailed down that “[t]here is an important conundrum in an
ID-based key system: the conflict between the ability to get a new key
when the old one is or could be abused by another (key revocation), andthe ability of another to be sure they are dealing with the same person
60© BGIN – All rights reserved

again. This may also provide an opportunity for parties to selectively
reveal positive credentials and hide negative ones”.
3 Privacy and Transparency● Although the features of SBTs is programmable privacy, it should not be alawless zone. Preventing evasive usage of privacy regulation must be
considered.
● Privacy concepts and protections differ between various jurisdictions andregions. Given the difference, how do we bridge or create a framework
given the different policy aims of the privacy policy? For example there is
General Data Protection Regulation (Regulation (EU) 2016/679) (GDPR)
and the California Consumer Privacy Act of 2018 (CCPA) which aims toensure strong protection on personal data and regulates business’s
activity to collect, use, and share data. GDPR and CCPA have overlaps aswell as differences in many ways such as the definition and rights it
ensures (Future of Privacy Forums, 2018). In the current system, there areinconsistencies.
● SBTs community includes cross-border communities, the “souls” spread
across regions. On what standards should these rules be applied and how
should they be complied? Even with the programmability, should there be
a common ground for the SBT community to have a baseline on thecollection, usage, and sharing of SBT data? This may apply to both the
SBT community as well as other third parties.
● ISO (the International Organization for Standardization) and IEC (theInternational Electrotechnical Commission) “provides a high-level
framework for the protection of personally identifiable information (PII)
within information and communication technology (ICT) systems”(ISO/IEC, 2011). ISO and IEC have framed “11 Principles of Privacy” asfollows in the ISO 29100 (Table 2). The question is should SBTs beapplied to these principles. If so, how to embed these principles in the
SBTs and how to ensure them? Should there be further standards andprinciples added or amended specifically for SBTs?
● How do we balance privacy with regulatory/tax compliance? What is thebest way for the SBT community and the regulators or tax authorities tocooperate?
● How do we ensure a balance between privacy and transparency foroff-chain data?What technologies can be used to balance privacy andtransparency? Are there ways other than the zero-knowledge proof? If so,
what are the merits and limitations? Can designated verifier proofs which

61© BGIN – All rights reserved

allow “authenticated but private conversations to take place” (Jakobsson,
et al., 1996) be applied for SBTs?
4 Responsibility● Who will be held accountable for building and running the SBT community(e.g., accountable for vulnerabilities in protocols, dispute resolution)? Toomuch responsibility might lure away those willing to contribute to thecommunity. It is a question that should be discussed in each community,
but there should be some kind of an incentive mechanism linked to theburden and responsibility.
● Who are the stakeholders and what do they do?
● How do the legal rules, enforcement, and judiciary apply to the SBTs? Inthat case, which jurisdiction should it be applied to?
5 Implementation● What are the risk as a consequence of having SBTs?
● Would the benefit of having SBTs outweigh the cost?
● A large population or services need to adopt SBTs in order to lead tooutcomes as we have described in clause 8. Given this, how much
scalability do we need to make a social impact? How to promote adoption
and scalability in an early stage?
● We have stated in clause 7 that SBTs do not eliminate other digital identity
forms. What is an ideal form of existence?
● How to bridge, if any, between SBTs or SBTs and other forms of digital
identity? How would different SBTs or SBT communities interact with eachother effectively while ensuring safety and soundness?
● There would be no meaning of SBTs if the SBTs were just shown on asmartphone screen and no infrastructure which uses SBTs as a proof of
the “Soul”. Therefore, social infrastructure beyond the SBT community
must be considered.

10. Conclusion
The application of Blockchain and smart contract technology has enabled avariety of technology, Bitcoin, Altcoins, ICOs, NFTs, DAOs with added layers ofcomplexity at each new development, ultimately pushing real demand towards SBTs, a
compatible on-chain social coordination tool. This is particularly necessary for the safety
and convenience of individuals and communities, interacting within plutocratic
anonymous, decentralized markets. Understandably, this relays back-bottoms-up
pressure for new tooling that can afford features of programmable privacy and62© BGIN – All rights reserved

recoverability, ensured by authentic and honest third-party verification; either byauthoritative sources or plural peer evaluation. In this report, we have discussed theemergence of SBTs, examining SBTs potential to bring a whole new means of social
coordination within decentralized markets not previously possible. Within this report wehave explored the context, opportunity, use cases, methodology, lifecycle and limitationsof SBTs, aiming to assist readers in understanding this novel technology and evaluate
how SBTs might afford previously impossible use cases.
In our discussion, we explored the opportunities and challenges of SBTs.
Throughout this paper we have outlined that SBTs have the potential to enable pluralsocial networks and provide rich-social context behind previously plutocratic anonymous
governance systems. If SBTs were to be adopted and implemented, individuals andsocial groups at all scales would be able to co-determine levels of utility and privacy,
creating flexible tooling for expansive functionality. However, it is important toacknowledge that SBTs are still in an early stage of development and theory. A serious
number of risks, malicious usages, challenges and limitations still need to be explored
and at the minimum highlighted to serve as a cautionary warning. Numerous questions
need to be answered to provide the market with confidence on the safety and value
behind SBTs, and create a forum to further multi-stakeholder discussions through this
exploration, to understand the implications of SBTs both technically and socially. Since
SBTs are closely related to personal information, these conversations must be handledwith the utmost care given the consequences. It is vital that SBTs should not bepromoted for SBT’s sake but understood and inspected from various perspectives,
including should SBTs even exist. Through the process of building this report, different
stakeholders sat together and discussed these issues, not just the advantages of SBTs,
but also serious discussions on the risks, dangers, and challenges.
Given its social implications, before advocating/promoting or denying SBTs, wethink that further multi-stakeholder discussion is essential and its surrounding
environment as well as the technical development. There should be a continuous
debate on the existence, design and management, usage, social impact and meaning,
applications, problems, and risks between academia, government, developers, lawyers
and commercial sectors.
Publishing this report is the first step in this process, and we hope that it willserve as a catalyst for an open and ongoing discussion. We are currently in theplanning stages of a subsequent paper on SBTs to ensure research and theory stays
ahead to provide a clear direction and vision for developers, academia, the commercial
sector and market participants. As BGIN is neutral, we have and will continue towelcome diverse perspectives and feedback for past, present and future discussions.

63© BGIN – All rights reserved

Appendix A – Acknowledgement(Informative)(Note) The views expressed in this report are based on the personal views of theauthors and not the views of the organizations to which they belong.

A.1 Editors and Co-editors● Michi Kakebayashi (University of California, Berkeley) - (LinkedIn)● Joseph Beverley (Soulbis) - (Joey@soulbis.com | LinkedIn)

A.2 Contributors (Alphabetical)
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●

E. Glen Weyl (Microsoft Research; RadicalxChange Foundation)
Hugh Harsono (University of California, Berkeley)
Kazue Sako (Waseda University)
Ken Katayama (Nomura Research Institute, Ltd.)Louisa Choe (Nansen)
Mitchell Travers (Soulbis)
Nat Sakimura (OpenID Foundation)
Pablo Pejlatowicz (Independent Researcher)Puja Ohlhaver (Flashbots Ltd.)Ryan Kris (Verida)
Shai Perednik (Amazon Web Service)
Shin’ichiro Matsuo (Georgetown University)
Shinji Sato (Independent Researcher)
Shrey Jain (Microsoft, University of Toronto)
Stephanie Bazley (AirTree Ventures)
Testu Kurumisawa (Yale University)
Tomonori Yuyama (Georgetown University)

A.3 Reviewers (Alphabetical)● Ash van der Spuy (Jubi.io)● Philip Sheldrake (Euler Partners)
Blockchain Governance Initiative Network (BGIN) aims at providing an open and neutral
sphere for all stakeholders to deepen common understanding and to collaborate toaddress issues they face in order to attain sustainable development of the blockchaincommunity. As an open network, we are now actively and widely seeking interested
64© BGIN – All rights reserved

parties to join this initiative, so as to accommodate diverse opinions from a wider rangeof blockchain stakeholders. This paper was discussed in Block #6, Block #7 and during
our bi-weekly IKP Working Group (co-chair: Nat Sakimura; co-chair: Mitchell Travers).
For those who are interested, please contact us via bgin-admin@mail.bgin-global.org.

65© BGIN – All rights reserved

Appendix B – Informative reference(Informative)● 5660-eth, Wizard Wang, "EIP-6147: Guard of NFT/SBT, an Extension of EIP-721[DRAFT]," Ethereum Improvement Proposals, no. 6147, December 2022. [Online
serial]. Available: https://eips.ethereum.org/EIPS/eip-6147. (last viewed on January
18 2023)● Omar Aflak, Omar, Pol-Malo Le Bris, Marvin Martin, January 2022. "EIP-4671:
Non-Tradable Tokens Standard [DRAFT]," Ethereum Improvement Proposals,
no. 4671., January 2022. [Online serial]. Available:
https://eips.ethereum.org/EIPS/eip-4671 (last viewed on November 22, 2022)● BGIN. March, 2022. “SR 005 NFT Study Report Part 1: Introduction and Use
Cases.” Available: https://bgin-global.org/pdf/NFTReport.pdf● Bloomberg. May 11, 2022. “Crypto Investors Likely Paying IRS Less Than Half
the Taxes They Owe.” Available:
https://www.bloomberg.com/news/articles/2022-05-11/crypto-investors-likely-payi
ng-less-than-half-the-taxes-they-owe.
● Buterin, Vitalik. 2021. “Why we need wide adoption of social recovery wallets.”
Available: https://vitalik.ca/general/2021/01/11/recovery.html (last viewed on
November 22, 2022)● Cai, Buzz. August, 2022. “EIP-5484: Consensual Soulbound Tokens [Final].”Ethereum Improvement Proposals, no. 5484,. [Online serial]. Available:
https://eips.ethereum.org/EIPS/eip-5484 (last viewed on November 22, 2022)● Cameron, Kim. 2005. “The Laws of Identity.” Kim Cameron’s Identity Weblog.
Available: https://www.identityblog.com/?p=352 (last viewed on November 22, 2022)● Chainalysis. February, 2022. “The 2022 Crypto Crime Report.” Available:
https://go.chainalysis.com/rs/503-FAP-074/images/Crypto-Crime-Report-2022.pd
f66© BGIN – All rights reserved

● Chainalysis. June, 2022. “The Chainalysis State of Web3 Report” Available:
https://go.chainalysis.com/2022-web3-report.html (last viewed on January 22, 2023)● Congressional Research Service. July, 2022. “Non-Fungible Tokens (NFTs).”
Available: https://crsreports.congress.gov/product/pdf/R/R47189● DAOitright.xyz Available: https://www.daoitright.xyz/ (last viewed on January 22,2023)● Daubenschütz, Tim, Raphael Roullet. April, 2022. “EIP-4973: Account-boundTokens [Review].” Ethereum Improvement Proposals, no. 4973. [Online serial].
Available: https://eips.ethereum.org/EIPS/eip-4973 (last viewed on November 22,
2022)● Daubenschütz, Tim, Anders. July, 2022. "EIP-5192: Minimal Soulbound NFTs
[Final]." Ethereum Improvement Proposals, no. 5192. [Online serial]. Available:
https://eips.ethereum.org/EIPS/eip-5192 (last viewed on November 22, 2022)● Elliptic. 2022. “NFTs and Financial Crime -Money Laundering, Market
Manipulation, Scams & Sanctions Risks in Non-Fungible Tokens.” Available:
https://www.elliptic.co/hubfs/NFT%20Report%202022%20-full.pdf● Entriken, William, Dieter Shirley, Jacob Evans, Nastassia Sachs. January, 2018.
“EIP-721: Non-Fungible Token Standard [Final].” Ethereum Improvement
Proposals, no. 721 [Online serial]. Available:
https://eips.ethereum.org/EIPS/eip-721. (last viewed on November 22, 2022)● Financial Action Task Force (FATF). “Frequently asked questions - Money
Laundering.” Available:
https://www.fatf-gafi.org/faq/moneylaundering/#d.en.11223. (last viewed on
December 7, 2022)● Goldfinch. “Unique Identity (UID).” Available:
https://docs.goldfinch.finance/goldfinch/unique-identity-uid. (last viewed on
December 14, 2022)● HonorLabs, "EIP-5633: Composable Soulbound NFT, EIP-1155 Extension[DRAFT]," Ethereum Improvement Proposals, no. 5633, September 2022.

67© BGIN – All rights reserved

[Online serial]. Available: https://eips.ethereum.org/EIPS/eip-5633 (last viewed on
January 18, 2023)● Hyungsuk Kang, Viktor Pernjek, "EIP-5252: Account-bound Finance [DRAFT],"
Ethereum Improvement Proposals, no. 5252, June 2022. [Online serial].
Available: https://eips.ethereum.org/EIPS/eip-5252. (last viewed on January 18, 2023)● Martin Becze, Hudson Jameson, et al., "EIP-1: EIP Purpose and Guidelines,"
Ethereum Improvement Proposals, no. 1, October 2015. [Online serial].
Available: https://eips.ethereum.org/EIPS/eip-1. (last viewed on November 22, 2022)● Ethereum.org. August, 2022. “ERC-20 Token Standard.” Available:
https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ (last viewed on
November 22, 2022)● Ethereum.org. “Non-fungible tokens (NFT).” Available:
https://ethereum.org/en/nft/ (last viewed on November 22, 2022)● EthHub. “ERC Token Standards.”
Available:https://docs.ethhub.io/built-on-ethereum/erc-token-standards/what-areerc-tokens/ (last viewed on November 22, 2022)● European Union (EU). 2016. “REGULATION (EU) 2016/679 OF THE
EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 April 2016 on theprotection of natural persons with regard to the processing of personal data andon the free movement of such data, and repealing Directive 95/46/EC (General
Data Protection Regulation) .” Official Journal of the European Union. Available:
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016R0679(last viewed on November 22, 2022)● Facebook. 2013. “Introducing Trusted Contacts.” Available:
https://www.facebook.com/notes/10157814523321886/ (last viewed on November
22, 2022)● Facebook. “How can I contact the friends I've chosen as trusted contacts to getback in to my Facebook account?” Available:
https://www.facebook.com/help/213343062033160 (last viewed on November 22,
2022)

68
© BGIN – All rights reserved

● Future of Privacy Forums. 2018. “Comparing privacy laws: GDPR v. CCPA.”
Available:
https://fpf.org/wp-content/uploads/2018/11/GDPR_CCPA_Comparison-Guide.pdf● Goldfinch. “Goldfinch Documentation.” Available:
https://docs.goldfinch.finance/goldfinch/unique-identity-uid (last viewed on
November 22, 2022)● ISO/IEC. 2011. “ISO/IEC 29100:2011(En), Information Technology —SecurityTechniques — Privacy Framework.” Available:
https://www.iso.org/obp/ui/#iso:std:iso-iec:29100:ed-1:v1:en (last viewed on
November 22, 2022)● Jain, Shrey, Leon Erichsen, and Glen Weyl. 2022. “A Plural Decentralized
Identity Frontier: Abstraction v. Composability Tradeoffs in Web3.” Available:
https://arxiv.org/abs/2208.11443● Jakobsson, Markus, Kazue Sako, and Russell Impagliazzo. “Designated Verifier
Proofs and Their Applications.” In Advances in Cryptology — EUROCRYPT ’96,
edited by Ueli Maurer, 1070:143–54. Lecture Notes in Computer Science. Berlin,
Heidelberg: Springer Berlin Heidelberg, 1996. Available:
https://doi.org/10.1007/3-540-68339-9_13● JFSA. June, 2022. “Report on Distributed Financial Systems in Trust Chains
Research on Technology Risk.” Available:
https://www.fsa.go.jp/policy/bgin/ResearchPaper_qunie_en.pdf● Kei. July 21st, 2021. “A Prehistory of DAOs.” Available:
https://gnosisguild.mirror.xyz/t4F5rItMw4-mlpLZf5JQhElbDfQ2JRVKAzEpanyxW1
Q. (last viewed on January 15, 2023)● Maister, D. H., Galford, R. M., Green, C. H. 2001. The Trusted Advisor: 20th
Anniversary Edition. United Kingdom: Free Press.
● Nakamoto, Satoshi. 2008. “Bitcoin: A Peer-to-Peer Electronic Cash System”
Available: https://bitcoin.org/bitcoin.pdf (last viewed on January 18, 2023)
69© BGIN – All rights reserved

● Pauwels, Pieter, Joni Pirovich, Peter Braunz and Jack Deeb. 2022. “zkKYC in
DeFi: An approach for implementing the zkKYC solution concept in Decentralized
Finance.” Available: https://eprint.iacr.org/2022/321.pdf● Philipp Bolte, Lauritz Leifermann, Dennis von der Bey, "EIP-5539: Revocation
List Registry [DRAFT]," Ethereum Improvement Proposals, no. 5539, August2022. [Online serial]. Available: https://eips.ethereum.org/EIPS/eip-5539. (lastviewed on January 18, 2023)● Pol, Ronald F. (2020): Anti-money laundering: The world's least effective policy
experiment? Together, we can fix it, Policy Design and Practice,
DOI:10.1080/25741292.2020.1725366● Pop, Valentina. February 26, 2015. “[Interview] ‘You Can’t Use 18th Century Law
for a Digital World.’” EUobserver. Available:
https://euobserver.com/economic/127800. (last viewed on December 7, 2022)● Reutlaw. “NFTs and Property Rights.” Available:
https://www.reutlaw.com/en/insights/nfts-and-property-rights. (last viewed on
December 8, 2022)● Sakimura, Nat. 2021. “Digital Identity The Essence of Cyber Business thatManagement Does Not Know. (Digital Identity Keieisha ga Shiranai Cyber
Business no Kakushin)” (In Japanese). Nikkei BP.
● Sheldrake, Philip. October 21st, 2022. “The number one challenge in computerscience.” Available:
https://medium.com/decentralized-web/the-number-one-challenge-in-computer-science-43b26c27f079. (last viewed on December 7, 2022)● Shu Dong, Qi Zhou, "EIP-4972: Name-Owned Account [DRAFT]," Ethereum
Improvement Proposals, no. 4972, April 2022. [Online serial]. Available:
https://eips.ethereum.org/EIPS/eip-4972. (last viewed on January 18, 2023)

70© BGIN – All rights reserved

● Sovrin Foundation. December 6, 2018. “What is self-sovereign Identity?”
Available: https://sovrin.org/faq/what-is-self-sovereign-identity/ (last viewed on
December 8, 2022)● Peter Swire, 1997. "The Uses and Limits of Financial Cryptography: A Law
Professor's Perspective." Available:
http://www.peterswire.net/archive/pscrypto.html (last viewed on January 20, 2023)● Szabo, Nick. 1996. “Smart Contracts: Building Blocks for Digital Markets.”
Available:
https://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool2006/szabo.best.vwh.net/smart_contracts_2.html. (last viewed
on November 22, 2022)● Szabo, Nick. 1997. “Formalizing and Securing Relationships on Public
Networks.” Available:
https://nakamotoinstitute.org/formalizing-securing-relationships/(last viewed on November 22, 2022)● The Board of the International Organization of Securities Commissions. March
2022. “IOSCO Decentralized Finance Report.” Available:
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD699.pdf● The National Law Review. April 23, 2021. “Thinking Beyond the Law: What Is theISO 29100 Privacy Framework?” Available:
https://www.natlawreview.com/article/thinking-beyond-law-what-iso-29100-privac
y-framework (last viewed on November 22, 2022)● Ushida, Ryosuke and James Angel. 2021. “Regulatory Considerations on
Centralized Aspects of DeFi managed by DAOs.” Available:
https://drive.google.com/file/d/14XkrwGI_8fFRFtfkePAH2OklZI-kIOKB/view● U.S. House of Representatives. September, 2020. “Understanding The Tax Gap
And Taxpayer Noncompliance.” Available:
https://www.treasury.gov/tigta/auditreports/2020reports/202030066fr.pdf
71© BGIN – All rights reserved

● Commodity Futures Trading Commission (CFTC) v Ooki DAO (formerly d/b/a bZx
DAO), No. 3:22-cv-5416 (N.D. Cal. September 22, 2022) "COMPLAINT FOR
INJUNCTIVE AND OTHER EQUITABLE RELIEF AND CIVIL MONETARYPENALTIES UNDER THE COMMODITY EXCHANGE ACT AND COMMISSIONREGULATIONS". Available:
https://storage.courtlistener.com/recap/gov.uscourts.cand.400807/gov.uscourts.c
and.400807.1.0.pdf .
● Weyl, Eric Glen and Ohlhaver, Puja and Buterin, Vitalik, 2022. “Decentralized
Society: Finding Web3's Soul.” Available at SSRN:
https://ssrn.com/abstract=4105763● Wang, Will, Mike Meng, Ethan Y. Tsai, Ryan Chow, Zhongxin Wu, and AlvisDu.
December, 2020. “EIP-3525: Semi-Fungible Token [Final].” Ethereum
Improvement Proposals, no. 3525. [Online serial]. Available:
https://eips.ethereum.org/EIPS/eip-3525 (last viewed on November 22, 2022)● World Wide Web Consortium (W3C). March, 2022 a. “World Wide Web
Consortium (W3C). ” Available: https://www.w3.org/TR/vc-data-model/ (lastviewed on November 22, 2022)● World Wide Web Consortium (W3C). July, 2022 b. “Decentralized Identifiers(DIDs) v1.0” Available: https://www.w3.org/TR/did-core/ (last viewed on November
22, 2022)● Wyoming Secretary of State. “Decentralized Autonomous Organization (DAO):Frequently Asked Questions.”
https://sos.wyo.gov/Business/Docs/DAOs_FAQs.pdf. (last viewed on December 7,
2022)● Weatherford, Dawn R., Devin Roberson, and William Blake Erickson. 2021.
“When experience does not promote expertise: security professionals fail todetect low prevalence fake IDs.” Cogn. Research 6, 25. Available:
https://doi.org/10.1186/s41235-021-00288-z.

72© BGIN – All rights reserved

● Word Bank. 2023. “Gini Index” Available:
https://data.worldbank.org/indicator/SI.POV.GINI (last viewed on January 22, 2023)● Yu Liu, Junyi Zhong, "EIP-5851: On-Chain Verifiable Credentials [DRAFT],"
Ethereum Improvement Proposals, no. 5851, October 2022. [Online serial].
Available: https://eips.ethereum.org/EIPS/eip-5851. (last viewed on January 18, 2023)● Sicong Zhao. May 2022 “How to evaluate the “Fairness” of DAO Governance?”
Available:
https://medium.com/@luo9137/how-to-evaluate-the-fairness-of-dao-governance82bde68c01b9 (last viewed on January 22, 2023)● Zoltu, Micah. May, 2022. “EIP-5114: Soulbound Badge [DRAFT].” Ethereum
Improvement Proposals, no. 5114. [Online serial]. Available:
https://eips.ethereum.org/EIPS/eip-5114 (last viewed on November 22, 2022)

73© BGIN – All rights reserved

Appendix C – BGIN Block #6 Session Notes(With E. Glen Weyl, Puja Ohlhaver, Shrey Jain)
Blockchain Governance Initiative Network (BGIN Block #6) @Zurich [Hybrid] – UZHBlockchain Center
IKP Working Group Editing Session - Soul Bound Token (SBT)
https://tube.switch.ch/videos/n7aPIsHzkj
Panel Speakers (Glen, Puja, Shrey):● SBTs are still preliminary in terms of social incentive design. The ideas raised areambitious and we won't have clarity on most of the implications raised until moreinnovations and experiments.
● If you regard SBTs as representing just membership to social groups, thosegroups have a socially determined set of rules, rights, and privacy controls(particularly programmable privacy). Starting from there, you can think of aperson being a constellation of their social memberships.
● The level of publicity is programmably private by the social groups themselves.
Initial publicity was just a starting point for other conversations and a way tobootstrap the idea. As we expect social groups to have their customs and norms
around conversation/communications, we expect those privacy expectations to
be encoded in social communication channels as well.
● All of that being said, if you think of an individual as being a constellation of social
membership, when we think as people to have a social identity, what the SBTs to
the extent that they are public (not everything is going to be public), what they
may need to do is to surface social coordination for fraud to the extent that there
are multiple players in the fraudulent schemes.
● It also enables you to have rather than government to individual, have anintermediate layer of communities for enforcement and cooperation between
communities.
● We talked a lot about the community recovery of wallets and you can think of that
also for community assets held by social groups, DAOs. It really adds aninteresting spin to why recovery methods for say stolen funds.
● The idea of governance token and DAO is native to web3 and the problem is thatyou don’t have civil resistance. Somebody could split holdings between different
wallets and actually say that he/she is 51% control of a protocol to benefit them.
For the same reason that the democracy does not become majoritarian direct
democracies, a lot of DAOs don’t want to do that because their assets will beeluded from those who own the majority of that stake.
● VCs (verifiable credentials) = Meant to prove properties but not to showcommitment as there is a lack of accountability/transparency (no public trace
74© BGIN – All rights reserved

●
●
●
●

unless you choose to present them). To prove property but not to facilitate
accountability. VCs are oriented towards proving property (claim or statements)
but not primarily to facilitate accountability.
SBTs = Commitment that you present publicly, at least partially, withtransparency, which means accountability. When you have memberships,
commitments and roles come along. SBTs are oriented towards rights of various
kinds. SBTs enable social coordination.The transparency (within the group andbetween the group) of the SBTs is dependent on the social group. SBTs
represent social membership and when you have social membership, there arerights, responsibilities, permissions, access controls etc., which are social
coordination tools.
The distinction between VCs and SBTs is subtle but an important distinction.
NFTs = Represent private property which is very distinct from both VCs and
SBTs.
For the tables, the rows could be added for credibility and trackability.
For SBTs led potential, SBTs broadly enables social coordination, for example
plural network goods or what people think as traditionally public goods, and doingthat in a sybil resistant way. As well as rethinking how we plurely concrete future
AI and intelligences in a way that the technology is transparent and based in thelegitimacy of data creators rather than data coders and make technologies moreaccountable to the users. So when you think of SBTs as representing
membership to social groups seeking social coordination around technology,
data, and communications.

Audience:● When reading the paper, it was really about creating credentials, memberships,
and legitimacy so I was curious why the reference was more about social
network theory as opposed to social capital. Is there space for discussion onsocial capital might be applied to SBTs?
Soul Bound Token (Interviewing)https://tube.switch.ch/videos/mP1TnEarQj● What was it that really motivated you to publish the paper “Decentralized Society:
Finding Web3's Soul”?
○ Our motivation was how we can achieve network coordination we need in
the 21st century both globally and locally, and bottom up key decentralized
ways. When we say decentralized, we mean a set of social groups where
the powerful company doesn’t dominate the network and the network
power is limited to solving problems at its social scale and not necessarilyon the social scale underneath it. Bottom up coordination of individuals co75© BGIN – All rights reservedcreating their communities to compose into larger networks in adecentralized way was really the animating goal.
○ Concerned that you couldn't really do stuff that sophisticated using
blockchain was the starting point. You needed base level data structures.
The combination of Vitalik’s paper and working with the gitcoin community
on quadratic funding and trying to move towards a more plural direction,
web3 as a primitive starting point, and showing people the pathway.
● What is in your opinion the biggest challenge or your concern? Is it NFTs or more
broad on the Web2 or Web3 ecosystem?
○ It was both. In Web3, there is the problem of hyper-financialization andalso DOAs struggling with governance and sybil resistance.
○ I don’t think it is the problem of NFTs per se, but it was an interesting point
to see that unlock so much success that highlighted the potential for the
space to be very innovative. The amount of innovations we saw in NFTs
was incredible in the past few years so I took that as an inspiration for
innovations.
○ I had an ambivalent relationship with Web3, on the other hand it is excitingthat there have been so many cool experiments happening there. At thesame time, there are activities that are awfully speculative and not
producing much value in the lives of people and so forth. I was pessimistic
about it. But the paper was triggered by my seeing that there may be a
way to build from what exists in the Web3 world as to what we wereaiming at.
● Do you have other ideas on the application (or steps to DeSoc) of the SBTs? (Wethink that it has benefits on government policies such as AML/CTF)○ The idea of representing signatures to petitions or otherwise putting yourname to some form of social principles. These are natural applications.
○ Others are more promotional affiliations. If you give a donation and receivea receipt, or a fan of a sports team and want to make a commitment could
be used. These aren’t amazing, transformative, long-term but near-term
applications.
○ There are explosions of experiments happening with SBTs. There is apotential for social coordinations in a decentralized way. Excited to look at
different communities looking at SBTs as a coordination tool and inparticular communities that have had a difficult time coordinating in thepast or are subject to monopolist extractors. In the scientific community,
there is a lot of innovation happening there in the DeScie space where
innovators are really trying hard to form what today we call “science” into
76
© BGIN – All rights reserved

“open-science”. Solve the problem of reproducibility of science and at thesame time achieve traceability. Unlock the renaissance in science. The
ability of the SBTs (the ability to show the membership to the socialgroups) and then the social groups to coordinate is very profound. We will
see these open-source communities having different problems of poor
ways of representing status or encouraging more contributions.
○ Innovation in protocols that do not necessarily have a token but haveopen-source research protocols or communities and a way to govern
themselves or ways of communicating is exciting too.
● What do you see as potential from a government side, such as AML issues?
○ See a different framework coming into existence. The basic principles of
KYCs and AML are that there is one authoritative notion of who you are
and traceable in state. That is a limited and simplistic way to think about
traceability.
○ Alternatively, people could hold a whole set of SBTs that shows affiliations
to communities and each community at least have some capacity to trace
their members and have authorities over their assets for community
recovery.
○ The governments could also set standards of SBTs that you have tocollect to do certain kinds of activities with certain entities. So there would
be different collections of SBTs that might be sufficient to give you
accountability for different activities. But it wouldn’t be traceable throughlegal naming, it would have to be affiliated with enough communities
diversely and jointly, to have enough credibility that you will reach thethreshold. That is much more secure because you can play with legal
names, but it is much more flexible and pluralistic. I hope we could get toregimes that would be a little more like that.
○ In Bogota, Columbia, they have stronger AML measures and you have togive a legal document number in order to do a transaction, even buying
food on the street with a credit card. That is not desirable and there aremuch more thoughtful ways to achieve traceability to transactions thanrequiring a passport number. You can have different thresholds fordifferent transactions and contexts.
○ Eventually, you would have to change the framework, laws, many people
would have to be able to access these technologies, would have to be oneof many options so that you don’t exclude people.
● What would be the necessary and sufficient conditions for a working
decentralized society? What would be the necessary elements?
77© BGIN – All rights reserved

○ It is useful to know the contributions. That enables individuals tocoordinate with others in an open-source much more easily. Especially thescientific community.
○ Different institutions would be governed democratically to a certain extent
and even the most democratically governed society is nowhere near what
could be possible. So it is an ambition, aim, goal, not a threshold.
○ It is not an end state, it is a north star. The key goal of the north star is justretain governance and critique technology (rather than technology governus). Active engagement with the tools of technology is one of the primaryvalues.
● What is the important aspect when we have to think about when we are trying tointegrate SBTs in different cultures and norms we have?
○ Hopefully, the SBTs should capture social groups, norms, expectations(including privacy), and not righting it over. It should enable people toexpress their norms which Web2 was not good at doing.
○ What is the interaction between the systems is an interesting game theory
question.
○ A lot of traditional corporations would want to use them as a way to giveaccess to services that gate native Web3 people. A lot of the aim depends
on the aims, needs, cultures, and values.
● How would SBTs coexist with other identities? How would large populations
adopt SBTs?
○ Whether it is DID, VC, or SBTs, you need to have a wallet (custodial or
non-custodial), being the way to benefit from these tools.
○ In the same way you scale traditional identity, you will scale them thesame way as you would to tokens, creating access to tools/wallets thatwould enable people to showcase their distributed shares of these tokens.
○ The way that they would coexist is having wallets of different identity,
experiments are yet to come.
○ All of these are going to end up being messy processes. Hope that there
will be public institutions trying both the experimentation and when there
are clear patterns, make a standazation.
● How to balance privacy and publicity?
○ With the SBTs, you can preserve the privacy while still being interoperable
in the blockchain and smart contracts. There has been enough proof ofconcept out there to present that the SBTs have the ability of selective
disclosures, as well as preserving tradeoffs between privacy and publicity.
78© BGIN – All rights reserved

○ We are only starting to understand what we mean by privacy and publicity.
The reality is, privacy is conceived as almost binary, which is not helpful.
What actually matters is what communities of people have access and inwhat way, what ability to disclose on what terms, collectively or individually
to other parties. This is why we call it socially programmable privacy.
○ The publicity idea has been dramatically misunderstood. Something could
be available somewhere but extremely hard to discover and not widely
understood, and that is a very thin version of publicity. What we usuallymean publicity is simultaneously/close to simultaneously gets into theminds of a very large number of people.
○ We use these terms without richness or precediton. Actually what we wantto get at is a rich range of programmability in both the notion of privacy
and publicity. Things could be mixed; something could be extremely public
to a very limited within the community but extremely secure externally(e.g. military operation).
○ We have to get through the notion of privacy and publicity, and sociallymeaning of privacy and publicity.
● In your opinion, who do you think are the key stakeholders and what are theirdifferent roles? As we have multiple stakeholders here today, could you sharesome of the benefits you imagine that SBTs can bring to each of them?
(Government/policy, business, users, academia)○ Communities which will be using these. DAO Star is a consortium of
DAOs focused on governance. Representation from there would be very
valuable.
○ Ministers of Digital Transformation who are interested in experimenting in
the public sector.
○ People who are concerned about potential harms which includes people
involved in tech ethics.
○ Large and established institutions that are considering going into space. It
could be a blockchain team from large corporations.
○ Social, entertainment, culture communities that have been seen in the
NFTs could be interested in adopting this.
○ Anyone experimenting with SBTs. They are the heart of the problem ofprogrammable social privacy.
● Message to the audience.
○ RadicalXChange hosts a blog which introduces what is going on anddefinitely keeps track of that.

79© BGIN – All rights reserved

○ SBTs are great social coordination tools and if you are part of a communitythat is seeking better coordination, think about how SBTs could help.
○ Working through the tradeoffs is what every community is trying to answer.
Round Table on NFT, SBT
https://tube.switch.ch/videos/eYrLfjB4r6● From what we have understood, SBTs primarily fall in 3 categories. i.e. Affiliation
SBTs, Credential SBTs and Commitment SBTs. What are the fundamental
properties that differentiate these SBTs?
○ SBTs can be thought of as right to various things (e.g., the right to accessthe document, purchase assets at some price).
○ All of these could be in the larger umbrella category of social groups. The
social groups have different levels of rights, responsibilities, permissions,access controls etc.
● How possible is it to establish a voting system through soulbound tokens insteadof a voting system based on market mechanisms such as quadratic voting? If
you have ideas about it, can you share some of your insights?
○ Ecosystems that use SBTs to interpret quadratic voting/funding in waysthat are partially but not completely clustered together. Separation ofquadratic voting roots is dependent on the pattern of affiliations that you
have. The most simplistic example is suppose that everyone has just one
affiliation, you could put all of the funds in the quadratic funding route
given by the same affiliation then give the matching fund only applied tothose cooperation of social groups. There are infinitely more elaborate
things than that.
○ It is not a prefilter and in the process itself. Prefilter could be one part butthat is just one piece. The main use of that is to condition the ways votes
are tallied.
● There is a focus on social network theory in the paper. However, memberships
and credentials seem to be a big part of the paper. What do you think about theperspective of social capital?
○ SBTs are not a great way to represent broader conditions and formation ofsocial relations. They can represent social networks and cooperation onthem.
○ Social Capital is embedded in the social network and at the end of thepaper we start to gesture towards alternative ways to think about trust
relationships and in the ways that eschews the status in SBTs and capture
it even better to bring equality and bring in social capital formation.
80© BGIN – All rights reserved

● What are your thoughts about transferability and non-transferability of souls?
○ The pattern that is created by all those things linked to the wallet makesthese transfers challenging at least once the system gets on going.
○ It is unclear why you transfer your soul if they also have the rights andpermissions associated with them to other communities that you
participate in. It would have to be for a large sum of money, but for a large
sum of money it is not a credible sale because of the community recovery(what we propose is a community recovery mechanism). And all thesubsequent actions would be tracked.
○ There are cases where transferable makes sense. When somebody dies,
their soul is at least partially passed on to the children.
○ We want the social norms of personhood to be governed for transfers.
(Privacy Death.)● Do you have specific use cases for governments in mind?
○ Other than the AML/KYC, another would be the way to prove that you areabove the age of 21 and eligible for action by having some drivers licenseor government issued ID. These are extremely easy to fake and they arealso based on bureaucrat processing. When there is so much informationthat you are above the age of 21 or not, it would make much more sense if
you have secure implementation, to have patterns of information rather
than one document.
○ In order to earn rights for voting/participation, there are arbitrary tests for
immigrants. When you think of rights as an accumulation of community
granting more permissions and rights eventually, would be an alternative
way to determine citizenship which is a more social and pluralistic way toview citizens. You could change the whole nature of citizenship.
● Examples of elective disclosure protocols that have been used in SBTs added in
the report would be great.
● In the near future, we are not going to get a single credential format and live wit hmultiple credentials.
● As opposed to using community, how about using such as biometrics data forrecovery?
○ Critique of the proof of personhood is that you lose the social
differentiation on both the security of the properties and pluralistic
properties of social incentive design.
81© BGIN – All rights reserved

○ In an attempt to build decentralized networks, biomerics fails to capture
the richness of sociality which is critical when you want to decentralize
systems.
● Soulbound tokens define the individual as a very social component, dependent a
lot on community. That is true but that could have a handicap on people that are
not much community connected even if they could influence society likeNietzsche. How could this slow down the mechanism of the future?
○ Self sovereignty is an illusion, we are social creatures and we have asocial membership and affiliations. It might not come into the same form
for everybody but at a very least we are born into a family and a region.
Even language is a social phenomenon. Zarathustra way is not a view ofindividuality now or ever.
○ Issuance of multiple SBTs makes it rich and enables social coordination.
● How about the people who are left behind? What could potentially happen to
those cases?
○ It also applies to vulnerable communities too.
○ SBTs is a tool and it makes it explicit what decisions of choices we makewith our relationship with technology. Currently we are having thesedecisions made from a Web2 company or nation states for us. SBTs
empower us to protect minorities and choose mechanisms like consensus
across differences, but we have to be intentional about it.
● How about the right to be forgotten on negative information in the context of
SBTs?
○ SBTs give you a right to participate and are not public to the world whichmakes it programmable privacy based on the decision of the social groupthat is issuing.
○ Negative reputation depends on the rules social groups are agreeing to.
○ The idea of making claims about someone else publicly whether theywould be positive or negative is inevitable and there would be only a few
ways that we can control that. That is consistent with the VC and DID as
well as SBTs. What matters more is how to manage negative information,
more client facing solutions we could think about. We could look into only
signed or approved SBTs which give consent. There are ways to goaround filtering this as we do today with NFT protocols that integrate withwallets, but there is no way yet today to inhibit making negative claims
about some individuals.

82© BGIN – All rights reserved

● What are your thoughts on data ownership?
○ We are going more towards social data (capturing social) that needs to be
determined and programmed by the set of contributors to that data.
○ SBTs can be seen as a tool to let social groups come together anddetermine the data.

83© BGIN – All rights reserved

Appendix D – BGIN Block #7 Session Slides
The slides that has been presented by Michi Kakebayashi and Joseph Beverley can befound in the following link. Videos are available too BGIN Media - YouTube.
Part 1: https://drive.google.com/file/d/1P_fXOvomHqVBbALk1amaeXtii5r0rLb2/view
Part 2: https://drive.google.com/file/d/1EyhVjAee1r4CXj1PWER1Pdyld-Y_E93u/view

84© BGIN – All rights reserved

85© BGIN – All rights reserved

86© BGIN – All rights reserved

87© BGIN – All rights reserved

88© BGIN – All rights reserved

89© BGIN – All rights reserved

90© BGIN – All rights reserved

91© BGIN – All rights reserved

92© BGIN – All rights reserved

93© BGIN – All rights reserved

94© BGIN – All rights reserved

95© BGIN – All rights reserved

96© BGIN – All rights reserved

97© BGIN – All rights reserved

98© BGIN – All rights reserved

99© BGIN – All rights reserved

100© BGIN – All rights reserved

101© BGIN – All rights reserved

102© BGIN – All rights reserved

103© BGIN – All rights reserved

104© BGIN – All rights reserved