A recent paper by prominent experts in the cryptocurrency and big tech industry proposes a decentralized digital identity based on non-transferable NFTs, known as “soul-bound NFTs”, as a solution to verify unique users and institutions in a decentralized manner. These NFTs could be connected to real-world credentials, effectively creating decentralized digital identities. The authors suggest that soul-bound NFTs could unlock various use cases, including under collateralized lending, social provenance, and recovery of lost private keys. The paper also explores the potential problems associated with implementing these ideas and ways to turn them into reality.
The Case for a Decentralized Digital Identity in Crypto
Crypto’s evolution has been exponential, but there’s one element that’s been holding the industry back, and that’s the ability to verify unique individuals and institutions in a decentralized manner.
The Crypto Paper
A recent paper penned by prominent personalities in crypto and big tech proposes a decentralized digital identity based on non-transferable NFTs that could serve as the foundation for crypto’s future. The paper, called “Decentralized Society Finding Web 3’s Soul,” was published on the Social Science Research Network on May 11th and authored by three individuals.
The first author is Vitalik Buterin, the co-founder of Ethereum. The second author is E. Glen Weyl, who holds a doctorate in economics from Princeton University and currently works as a social technologist at Microsoft. The third author is Puja Olhava, a Stanford law school graduate who currently serves as strategy council to Flashbots, a crypto project that provides products and research related to minor extractable value.
The solution proposed in the paper involves creating soul-bound NFTs that can’t be transferred out of a user’s crypto wallet. The authors state that soul-bound NFTs could be connected to real-world credentials such as education and work experience, effectively making them decentralized digital identities. The issuance of soul-bound NFTs to crypto users makes it possible to create a new kind of decentralized society, which they call D-Soc for short.
The Use Cases
The paper identifies several use cases that could be unlocked by soul-bound NFTs. The first is “social provenance,” or the ability to prove the origin of something. The second is using credentials as collateral for a loan instead of a credit score. The third use case is the ability to recover your crypto wallet if you lose the private keys.
The Stairway to D-Soc
The authors explain what they call the “stairway to D-Soc” or all the use cases unlocked by soul-bound NFTs and how they can become the building blocks of a decentralized society.
In conclusion, a decentralized digital identity based on non-transferable NFTs has the potential to revolutionize the crypto industry and unlock many use cases that are currently inaccessible. However, it remains to be seen how these ideas can be turned into reality. The paper serves as a starting point for further discussion and exploration of the potential for a decentralized digital identity in crypto.