The current bear market seems to be almost coming to an end. This means it’s time to start exploring the development that will spark the next bull run. One of these developments is the Soulbound NFTs.
Let’s dive into it, shall we?
What are Soulbound NFTs?
Soulbound NFTs are quite literally stuck with their owner. Deriving inspiration from the online game World of Warcraft, Vitalik Buterin, founder of Ethereum, gives a nice and simple-to-understand analogy of what Soulbound NFTs are. He writes,
“One feature of World of Warcraft that is second nature to its players, but goes mostly undiscussed outside of gaming circles, is…soulbound items. A soulbound item, once picked up, cannot be transferred or sold to another player.”Vitalik Buterin
Vitalik notes that the purpose of the soulbound items in the game is to keep it challenging and interesting.
Stemming from this idea is Soulbound NFTs. Currently, NFTs are mostly used to signal wealth. Trading at insane prices, those who are able to afford them upload them as their Twitter profile pictures to show the world they are wealthy.
However, there is really no way of knowing whether the person actually did whatever it took to gain the NFT.
NFTs are earned in many different ways. Going to Project Galaxy, you can find hundreds of NFTs that you can earn for completing certain tasks (some of which are not very easy). However, these NFTs are tradeable; another person can buy them from the one who earned them.
Soulbound NFTs in DAO Governance
To fully implement these types of NFTs, there must be non-transferability. And therefore, Non-fungible tokens become forever bound to the owner. Similarly, Vitalik proposes the creation of DAOs where governance is bound to the owner of the NFT and is non-transferrable. This means that it’s not the one with the most money that automatically makes the decision. He quotes a proverb that says,
“those who most want to rule people are those least suited to do it”Douglas Adams
Such soulbound NFTs could be used to run decentralized autonomous organizations and actually bring in true decentralization.
This is a fairly new field and could morph into a hot niche in the future. It has deep implications for decentralization, proof-of-humanity, proof-of-attendance, and many more. It will certainly be interesting to see how this field grows.
Vincent Munene is a freelance writer and a great blockchain enthusiast. Blockchain has changed his life in terms of financial freedom and in return, he likes to educate people and keep them up to date on everything blockchain. He is a Biochemist by profession and also loves to play the piano.