The popular role-playing game World of Warcraft (WoW) inspired Vitalik Buterin to propose a new model of non-fungible tokens (NFT).
The Ethereum co-founder posted on his personal blog a article in which he defends the need for NFTs that cannot be traded on secondary markets.
These NFTs would be like items soulbound of WoW, attached to the soul of their original holder. The feature has been implemented into in-game items to prevent them from being sold to other players who haven’t put in the real effort to earn it.
“The purpose of the mechanics is pretty clear: it keeps the game challenging and interesting by making sure that to get the best items you really have to do the hardest thing and figure out how to slay the dragon. You can’t just kill boars ten hours a day for a year, get thousands of gold and buy epic magic armor from other players who slew the dragon for you,” explains the developer.
This mechanism, therefore, proves that the holder really “fought” to obtain a certain item, which can either be something that only exists in the virtual world, such as an epic magic armor gained after defeating a dragon, as if it were something from the real world, such as a diploma or driver’s license.
The problem is that it is still difficult to prove this in the current molds of NFTs. For example, if someone shows they have an NFT that can only be obtained by doing X, you can’t be sure if that person actually did X or just paid someone else to do it for them.
The transferability of NFTs, however, is what moves the market and guarantees “value” for the item. “But what if we want to create NFTs that aren’t just about who has the most money, and actually try to signal something else?” teases Buterin.
The application of NFTs soulbound
The developer brought as an example the work of the POAP, “proof of attendance protocol”, which allows projects to send NFTs that indicate that the recipient has personally participated in an event. But even so, there is no mechanism to prevent them from being transferred between network participants.
According to Buterin, POAP is an excellent example of NFTs that work better if they could be soulbound since they wouldn’t have as much appeal to move a secondary market.
“Making more items in the crypto space “soulbound” could be a path to an alternative, where NFTs can represent much more who you are and not just what you can afford,” concludes Buterin.
Solution for DAOs
The developer points out that this is not a problem limited to the world of NFTs and is also an impediment to the health of decentralized autonomous organizations (DAO) that allow the community to participate in project decision-making.
This right is granted to protocol token holders. The problem here is the difficulty of preventing a single holder from acquiring tokens from other participants to manipulate a decision that should be collective.
“If the goal is for governance power to be widely distributed, transferability is counterproductive, as concentrated interests are more likely to buy everyone else’s governance rights,” concludes Buterin.