Earlier this year, Vitalik ushered in a new era of NFTs with his “Soulbound” article. This has led to many experimentations within this “new” use-case for NFTs – Soulbound Tokens (SBTs). While a few have gained traction, the majority have not. Before we dive into the current landscape of SBTs, let’s quickly go over what it is and the promises it brings.
Simply put, SBTs are non-transferable NFTs that can represent many things. The fact that they are non-transferable enables them to become credible reputational data points ranging from work credentials, skill credentials, and more.
This ability to build up your identity through an ecosystem of SBTs unlocks new possibilities for Web3. For example, this could pave the way for governance to experiment beyond token voting, uncollateralized lending in DeFi, and a way to prevent Sybil attacks.
Note: While some of these SBTs aren’t exactly “non-transferable”, they exhibit other qualities of SBTs by acting as reputational data points.
While the term “Soulbound” wasn’t coined until earlier this year, POAPs have essentially been a version of an SBT since its inception in 2019. Of all the speculative NFTs focusing on rarity and price, POAPs took a vastly different approach by representing your attendance at a physical or virtual event.
This idea took off and has gained a tremendous amount of traction since. On the Gnosis Chain (aka xDAI), over 5M POAPs have been minted since Oct 2020. And even in the past few months of a bear market, a steady demand of POAPs are still being minted.
While POAP alone doesn’t tell you much about someone, it formed the foundation for other SBTs to come.
By far one of the biggest players in the SBT space, Project Galaxy has close to 1M “OATs” ( Galaxy’s equivalent for SBTs) minted. They found success by pitching “OATs” as a way to build communities, aka growth hacking.
These types of actions to earn OATs have ranged from “participating in AMAs”, “following specific accounts on Twitter” to more notable campaigns like the recent “Arbitrum Odyssey '' where users were incentivized to bridge assets onto Arbitrum. Projects, DAOs, and companies have found this tool to be useful, and have therefore partnered with Project Galaxy to issue “OATs”.
Among the players in the SBT space, RabbitHole has positioned itself as the leader in the “proof of skill” category. They’re a platform that educates users by guiding them through a series of on-chain actions in a specific area in Web3. An example would be their “Intro to DeFi” guide, which features on-chain actions such as staking ETH on Lido, providing stETH as collateral on Aave, and providing liquidity on Uniswap. After completing these on-chain actions, the user would be eligible to mint a “RabbitHole credential” which represents your skill set in that specific area.
To this date, there has been a total of 35,035 credentials minted since their launch in May 2022, with 17,058 unique addresses.
Out of all the current players, Noox World is probably taking the most direct approach in issuing SBTs. Each SBT on Noox is earned through specific on-chain actions. For example, swapping 10+ times on Uniswap will enable you to mint the “Uniswap Uncommon Swapper” badge.
Since their start in May 2022, there’s around 20k badges minted from 4,250 unique addresses. One interesting thing to note is while all the previously mentioned SBTs are free to mint, Noox has a 0.002 ETH minting fee for each badge. This has led the team to accumulate around 40 ETH in total.
(Source: Dune Analytics - @gm365).
Interestingly, the majority of daily claims of Noox Badges took place in the month of May. This could most likely be attributed to the overall hype SBTs were getting due to Vitalik’s article. Since then, demand for minting Noox Badges has slowed down.
DeQuest has taken a more niche approach in the SBT space by focusing on gaming. Similar to RabbitHole, DeQuest features “Quests” which guide users to learn and explore various games. In their “Quests” category, close to 5k badges have been minted.
The value proposition for both users and games is pretty clear. By completing these “Quests” users receive an SBT and monetary rewards at times. For games, this serves as a mechanism to bootstrap their user base via DeQuest’s community.
At this stage, it’s clear to see that the SBT space is still early and various projects are experimenting with different approaches. While some have gained traction, most projects are facing a similar problem – the lack of demand.
In my opinion, POAP is the only one that has found any semblance of product-market fit. While Project Galaxy has done well in terms of attracting users and projects, this is mainly attributed to their BD efforts rather than organic demand. RabbitHole, Noox World, and DeQuest have all largely seen a drop-off in demand after their initial launch.
This leads to the question if SBTs are meant to be the next big thing, why aren’t they taking off?
Well simply, the SBTs of today aren’t the SBTs of the future.
If you’ve realized, SBTs today mainly serve as an engagement tool:
- “Attend AMA” SBT
- “Bridge to X” SBT
- “X swaps on Uniswap” SBT
These SBTs at the end of the day don’t tell you much about a user. They hold relatively little insights and are often meaningless. This means individuals, DAOs, and corporations looking to find insights about users who hold these SBTs, often don’t find much. Which leads to no value being provided for the holders of SBTs.
This puts the SBT space in a predicament. In order for users to seriously collect SBTs, they need to get value from it. But in order for individuals, DAOs, and corporations to start providing value to SBTs, there needs to be an existing ecosystem of meaningful SBTs and users collecting it.
It’s a classic “chicken and egg” problem. Until this is solved, I don’t think SBTs can take the next step.
Stay tuned for the next article on what I think needs to take place for SBTs to take off.