Finding the Soul of Web3: Planning a Future Built on Trust

Author: Glen Weyl

Original Title: 《Decentralized Society: Finding Web3's Soul》

Compiled by: Nanfeng, Unitimes

Preface:

The author of this article, Glen Weyl, is a researcher in the Office of the Chief Technology Officer at Microsoft and a co-author of Radical Markets. This article is adapted from Decentralized Society: Finding Web3's Soul, a paper co-authored by Glen Weyl, Flashbots strategist Puja Ahluwalia Ohlhaver, and Ethereum co-founder Vitalik Buterin.

In less than a decade, Web3 has built a parallel financial system with unprecedented flexibility and creativity, shocking the world. Cryptographic and economic primitives, such as public-key cryptography, smart contracts, proof of work (PoW), and proof of stake (PoS), have formed a complex and open ecosystem for financial transactions.

However, the economic value that financial transactions rely on is generated by people and their relationships. Due to the lack of primitives in Web3 to represent social identity, Web3 has fundamentally relied on the highly centralized Web2 structures it seeks to transcend, thereby replicating Web2's limitations.

For example, the lack of Web3-native identity and reputation forces NFT artists to often rely on centralized platforms like OpenSea and Twitter to promise scarcity and initial provenance, and it hinders forms of under-collateralized lending. DAOs (Decentralized Autonomous Organizations) that attempt to go beyond simple token voting often depend on Web2 infrastructure (like social media accounts) to resist Sybil attacks (where one or a few entities pretend to be many). Many Web3 participants rely on custodial wallets managed by centralized entities like Coinbase. Decentralized key management systems are not user-friendly for anyone except the most sophisticated users.

In our paper, we will illustrate that even small and incremental steps using Web3 primitives to represent social identity can address these issues and bring the ecosystem closer to regenerative markets and their interpersonal relationship foundations in a native Web3 environment.

More promisingly, we emphasize that Web3-native social identities with rich social composability can make significant progress on broader long-term issues such as the vulnerability of financial attacks around wealth concentration and governance, while also sparking a Cambrian explosion of innovative political, economic, and social applications. We refer to these use cases and the richer, more diverse ecosystems they support as "Decentralized Society" (DeSoc).

Soulbound Tokens (SBT)

Our key primitive is an account (wallet), which holds publicly visible, non-transferable (but possibly revocable by the issuer) tokens. We choose this set of attributes not because they are obviously the ideal feature set, but because they are easily implementable in the current environment and allow for important functionalities.

We call this account a "Soul," and the tokens held by the account are referred to as "Soulbound Tokens" (SBT). While we are very interested in privacy, we initially assume these tokens will be publicly visible, as it is technically simpler to validate as a proof of concept, even if limited to a subset of tokens that are willing to be shared publicly. Programmable privacy SBTs are the next step we will discuss below.

Imagine a world where most participants have a "Soul" (i.e., an account) that stores SBTs corresponding to a range of affiliations, memberships, and certifications. For example, a person's "Soul" (account) might store SBTs that represent educational certificates, companies they have worked for, or hashes of artistic works or books they have written. The simplest form of these SBTs is the ability to "self-certify," just like we share information about ourselves in a resume. But the true power of this mechanism emerges when SBTs held by a "Soul" (account) can be issued by other "Souls," which are the counterparties to these relationships. These counterpart "Souls" can be individuals, companies, or institutions.

For instance, a university can be a "Soul" that issues SBTs to graduates. A stadium can also be a "Soul" that issues SBTs to die-hard fans of the Dodgers.

Note that a "Soul" does not need to be associated with a legal name, nor is there a requirement for any level of agreement to ensure "one Soul per person." A "Soul" can be a persistent pseudonym that holds some SBTs that cannot be easily associated with it. We also do not assume that "Souls" are non-transferable among humans. Instead, we aim to illustrate how these attributes can naturally emerge from the design itself where needed.

Lending of "Souls"

Perhaps the greatest financial value directly built on reputation is credit and unsecured loans.

Currently, the Web3 ecosystem cannot even replicate the most primitive forms of unsecured loans, as all assets are transferable and sellable—thus only serving as collateral. Traditional financial ecosystems support various forms of unsecured loans, but these loans are often regulated by centralized credit scoring mechanisms—the rationale being that borrowers with poor credit have little incentive to share information about their creditworthiness.

However, such credit scoring has many flaws. At best, they obscurely increase and decrease factors related to creditworthiness and bias those who have not accumulated enough data (mainly minorities and the poor). At worst, they can give rise to opaque "social credit" systems reminiscent of Black Mirror, facilitating social outcomes and exacerbating discrimination.

The SBT ecosystem can unlock a censorship-resistant, bottom-up alternative to top-down commercial and "social" credit systems. SBTs representing educational certificates, previous work experiences, and rental agreements can serve as long-term records related to credit, enabling a "Soul" (account) to obtain loans through meaningful reputation, thus avoiding collateral requirements. Loan amounts can be represented as non-transferable but revocable SBTs, allowing loan amounts to be embedded in a "Soul's" (account's) SBT—as a form of (non-seizable) reputation collateral—until they are repaid and subsequently destroyed (or, better yet, replaced with a "proof of repayment" to enhance the "Soul's" credit history). Similar to notes on a credit record.

SBTs provide useful security properties: the non-transferability attribute prevents the transfer or concealment of unpaid loans, while the rich ecosystem of SBTs ensures that borrowers attempting to evade loans (possibly by creating a new "Soul") will have no SBTs to meaningfully collateralize their reputation.

The convenience of using SBTs to calculate public debts will give rise to open-source lending markets. New associations between SBTs and repayment risks will emerge, generating better lending algorithms to predict credit reliability, thereby reducing the role of centralized, opaque credit scoring infrastructures. Better yet, lending may occur within social relationships, creating new forms of community lending.

In particular, SBTs can provide a foundation for practices similar to "group lending" pioneered by Nobel laureate Muhammad Yunus and Grameen Bank, where members of a social network agree to support each other's debts. Because an SBT of a "Soul" represents membership in a social group, participants can easily identify other "Souls" that may be valuable co-participants in group lending projects. Commercial loans are a "borrow and forget" repayment model, while community loans may take a "borrow and help" approach, combining operating capital with human capital for higher returns.

Don't Lose Your "Soul"

The non-transferability of SBTs—such as a one-time issued educational certificate—raises an important question: how can you avoid losing your "Soul"? Today's recovery methods, such as multi-signature recovery or mnemonic phrases, have different trade-offs in terms of mental load, ease of handling, and security. Social recovery is an emerging option that relies on a person's trust relationships. SBTs allow for a similar but broader paradigm: community recovery, where the "Soul" is cross-voted by its social network.

Social recovery is a good starting point for ensuring security, but it has some flaws in terms of security and usability. Users manage a group of "guardians" and grant them (based on an absolute majority) the power to change the wallet keys. These guardians can be a mix of individuals, institutions, or other wallets. The problem is that users must balance the desire to have a considerable number of guardians with the need to prevent guardians from coming from a dispersed social circle to avoid collusion. Additionally, guardians may pass away, relationships may deteriorate, or people may simply lose contact, necessitating frequent and laborious updates to guardians. While social recovery avoids a single point of failure, successful social recovery depends on curating and maintaining trust relationships with a majority of guardians.

A more robust solution is to link the recovery of a "Soul" (account) to the relationships of its community members, not by curating guardians, but by leveraging the broadest possible real-time relationships for security. Recall that SBTs represent memberships in different communities, some of which—like employers, clubs, universities, or churches—may inherently belong more to off-chain communities, while others—like participating in protocol governance or DAOs—may belong more to on-chain communities. In the community recovery model, recovering a "Soul's" private key requires the consent of a qualified majority (random subset) of members within the community to which that "Soul" belongs. Similar to social recovery, we assume individuals can access secure, broader off-chain communication channels than the blockchain itself, where "authentication" (through dialogue and shared secrets) can occur. We can generally view these SBT-tokenized relationships as a means to gain access to these communication channels.

*Image Source: *Decentralized Society: Finding Web3's Soul, by Glen Weyl, Puja Ahluwalia Ohlhaver, and Vitalik Buterin.

Maintaining and recovering the cryptographic ownership of a "Soul" (account) requires the consent of the community network to which that Soul belongs. By embedding security in social interactions, community recovery can prevent a "Soul" from being stolen (or sold). A "Soul" can always regenerate its keys through community recovery. Therefore, any attempt to sell a "Soul" will lack credibility, as the seller must also prove that they have sold relationships that can be used for recovery.

Programmable Privacy

Most valuable data is not necessarily personal but interpersonal (e.g., social graphs), or only valuable when aggregated in larger groups (e.g., health data). However, proponents of "self-sovereign identity" tend to view data as private property: data about such interactions is mine, so I should be able to choose when and to whom to disclose this data. But in terms of simple private property, people's understanding of the data economy is minimal. Even in simple bilateral relationships, such as extramarital affairs, the right to disclose information is often symmetrical, typically requiring permission and consent from both parties. The Cambridge Analytica scandal was primarily about the company's leaking of people's social graph attributes and their friends' information without consent.

Rather than viewing privacy as transferable property rights, a more promising approach is to see privacy as a set of programmable, loosely coupled rights that allow access to, modification of, or profit from information. Each SBT—regardless of whether it represents an affiliation, a membership, a certificate, or access rights—also has an implicit programmable property right that clarifies access to the underlying information constituting that SBT: including holders, agreements between them, shared properties or assets, and obligations to third parties, etc. Some SBT issuers and communities will choose to make SBTs fully public, just like displaying information in a public resume. From the atomic perspective of verifiable credentials, some SBTs will be private. Most SBTs will fall somewhere in between, publicly sharing some information while keeping other information private, and sharing some information with a designated subset.

SBTs make privacy a programmable, composable property right that can map to the complex expectations and agreements we have today. Better yet, SBTs help us envision new configurations, as there are countless ways to combine privacy (as a property right to access information) into a nuanced set of access permissions.

For example, SBTs can allow holders to run computations on data storage using specific privacy-preserving technologies, which may be owned and managed by a group of "Souls." Some SBTs may even grant access to data in a way that allows computations across data storage, but the content can only be verified through third-party permissions. This could be useful for instantiating and representing SBTs for "continuous voting" mechanisms, where the voting mechanism needs to tally votes from each "Soul," but the votes should not be traceable to anyone to prevent bribery.

SBTs can manage healthier forms of the "attention economy," enabling "Souls" to filter out spam from outside their social graphs while enhancing communication from real communities. This would be a significant improvement over today's communication platforms, which lack user control or governance and auction users' attention to the highest bidder, even to a bot. Audiences can more clearly know whose speeches they are listening to and better honor works that inspire insights.

Such economic models can optimize positive-sum collaboration and valuable contributions.

Einstein remarked at the 1932 disarmament conference that "the organizational capacity of mankind" had failed to keep pace with "technological progress," which "put a razor in the hands of a 3-year-old child." In a world where his observation seems more prescient than ever, learning how to plan a future based on trust (rather than replacing trust) appears to be a necessary lesson for humanity's survival on this planet.