Decentralized Society: In Search of the Soul of Web3

It's certainly been a slow week for cryptocurrencies and the NFT market, but that's just the market side of the equation. In contrast, it seems that we have just made a new and very meaningful leap forward in our ecosystem knowledge and research base.

That's because this week Ether founder Vitalik Buterin released the paper "Decentralized Society: In Search of the Soul of Web3" in conjunction with economist Glen Weyl and Flashbots researcher Puja Ohlhaver.

Notably, this paper centers on the new humanistic possibilities around non-transferable "soul-binding" NFT, a topic Vitalik Buterin has been exploring this year.

After reading this new paper, I was reminded of how I felt when I first discovered Ether, i.e. hopeful for a better future and confident that we have the ideas and the means to really start making it happen.

However, maybe you don't have much time to skim through this 30+ page paper, or maybe you're a little confused about some of the concepts. No worries! Below we will explain, summarize, and quote some of the key ideas from the authors of the paper so that you can quickly understand the basics of the Decentralized Society (DeSoc).

Introduction to Decentralized Society (DeSoc)

Main idea:

  1. Currently, web3 revolves around financialization and transferable assets.
  2. However, many mainstream economic behaviors (e.g., "unsecured lending and personal branding") rely on non-transferable social relationships that are built on trust and persist over time.
  3. The authors propose non-transferable soul-bound tokens (SBTs) held by "souls" (i.e., accounts) as a way to better encode social networks in web3.
  4. The SBT would encode these relationships by tracking the "commitments, credentials, and connections" of the souls on the chain.
  5. The Decentralized Society (DeSoc) will rely on SBT to allow "souls and communities to come together from the bottom up, as emergent properties of each other, to co-create multiple network products and intelligences within a range."
  6. If continued, DeSoc could also pave the way for new property rights and governance mechanisms that "reward trust and cooperation while protecting networks from capture, extraction, and domination."
  7. In short, DeSoc points web3's current hyper-financialized state to a "more transformative, diversified future of increasing returns based on social distance"

Soul and Soul Bound Tokens (SBT)

"soul" is synonymous with accounts, wallets, etc.
2. A "soul" can hold an SBT, which is non-transferable, potentially revocable, and initially public, while later privacy SBT use cases will become more feasible.

  1. SBTs can track "affiliations, memberships, and certificates" such as "educational certificates, work experience, or [...] hash of a book or artwork".
  2. SBTs can be issued by the "souls" themselves, but importantly, they can also be attested by other "souls" "as counterparties to these relationships".

Possible Decentralized Society (DeSoc) Use Case Artists
Artists can use their "souls" to publish NFTs, by doing so they can stake their reputation on their work in a direct, on-chain way, and artists can also create their own SBTs for different purposes, such as linking their NFTs to on-chain collections to deepen provenance. Thus, SBTs and the social networks they draw can help defend against plagiarism, deep forgery, etc.

Unsecured Loans
In the web3 DeFi space, the use case of lending without collateral is still clumsy, so SBTs can be used to create a "censorship-resistant, bottom-up alternative to top-down commercial and 'social' credit systems"

SBT could be a way for people to use their reputation as collateral for loans without having to provide collateral for the funds up front.

"Loans and lines of credit can be represented as non-transferable but revocable SBTs, so they are nested within the soul's other SBTs. Until they are repaid and subsequently burned, or better yet, replaced by proof of repayment."

Social Recovery
In web3, you don't want to lose access to your wallet, because in a DeSoc environment, you will lose access to your "soul".

Social recovery wallets like Argent allow you to rely on trusted relationships (i.e. guardians), which is currently our best option for protecting our Ether accounts over time. However, over time, maintaining a tight-knit group of active guardians can become tedious, so "social recovery" via SBT may be a better option.

Why is that? Because SBT keeps track of the community you belong to, so if you need to recover your "soul", then SBT can be used to "leverage the widest range of real-time relationships to ensure safety", not just a few guardians. Some implementation mechanisms still need to be worked out, but the concept is certainly possible.

Soul Airdrop
To date, airdrops have been a rather imprecise or inefficient way to cultivate new web3 communities. In contrast, SBT allows for "convening communities at the unique intersection of souls".

"Soul airdrops are airdrops based on the calculations of the SBT and other tokens within the soul, for example, a DAO who wants to rally the community in a specific L1 protocol can make a soul airdrop to developers who hold 3 of the last 5 meeting attendees who attended the SBT or other tokens that reflect the identity of the attendee (e.g. POAP). "

DAO Defense
DAOs, which are centered on community governance, face the threat of witch attacks, where users have multiple wallets to increase voting power, and SBTs will provide a defense against such attacks because they can more easily separate "unique souls and possible bots" to deny "any seemingly witch attacker's soul voting rights".

Flexible property
Today, in most cases, an NFT grants its owner the right to use, destroy or profit from an asset on a one-time basis. However, it is difficult to find situations where all these property rights are offered to a single owner outside of the NFT. Consider how you can use an apartment under a lease, but not destroy it, etc. Using SBT, you can not only mimic the mainstream property approach, but also create novel approaches for web3. For example, the authors of the paper mention the possibility of a local currency experiment in which SBT could make a currency more valuable to hold and consume for souls who live in a particular area or belong to a particular community.

Why Decentralized Society (DeSoc) is important
"Web3 aspires to transform society broadly, not just the financial system. However, today's social structures - families, churches, teams, corporations, civil society, celebrities, democracy - make no sense in a virtual world without the original languages that represent the human soul and the broader relationships they support (often called "metaverse") makes no sense. If web3 eschews persistent identities, patterns of trust and cooperation, and combinable rights and licenses, we will see witch attacks, collusion, and a limited economic realm of fully transferable private property, all of which will tend to evolve toward 'hyper-financialization' (hyper-financialization).

To avoid hyper-financialization while unleashing exponential growth, we propose to enhance and connect our sociality in virtual and physical reality, empowering souls and communities to encode rich social and economic relationships. But it is not enough to build on trust and cooperation. Correcting the bias and tendency to over-coordinate (or collude) among networks of trust is essential to encourage more complex and diverse relationships that span greater social distances than ever before. We call this the "decentralized society (DeSoc)": a co-determined sociality where souls and communities come together from the bottom up as emergent properties of each other to produce diverse network products at different scales.

We emphasize pluralistic network products as a feature of DeSoc because networks are the most powerful engines of economic growth, but are most vulnerable to capture by private players (e.g., web2) and powerful governments. The most significant economic growth comes from the increase in network gains, with each additional unit of input producing more output. [...] Networks with incremental gains are most efficient when they are neither purely public nor purely private goods, but partial and multiple shared goods. deSoc provides the social basis for decomposing and reconfiguring rights [...] and creating effective governance mechanisms between these rights to enhance trust and cooperation while checking for complicity and capture. "

For now, DeSoc is still just a concept and an area of research, not something we can tap into in the wild today.

However, with Ether and NFT, we already have the infrastructure we need, and these technologies will continue to evolve. And with this "decentralized society" paper, we already have the basic blueprint, not to mention that many projects are beginning to explore soul-bound NFT.

"Ether is the Shearing Point of hope. A timeless, programmable, global financial and coordination foundation. It is a bonfire around which we can build a cyberpunk world as well as a solarpunk world."

I think critics and supporters often focus too much on today's web3, and while that's perfectly reasonable and definitely worth discussing and working on, it seems to me and many other dreamers that we can't help but obsess and envision what's coming.

We have a long way to go before DeSoc really arrives, but after this paper comes out, it's clearer than ever that the future of NFT will be much broader and more social than many of us previously imagined.

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