Web3 is not just the third iteration of the internet, it is a movement geared at changing the dynamics of how digital engagement is done. This cuts across different forms of digital ownership, data management, asset transfer, and social experiences. And the best part? Builders in the Blockchain ecosystem are working tirelessly to introduce innovations further propelling this movement in the right direction.
Two of the most recent and highly talked about innovations are ERC-6551 and Soulbound Tokens (SBTs). If you’ve been paying any attention, you would have come across both ERC-6551 and SBTs, but if you haven’t, in this article, we will be introducing you to what they are, their relationship, and their relevance to the Web3 social ecosystem.
What is ERC-6551?
ERC-6551 is an Ethereum Improvement Proposal (EIP). This standard allows NFTs to function as smart contract wallets themselves and this means NFTs can hold tokens, receive airdrops, buy other NFTs, or essentially perform any task a smart contract wallet can.
ERC-6551 or Token Bound Accounts (TBA) opens up a new possibility for storing digital assets within a digital asset. This standard links NFTs with their ‘token-bound account’ or ‘token-bound wallets’ so they can own a range of ERC tokens such as ERC-721, ERC-1155, USDC, or ETH.
The proposal was created in February by a joint effort of builders from the Web3 venture studio — Future Primitive and the NFT creator platform — Manifold. Although the proposal is not yet officially a token standard, it’s already being adopted by protocols and projects in the ecosystem.
For example, we announced our latest update a few months ago where we talked about incorporating this new standard to empower ownership on Match Chain, and other projects like Stapleverse, POAP, Lens have also publicly talked about adopting this standard.
According to Dune Analytics data from SeaLaunch, since July till date (Oct. 15) there are 28,140 activated ERC 6551 accounts, 1,588 ERC 6551 transactions on both Ethereum and Polygon, and a total of 13,371 NFTs held by TBAs.
ERC-6551 is nicknamed the “backpack wallet” because they serve as backpacks that can carry around all of your digital belongings. The backpack wallet nickname is also a reference to the fact that ERC-6551 NFTs can be used to create composable NFTs. This means that you can combine multiple ERC-6551 NFTs into a single, more complex NFT. For example, you could combine a character NFT, a weapon NFT, and an armor NFT into a single “adventurer NFT”.
The backpack wallet nickname is a fitting one, as it captures the versatility and power of ERC-6551 NFTs. They are not just static digital assets; they are dynamic and interactive entities that can be used to create a wide range of new and innovative applications.
What are Soul Bound Tokens (SBTs)?
We all love NFTs, and even more so the innovation they have brought to digital ownership and identity. NFTs allow us to prove digital ownership of an asset, and even Twitter has systems in place to verify that someone owns their profile picture (PFP). However, although NFTs are unique digital representations of ownership, they are transferable and can be bought or sold. This limits what can be done with NFTs.
To clearly understand these limitations, on January 26, 2022, Vitalik Buterin, co-founder of Ethereum, published an article titled “Soulbound” on his blog. In the article, he spoke about the concept of soulbound items in Minecraft, which are basically items that once picked up cannot be transferred or sold to another player.
He explained how introducing this to NFT may power a shift from NFTs representing just digital collectibles to more personalized assets that cannot be transferred. In Vitalik’s words, “A common criticism of the “web3” space as it exists today is how money-oriented everything is. People celebrate the ownership, and outright waste, of large amounts of wealth, and this limits the appeal and the long-term sustainability of the culture that emerges around these items. There are of course important benefits that even financialized NFTs can provide, such as funding artists and charities that would otherwise go unrecognized. However, there are limits to that approach, and a lot of underexplored opportunities in trying to go beyond financialization. Making more items in the crypto space “soulbound” can be one path toward an alternative, where NFTs can represent much more of who you are and not just what you can afford”.
By May 2022, the concept of Soul Bound Tokens(SBTs) was proposed by Vitalik Butterin, Eric Glen Weyl, and Puja Ohlhaver in a document titled “Decentralized Society: Finding Web3’s Soul” with the goal of addressing the current limitations of NFTs and different decentralized innovations.
In the document they talked about “souls”, which are wallets holding soulbound tokens. They also cited an example that a person might have a Soul that stores SBTs representing educational credentials, employment history, or hashes of their writings or works of art.
SoulBound Tokens are non-transferable digital assets that cannot be bought and sold (unless you sell your whole wallet) and are not designed to have any market value. Instead, they can be self-issued like CVs, issued by individuals or organizations to represent an achievement or documentation.
SBTs are definitely a game changer for digital identity. The paper really explored how Soul Bound Tokens will help lessen how much Web3 platforms depend on Web2 for identity verification and help amplify the DeFi concept.
How are ERC-6551 and SBTs related?
When you think about their potential collaborative impact, ERC-6551 and SBTs are two innovations that are about to shake up the way we think about digital ownership and identity in Web3.
ERC-6551 is a technical standard that enables NFTs to function like wallets. This means that NFTs can now hold assets and engage in on-chain interactions in their own right.
SBTs, or soulbound tokens, are a type of NFT that are non-transferable and cannot be sold. This means that SBTs are permanently bound to the account that owns them.
While the concept of SBTs was first introduced, ERC-6551 is the first technical standard that addresses the shortcomings such as scalability and security issues of implementing SBTs. So, ERC-6551, makes it possible to implement SBTs in a scalable and secure way.
It’s important to note that SBTs can also be implemented without ERC-6551. However, ERC-6551 provides a number of benefits, such as a standard way to mint and manage SBTs, and a way to interact with SBTs using TBAs.
One way to think about the relationship between ERC-6551 and SBTs is that ERC-6551 provides the foundation for SBTs to be scalable. ERC-6551 enables NFTs to hold assets and engage in on-chain interactions, which is essential for SBTs to be able to represent credentials, affiliations, and enrich the profile/personality of the sbt holder through on-chain history and authenticity verification.
Another way to think about the relationship between ERC-6551 and SBTs is that they are two sides of the same coin. Together, ERC-6551 and SBTs have the potential to create a new paradigm for digital ownership and identity.
Why are ERC-6551 and SBTs important for Web3 socials?
Web3 thrives on innovation. The concept of decentralization, transparency, user ownership, and community empowerment goes beyond ideologies. Moving from proposals to reality has been driven mainly by constant innovation in the space.
ERC-6551 and SBTs (soulbound tokens) are the latest and, as we’ve discussed throughout the article, have great potential for Web3 socials and could be a key agents for mainstream adoption. The following points are some of the importance of these innovations to Web3 socials.
1. ERC-6551 and SBTs — Future of Web3 Social Identification:
SBTs introduce a true symbol for digital identification which can help to seamlessly create a system that does not require Web2 verification for Web3 system to function. This pushes both decentralization and increases the ease of user experience. ERC-6551, on the other hand, makes it possible for SBTs to be transferred between different Web3 applications, making them even more useful for Web3 socials.
ERC-6551 and SBTs can be used in Web3 socials in a similar way to how traditional social media platforms use user profiles and reputation verification systems.
For example, on a traditional social media platform, a user’s profile is a collection of information about the user, such as their name, bio, location, and interests. The user’s profile is used to help other users learn more about them and to connect with them based on shared interests.
On a Web3 social platform, an SBT can be used to represent a user’s profile. It can be used to store information about the user, such as their name, bio, location, and interests. SBTs can also be used to store information about the user’s reputation, such as their contributions to the Web3 social platform or their participation in certain communities.
The main difference between a traditional social media profile and an SBT is that an SBT is decentralized. This means that the user has complete control over their SBT and can choose which information to share with others. It also means that the user’s SBT cannot be censored or deleted by the Web3 social platform.
2. ERC-6551 and SBT will power interoperable and composable digital identity:
ERC-6551 allows SBTs to be transferred between different Web3 applications. This means that users can take their SBTs with them when they move from one Web3 social platform to another.
Here’s another example: Imagine that a user is joining a new Web3 social platform. They want to be able to connect with other users who share their interests and who have a good reputation.
On a traditional social media platform, the user would have to rely on the platform’s algorithm to recommend users to them. The algorithm would take into account the user’s interests and connections, but it would not be able to take into account the user’s reputation.
On a Web3 social platform, the user can use SBTs to find other users who share their interests and who have a good reputation. For example, the user could follow SBTs that represent their interests or that belong to people they admire. This would allow the user to see more of the content that they want to see and less of the content that they don’t.
SBTs could also be used to create reputation systems on Web3 social platforms. For example, a user could be rewarded with an SBT for participating in a discussion on a diversity-related topic. This would allow the user to signal to other users that they are committed to diversity and inclusion. And transferring SBTs between platforms seamlessly with ERC-6551.
Conclusion
Both ERC-6551 and Soulbound Tokens are evolving innovations with a lot of work being done on them, but they already have a great impact on Web3 social identity and ownership.
ERC-6551 provides a more flexible and scalable way to create and interact with NFTs while enabling new features such as on-chain reputation and social relationships. This could lead to the development of new types of Web3 social networks and communities where users are in control of their own data and identity.
Also, Soulbound Tokens represent a wide range of things, such as educational credentials, memberships, and social reputation. This could lead to a new era of Web3 social identity where users are able to verify their accomplishments and experiences in a decentralized and trustless way.
Overall, ERC-6551 and Soulbound Tokens have the potential to give users more control over their data and identity, and by enabling new forms of ownership, ERC-6551 and Soulbound Tokens could help to create a more equitable and transparent Web3.