Unchained - How Soulbound Tokens Could Reduce Speculation and Improve DAO Voting - Ep. 360

Starting point is 00:00:00 Hi, everyone. Welcome to Unchained, your no-hype resource for all things Crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto seven years ago, and as a senior editor at Forbes, was the first mainstream media reporter to cover cryptocurrency full-time. This is the June 7th, 2022 episode of Unchained. With the Crypto.com app, you can buy, earn, and spend crypto in one place. Download and get $25 with the Laura, link in the description. This episode of Unchained is brought to you by Beefy Finance, the multi-chain yield optimizer. Beefy is the easiest way to earn more from your crypto. Deposit funds into Beefy's secure vault to auto-compound yield across 12 blockchains. Got crypto? Choose Beefy. Today's topic is Soulbound Tokens.

Starting point is 00:00:55 Here to discuss our Glenn Weil, founder of the Radical Exchange Foundation, and political economist and social technologist at Microsoft Research Special Projects, and Pooja Alhaver, strategist at FlashBots. Welcome, Glenn and Pugia. Thanks for having us. Good to be with you. Yeah. Quick note that I am in Europe and do not have the cord that connects my nice mic to my computer. So my sound is not great. Apologies. And I also need to note that because I have COVID, or at least I had it a few days ago, I don't know about now. I may also cough during the episode I likely will. Hopefully I will not choke on screen. We'll see. All right. First, let's discuss each of your backgrounds and how it is that you came to write this paper with Ethereum creator Vitalik Bouturin

Starting point is 00:01:43 on Soulbound Tokens. Glenn, why don't we start with you? So I have a background as an economist. I was a professor at the University of Chicago for a few years. And then I ended up at Microsoft, off mostly for personal reasons. I was developing a lot of sort of radical ideas about how to reimagine our politics and economy. And in 2016, when a lot of the populist waves started to happen in mainstream politics, I decided to write a book called Radical Markets that put those things together jointly with Eric Posner into sort of a vision of addressing some of the big picture problems in the world. And I was not all involved in what was then called the blockchain space, but in fact, I was quite skeptical of what little I knew about it.

Starting point is 00:02:30 But the book ended up not being a particularly great mainstream success, but found a audience within the blockchain world. And actually, you know, one part of that all happening was the great episode that we all did with Santee Siri a few years back. Yeah, that was a great episode. I will link to it in the show notes for people. Yeah. And Vitalik and I got to be pretty close through that process. We've written several things together and we founded this the radical exchange foundation together he's been the primary financial supporter of the radical exchange foundation and he's on the board and we've just been in conversation about ways to integrate technology with reimagining new political and economic structures since then

Starting point is 00:03:14 and in January he wrote piece about soulbound tokens um and as we might get into there wasn't anything like that was huge technological breakthrough there and we can talk about that. But it made me see ways that there was a much quicker path from the current state of the Web3 ecosystem towards some of the things we'd been imagining. And Pugia and I started thinking about that and we wrote a paper around that and we ran up by Vitalik and he was enthusiastic and contributed as well. And that that's how this paper came about. Well, I'm actually a lawyer by training. And my first sort of career was in public policy thinking about issues. This was around 2003 to 2007, and then I went to law school during the financial crisis and studied financial markets pretty deeply, and then became an

Starting point is 00:04:05 entrepreneur, stumbled across Glenn's book, DMed him on Twitter, thought this was really interesting. I thought a lot of the ideas he proposed was kind of a third way between the left and the right and resolved a lot of interesting issues while raising new issues. And through Glenn, I became, you know, to radical exchange and Audrey Tong, who I found to be a total inspiration in her movement in digital democracy in Taiwan. And so that has been my entry point more from the social, political innovation lens and also in crypto as well. I've always been interested in the social and political ramifications of crypto. So let's just give a really basic definition of today's topic, Soulbound Tokens, and also talk about where this concept originates from.

Starting point is 00:04:56 Yeah, so Soulbound Tokens was an idea that Vitalik discussed in January, and he basically described it as just a non-transferable token, a non-transferable NFT, basically. And this has a bunch of different types of antecedents, one of which is World of Warcraft and the fact that there's lots of items in World of Warcraft that are not just like tradable swords or something like that, but that are actually attached to a character like wings. And that was, you know, Vitalx inspiration. There's an enormous community of people who've been working on things related to decentralized identity for years who have been thinking about things that have that basic structure for a long time. And we can get into some of the details of that later. But this attempt to connect it to all the

Starting point is 00:05:53 exciting energy around new forms of social and economic organization within the Web3 community was really what I think the contribution that Vitalik's paper made was. And that's really what we tried to emphasize in this paper. So Soulbound tokens is more of a general allusion to this notion of these non-transferable statements about people that are at least partly public so they can interact with D-Apps. It's not really a full technical specification. And the emphasis of the paper, at least as we intended it, was to be on opening people's eyes to both the near-term and really ambitious, longer-term applications that these could enable and sort of painting a sociotechnical picture there, rather than to focus primarily on the design of a particular standard,

Starting point is 00:06:42 which, as I mentioned, there's been a lot of work on for some time, and there's continuing suggestions about and happy to discuss that. But the intention of the paper is really around illustrating all the things that this can make possible when it interacts with the energy in the Web3 ecosystem. And Pujo, do you want to flesh out what that vision is? Yeah, so it's a bottom up, it's a vision, first of all, a bottom-up coordination, starting first with individuals nested within their communities and forming broader nested forms of cooperation. And so there's a few principles around our ideas. One basic

Starting point is 00:07:19 one is just local control on the idea that those who are closest to a prom generally have like the largest stake in its resolution. And so what we try to do is paint a picture of how starting with like decentralized reputation and communities, these communities can kind of compose into larger and larger networks of coordination, a consensual, yes, get decentralized and pluralistic way. And yeah, I mean, we go into a lot. I mean, we touch on, we go to the far reaches of, you know, prediction markets and AI,

Starting point is 00:07:52 but ultimately the idea is to ground these technologies in the people that use them and have networks coordinated and owned by the people that use them and the communities that participate them in compulsive ways. Maybe Glenn, you want to take a shot I just think one other sort of philosophical element I would add is there's a there's a sociologist named Georg Zimmel who was one of the founders of the field book had kind of forgotten in the 50s and he had this idea that there is no such thing as an individual in primitive human society or

Starting point is 00:08:30 you know early human societies that people are part of a group and that individuation happens as a result of modernity because people become parts of many. different social communities. Your work life is different from your home life, is different from your religious life, is different from, et cetera, et cetera. And as you accumulate all those social relationships, sort of the pattern of social relationships becomes unique for each person. This was the inspiration for what became social graph theory and, you know, the idea of social networks. And I think that that underlying vision, the notion that that network of relationships, that the individual actually comes out of the collection of communities that she's a part of

Starting point is 00:09:13 and that communities emerge from the set of individuals within them, but that that underlying network of connections is the fundamental thing. It was the inspiration for the internet. It was the inspiration for so much of how we live, and yet it's never really been expressed in the way that our technologies are set up. And we're trying to describe a path from the current Web3, system, just something like that that you might think of as sort of like the internet society that was imagined even before the technologies for it were possible. Yeah, I just want to add on that

Starting point is 00:09:48 quickly. So in the paper, we talk a lot about how individuals are differentiated by their communities and vice versa. Communities are differentiated by their individuals. And so there are two ways to look at this. So you can look at it as, you know, some people sort of got caught up in the framing around soul-bound tokens. You can also call them community-bound tokens, right? Because it's the communities in would you participate in, right, that really define you. And that's what Glenn was just alluding to. Yeah, actually, let's talk about the name because a lot of people, I tweeted on, you know, Twitter, what I should ask you. And multiple people asked about the name. And I agree, you know, even just reading through the paper where it says your account will be called your soul.

Starting point is 00:10:32 it almost feels like it was purposely written to mimic some, you know, futuristic dystopia and science fiction. And I was a little bit like, why don't I just call it an account? So, yeah, why is it called soul-bound tokens? And why are you suggesting the account would be called your soul? It's kind of interesting. I think the folks who have kind of come from a more pluralistic background and see themselves with a nested cooperation,

Starting point is 00:11:02 networks, soul bound really resonated with them. And I think folks who have a sort of more individualistic, atomistic perspective, community bound resonates more with them. But I think it was, frankly, it was just a lot of fun to write the paper and riff off of the metaphor. That was like part of it. I mean, as I was writing it, I was having a lot of fun. But the other idea is I get the soul can sound dystopic, but souls are actually things you're supposed to like, be very careful about, you know, you don't want to just like sell your soul. You don't want to like financialize your soul. And so the idea was more around, okay, these are very careful. Your soul is something very careful and precious. And, you know, you want to shepherd it carefully,

Starting point is 00:11:48 not financialize into some sort of like, you know, dystopic reality. But Glenn, what do you think? I mean, I think part of the intention, frankly, was to do something whimsical and deliberately not something that sounds like a technical standard so that people wouldn't think that we were proposing a technical standard that should be called soulbound or souls or whatever. We were trying to be more metaphorical and more elusive deliberately. Now there's pluses and minuses of that and obviously there's a lot of people who've taken it very, very literally. And that's unfortunate. And I regret that at least. But the intention, at least from my part, was, precisely to illustrate and allude to possibilities rather than fully specify technical standards,

Starting point is 00:12:39 which if you use some much more technical term, would have sounded that way. Okay, yeah, it's funny because I was definitely going to ask about this, but I wasn't going to have it so high up in the conversation. But between the fact that it just naturally came up and then, like I said, noticing on my tweet, like how many times that particular point got mentioned, I was like, you know what, this is something people want to know about. But, you know, another thing I think that is kind of like hard to see at this moment when it's this concept that's been thrown out there. There's been a lot of examples given. We're already seeing there's at least, you know, one token project that is looking to use this concept. I'm sure it's just at this phase right now

Starting point is 00:13:21 where a lot of people are like, what kinds of problems exist that this is going to solve? So can you talk a little bit about, you know, what problems is? is that you see, that you feel that this is a solution that makes sense for those? Well, let me just start with things that are very, very near-term and concrete. These are not the things that excite me the most, but I think it's important that we start with them because otherwise it sounds very abstract and futuristic. So, first of all, there are a lot of organizations that would like to issue NFTs, promote more or less the same purposes that everyone's issuing NFTs,

Starting point is 00:13:56 basically to allow for some meaningful provenance on some object that is in some sense digitally unique or scarce or something like that. But who thinks speculation is awful and don't want to be throwing stuff out there that's going to be the subject of speculative excess. They want them to be purchased by people who are actually going to value them for what they are rather than just seek. to resell them. And I've actually, I have another design that does a similar thing to that while still allowing

Starting point is 00:14:32 for transferability. But I think that a non-transferable NFT is a very simple and natural way to just address that concern. And I think it might unlock many more mainstream organizations getting all the benefits of NFTs. Just to take one small step beyond that, if you're an artist who's issuing an NFT, right now you commit to that being scarce by issuing a press release usually. You say this is going to be part of a limited edition or whatever it is that you want to say about it. An alternative would be that

Starting point is 00:15:07 you could issue a soul-bound token to your wallet, so whatever you want to call it, that is sort of countersigned or countersigning or issued by the transferable NFTs that you're putting out there. And that is a public commitment to effectively not double spend in the sense that you're not going to recreate more than however many you said you would of that object. So these are, I mean, these are very simple things, right? There's nothing amazing or earth-shattering about any of this, but I do think that there are things that are really missing from the ecosystem that could easily be solved using this type of an approach. And so some examples would be like your driver's license, your university degree.

Starting point is 00:15:57 No, I don't, let's not go there. Let's not go there. I mean, look, I'm not saying that those things couldn't, couldn't be included here as well. But I certainly wouldn't want driver's license to be on chain. And we really have to figure out the privacy model before you want that. University degree, you know, a lot of people put that on LinkedIn anyway, right? A lot of people lie about it on LinkedIn. Yeah. And it would be nice. I think if people could have more transparency about what's actually true there, and this would be helpful in that regard.

Starting point is 00:16:28 But why did you not want to talk about actual examples? Because I feel like this conversation is a little bit difficult to have when it's so abstract, and I feel like it's actually easier to understand through concrete examples. So I don't want to talk about driver's licenses, because I don't want those to be in a model where our primary idea is that this is public. So university degrees I'm reasonably comfortable with. I'm more comfortable with things like I just said before, which are NFTs that are not transferable or social tokens. But like what's an example of a need for?

Starting point is 00:17:01 Like why would I need that? What would I use it for? I'll give me an example, Laura. So like like let's take. So initially when we wrote the paper, we started, okay, we assume say take just a small set of tokens, which people are memberships and filations. People would be willing to have public about themselves anyway. Right. And so where is there a degree of high publicity and also a problem of, say, like,

Starting point is 00:17:23 monopolistic power? Science is actually a really great starting point for that. Scientists are very public about their credentials, they're very public about their journals and publications. And yet, scientists are like a really exploited group of sort of the academic class and in the knowledge production supply chain because, right, they submit their journals to, excuse me, they submit their articles to journals. They don't get paid, right? The journals are major rent extractors. Same thing with peer reviewers. And so you can imagine like a small scientific community, right, getting together and representing their credentials, which they do publicly anyway, and their publications public anyway, and forking away, say, like a rent extractive

Starting point is 00:18:05 journalistic monopoly like nature or cell or something like that and recreating that and say, and forking away those monopoly rents and sort of regenerating them, redistributing them back into the scientific networks to produce more scientific knowledge and having scientists paid in peer-reviewers space. So, like, that's like a very low-hanging fruit application I see. Another really, like, important application to the crypto space in general is getting a sense of actually how decentralized some of our systems are. And it's really important that we do that because the whole.

Starting point is 00:18:43 whole sort of premise and justification for crypto as decentralization, right? It's what protects it from being regulated by any trust and also securities regulation as well. And so part of this paper was to help us give us some primitives to start to measure up the decentralization of our systems and justify them. And I think we can actually apply the same analysis to traditional finance and have some really interesting conversations about the ways in which Web 3 might be, you know, superior or even leading traditional financial networks that tend to also concentrate power. So I think there are a lot of applications, but I would say I'm very bullish on like the scientific network and research case.

Starting point is 00:19:26 Another example that's very similar to that that I would give is open source software contributors. Again, extremely public. Like the whole point is for it to be public, open, social capital, in a public way. Not saying everything in open source is that way, but that's the way that the dominant ethos of the community is. Soulbound token type constructs would be very natural for roles that you have within an open source repo, like maintainer, contributor, user, et cetera. And those are already public, effectively, badges that usually GitHub gives out. And a decentralized approach to them would

Starting point is 00:20:04 allow a bunch of really interesting additional applications. And moreover, even though I was not concerned about driver's licenses, I was concerned about that specific example you gave. It's not that there aren't a ton of examples that are credential like that I would be comfortable with. Anything, no one puts their driver's license on their LinkedIn profile. No one puts their driver's license on their Twitter profile. When we talk about things that are public and we're starting from a public perspective, and we can talk about privacy, that's something we're really interested in. But starting from public perspective, anything that you don't want to put on LinkedIn or Twitter, I would not say belongs in a public setting. But there's lots of things that

Starting point is 00:20:41 you do put in those contexts. And they are pretty centralized right now. And I think we get a lot of value out of decentralizing those types of things. So choose any example that fits those cases. And I'm happy to talk about it. On a basic technical level, how does a sole bound token work? because obviously you would have to have some mechanism by which you keep people from either transferring the token or you have to account for situations in which maybe they're switching between wallets. How do they keep the sole bound token? Or what if something happens where one of their wallets gets compromised and one of the soulbound tokens was in there? So just in general, like how do you kind of account for these different scenarios?

Starting point is 00:21:30 So a key to soulbound tokens, you actually can't have sole bound tokens unless you also have this mechanism we describe called community recovery. And the idea around community recovery is that you basically are the intersectional vote of your social network. And so if you try to sell your wallet with your transferable, with your non-transferable tokens, you couldn't actually credibly do that because you could always just recover it back from your community. So community recovery as a wallet mechanism is very key to sell bond tokens. The two really go hand in hand.

Starting point is 00:22:09 And we talk a little bit about at the end of the paper, how do you bootstrap both of these things? And it's a really important area of probably the most important area of research. and it's the hardest area of research. So when folks like DM me and they're super excited about Silvan tokens, I'm like, okay, okay, that's great. I'm interested in community recovery right now, right? Because the concept really needs that to take off. Yeah, the only slight way I would just qualify what Pugia said is that we don't have

Starting point is 00:22:37 community recovery yet. And these bootstrapping things are going to have to help us get there. And so there's going to be things that are going to be sort of proto-soul-pound tokens that will exist prior to community recovery working. And I'm open to a variety of those, and we discuss a bunch of different paths in the paper. But at some level, as to which you pointed out, those aren't real soulbound tokens until you have a community recovery mechanism that anchors them. Yeah. And so what are some ideas for structuring the community recovery? Because I definitely, this was not the first time I had heard somebody talk about these ideas. So I feel like they're

Starting point is 00:23:11 sort of like percolating out there now. So let's say that I'm the person with the bound tokens that, you know, were like I either lost the keys to my wallet or somebody fish them from me or whatever it is. How would this work? So a bunch of different ways to think about it. I mean, you might want to, we talk about correlation discounts in the paper. So maybe you want to apply some correlation discounts. Like the mechanism would apply correlation discounts to. But Pugia, before we even get there, I think we should describe the basics of what it is at all. So is that right? Laura, I think that might be helpful.

Starting point is 00:23:47 Yeah. Just the basic idea, Laura, is let's start with the idea of social recovery and let's explain that. And then let's move to community recovery. So the idea of social recovery is that you appoint a set of guardians, other wallets, and some sort of qualified majority of them, let's say three out of five or whatever, can always come together and unlock your keys and allow you to regenerate your private key. And perhaps even you put some safeguards in there, like if you're going to make a really large transaction, or if you're going to make a bunch of transactions in rapid succession or something

Starting point is 00:24:19 like that, you need support from some qualified majority of those guardians, let's say. So that is already pretty well established. I think it's generally working fairly well, at least relative to other non-custodial approaches within the ecosystem right now. The origin and loop ring wallets both have it. So that's great. That's a great mechanism. And we think it's something to build on. And can you give examples of who the different entities would be or what types of entities they would be? Well, usually in the Web3 ecosystem so far, it's other friends. It's just individuals who you have a relationship with and whose address you know. So, but the community recovery is a somewhat different paradigm than that. So, I mean, of course, it could be Dow or

Starting point is 00:25:06 something, you know, it could be, it can be any wallet. So I don't know the distribution right now of when people use these social recovery mechanisms, how often it's a DAO or a group or a foundation versus how often it's an individual. My understanding is it's usually a set of individuals who you have a relationship with. What we're hoping to do to go beyond that is to deal with what I see as some of the limitations of the social recovery mechanism. Number one, you need to make sure all the people you're linking to, like themselves haven't been compromised, that they're still your friends, that as your relationships evolve, that you evolve that set of, so it's somewhat intensive for the user in a way that sort of only, its relevance only becomes clear when you have a

Starting point is 00:25:48 compromising event. And so I think there's a significant concern that that isn't really going to do a great job of, I mean, again, it's much better than other purchases to non-cissotia. And I'm a big fan of it, but I don't think it's going to necessarily do the best job keeping up with the evolving nature of people's lives. What we propose instead, and it's somewhat vague, but I think you can get a sense for it, is that the sole-bound tokens that you have, which denote affiliations, relationships, you know, in public elements of employment, et cetera, would be a substrate for choosing a set of people

Starting point is 00:26:27 who are your guardians in the social recovery in an automated way. So let me turn to Puget's example of the scientific. And just be super, super concrete. This is very, very specific, but just to put in, imagine that you have a sole bond token for every paper that you've co-authored. And there is a fungible but not transferable equivalent sole bond token that's held by every other author of each of those papers. And when you want to recover your wallet, the system randomly chooses five papers that you've authored and asks you to get at least one co-author of each of those papers, or,

Starting point is 00:27:09 maybe three of those papers, whatever. Like there's some bunch of floating parameters here, but some parameters that you have to get those people to come and recover your wallet. The nice thing about that is that stays up to date as you publish new things as your interests evolve. It's done in an automated way that doesn't require you to constantly, you know,

Starting point is 00:27:29 maintain those things. And it can be enriched in a bunch of ways that Pujo was getting at. So Pujo, I don't know if you want to turn to the correlation discount point. Yeah, so, right. So like if you imagine Solbon tokens representing your memberships and affiliations, what if you want wallet recovery to be secure, you don't want, for example, recovery to happen with like a set of collusive individuals who could like, say, hijack your wallet, right? You want it to be amongst like the maximally like uncorrelated diverse members from, you know, people from different communities who aren't talking to each other, right? And who can't like collude to steal your wallet from you, right? And so. So SBTs kind of give you a natural substrate to actually, you know, calculate sort of correlation discounts or like maximally uncorrelated individuals in real time to, you know, have wallet recovery.

Starting point is 00:28:25 And then there's a lot of, it's a lot of research. I mean, it's nothing easy. It's, I'm not an expert at this, but there's all, you know, there's recency bias and other kinds of things you need to take into account. And it will take a long, I don't know, I don't know how long, but it's, not going to be solved in like the next like three months or something right i mean i think that the you know the ideal version of this laura is one where it automatically generates a set of guardians for you effectively that whose only point of contact is through you like you're sort of the network

Starting point is 00:29:02 central node in the set of guardians that are created by the by by by by by by by the by by the generation. And like, I'm not saying this word for everyone, but I can give very clear illustration from my life. So I used to be an academic, as I mentioned. I was in the field of economics. I have all kinds of friends from the world of economics. I would never trust those people to, like, be the guardians of something for me because they represent one element of my life. And like, I'm not that tied to the economics community anymore. And like, I would be worried about a potential of those people, like, screw with me in some way. I also have a bunch of crypto. people that I hang out with. And there's like essentially zero overlap between the crypto people and

Starting point is 00:29:43 the econ people. And again, like, I might be worried that those people could get together and like, you know, there's all kinds of weird stuff that goes on in the crypto world. You know what I mean? And I wouldn't want those people alone to do it. I also have this bunch of collaborators from philosophy and from ecology because I've written in those fields. But like those people don't talk to each other at all. Their point of contact is through me, you know? And so if you had a system that auto-generated a set of guardians that was drawn from those maximally non-communicating fields that maximally have the property that I'm the central node between them, that seems like about as secure of a way as you could come up with to do my social recovery scheme and not something

Starting point is 00:30:25 that you'd want individuals to have to do the calculation of themselves. And that's one of the problems with social recoveries that it's sort of relying on them to do that. Yeah, I can actually already picture which groups I would use for my recovery because it just feels like, oh, these are the natural groups where I'm close to all of them, but they don't know each other. I'm sure most people could do that exercise. So, you know, it's not impossible to see how this might someday be applied. So in a moment, we're going to talk a little bit about things like decentralized society and kind of different ways that these might be used.

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Starting point is 00:33:09 Link in the description. Back to my conversation with Glenn and Pooja. So as you wrote about in your white paper, Soulbound tokens are just a piece of this larger vision you have that you call decentralized society or D-Soc. What is that and why is that important? So as I mentioned earlier, there's a few principles of ESOC. I would say two key ones. One is local control. And that's the idea that local communities

Starting point is 00:33:40 who have the greatest stake in a resolution of problems should have control over solving that problem, but also this other principle called cooperation or consensus across difference. And we write a lot about that and we provide some mathematical representations of that. But the idea basically is that when you want to compose communities into broader cooperating networks to provide broader shared goods, you want to draw consensus from the maximally diverse participants. And that's a better signal for shared goods than, say, consensus amongst a group of individuals who might be correlated in some way and might be over-coordinated or maybe colluding in some way. And so decentralized society is really a picture of how we can get these communities to pluralistically cooperate

Starting point is 00:34:33 into very rich social networks of broader coordination and generate broader and broader goods, shared goods at different levels in a very dynamic, pluralistic way. There are a few kind of different applications that you say that you feel soulbound tokens could open up in the crypto world. There's one example of a financial one, under collateralized lending. So how would this work with sole bound NFTs? So the basic idea is that if people want to stake some reputation that they have on something, and this can be to get a financial loan or it could be to get, in the case of the artists,

Starting point is 00:35:17 to guarantee that they won't issue something else very similar to this in the future, just any time you want to stake non-financial reputation, you need some representation of what that reputation is, and you need to make some sort of at least semi-public statement that you will repay, not issue something again, et cetera. In fact, you can think of the double spend problem as just a very special case of this. Double spend is basically like,

Starting point is 00:35:44 I am giving you this currency, and I'm publicly stating that I am not going to give this currency to anyone else in the future and hold me to it. You know, you're doing that in a collateralized setting where you just have the currency in your account. But there's lots of cases where you, there are properties of you that are valuable, but that you wouldn't sell.

Starting point is 00:36:08 All labor is like that, right? Like, our labor is valuable, but you also don't sell yourself into slavery, right? So just the idea of work, the idea, like anything that is not just a purely financial asset relies on this principle of having properties about yourself that have value to others, but that you don't offer as transferable collateral in the case that you're not able to deliver on that.

Starting point is 00:36:33 But you're just, you know, you'll accept the reputational hit that you will face as a result of it. Again, nothing in this is super creative or new. And there's lots of other things that could potentially be used as substrates for this, but they have to share this property that there are elements of it that are at least partly public. So you're able to make that commitment that if you break it, people hold you accountable for it. What's powerful about doing it in a decentralized way is that it opens the possibility that you can do this in a community-based way where people are horizontally lending to each other or guaranteeing to each other that they'll pay back if another one doesn't pay back, et cetera, like the Grameen Bank does. Whereas if you do it in a purely top-down way, things tend to be based on like sort of a single credit score that is shared across all contexts rather than on those relational aspects. Yeah, I was feeling that it's more like a, I don't know if holistic FICO scores the way,

Starting point is 00:37:30 but just something more contextual, I guess, rather than, yeah, the FICO score is like kind of, it can only see what it can see. And one other thing that I found interesting in your proposal was you talked about how you could use Solvound NFTs and DAOs in a way to help support the diversity of a DAO. How could you do that? Yeah, so if you imagine each member of a DAO having a set of their own memberships and affiliations, right, you could, if you wanted to, say, surface minority voices within the DAO that might be overshadowed by majoritarian influences, you could programmatically, right, bring these voices to the center of the DAO and elevate them. If you wanted the Tao to represent the members of the Tao, you could also surface those most intersectional members who kind of best represent the Tao as well. So there's a lot of really

Starting point is 00:38:28 interesting ways that we can encourage pluralism within Dao's that we really can't today because we don't have really any visibility beyond just like the wallet, right? Let me give an analogy. So there are kind of a couple of paradigms that often compete with each other for thinking about things like college admissions. So you, one is like meritocracy, like the best people should all get in. There's some score that you're going to give to everyone and that we're going to get the best. Another paradigm is like, well, maybe there should be some amount of randomness to it so that we get something that's representative of the population. An alternative that I find very appealing is to say, well, sure, we want something like merit

Starting point is 00:39:09 but merit is contextual. It depends on what else is represented. And if we want a student body that is maximally diverse and maximally benefiting from the other people who are on campus, then actually it's not like a select all the top ones problem. It's a combinatorial optimization problem over a collection of people that will together be diverse, representative, and interact in a positive way. And if you want within a Web3 context to solve that type of a problem, you need to think about algorithms that can do combinatorial optimizations over a rich set of things that constitute people and not just like how much money to someone or how much tokens does someone have, you know?

Starting point is 00:39:57 Which reminds me also that another thing that I found interesting about the paper was that you talked about quadratic funding, which you had discussed previously when you came on my show. And I've really liked seeing how it's being applied in some of these DAOs like Gitcoin Dow where for people who don't know, Kevin O'Waki, the founder of Gitcoin Dow, and maybe he got this phrasing from you. He says he likes to think of it as optimizing the preferences of the many and the poor over those of the few and the rich. And essentially, if people vote for a grant proposal and they don't have as much money. It's like lower dollar amounts that they're allocating to it. But there's many more of these people. And then there's another proposal where

Starting point is 00:40:45 some whales, you know, allocate a whole bunch of tokens. But really, it's just like two or three entities that actually really support that one. Then the proposal that has many more entities voting for it will get more of the funding. But what was interesting is in this paper that you guys wrote recently, you talked about kind of the pitfalls of that and said that quadratic funding doesn't scale, but that you felt that soulbound NFTs could help resolve some of the issues there. So can you talk about that? Sure. So the problem with just simple quadratic funding is, say, a highly coordinated group could just swamp a mechanism by, say, each giving like a dollar, right? Because as you said, you reward the participation of the many, right, over the

Starting point is 00:41:33 few. So what sole bound tokens do is they give us a social substrate and let us actually look at what are the weak affiliations and strong solidities, right, amongst people that lets us discount those groups that may be over-coordinating and trying to swamp the mechanism. And in that way, you get, as back to that principle, cooperation across difference, you get consensus, right, amongst the most diverse, right, members. And you can elevate that with correlation discounts and let the mechanism scale. Glenn, it's your mechanism. So maybe you have something to say.

Starting point is 00:42:08 I think what I would just say is, Laura, I actually really love the example you gave of like those big entities. Because even those big entities will tend to have, let's go beyond the issue of like a pure civil attack and them just inventing people. They're going to have a bunch of hangers on of various kinds, you know, like every big entity does. Right. And you don't want the mechanism to just get taken over by like a bunch of hangers

Starting point is 00:42:32 of some centralized entity who just give a tiny amount just because they're hanging on to whatever the momentum is there, right? You actually want people who are genuinely independent of each other and you want to match those contributions. And there's just no way to do that with certainly with basic quadratic funding, not even with some sort of proof of humanity because it treats all people as sort of interchangeable. But people aren't interchangeable. People are socially situated. And the problem that we need to solve is not really the problem of getting selfish people to act in the common good, but rather the problem of getting people who are partial to certain communities to work with people who are farther away from them socially. And that's what we hope you can get towards with this types of structures.

Starting point is 00:43:22 So you're saying basically that through the soulbound tokens, people could say, oh, okay, well, community A, which has this ringleader has been sort of flooding the system with their support. But now we see that even though they have strength in numbers, that actually when you look at the diversity of groups that make up this organization, that communities B, C, and D are also not represented in this vote, even though the number of tokens being allocated to this vote is high

Starting point is 00:43:58 or something like that. Is that kind of what you're getting at? Exactly. And it comes back to exactly the thing that you said about the different groups in your life that you would appoint for the recovery of your wallet. What you want is not, oh, I need a ton of friends because if all those friends are like crypto bros that you met at the same party, that's probably not a really good indication that that's good for you. In fact, that might be part precisely of like a worst case scenario that they're like a gang of people who kidnapped you and then, you know, took over your social recovery thing or something like that. at, right? Whereas if it really is people from completely different parts of your life, that's a much stronger signal. And, you know, fundamentally what I, again, returning to the point before, is this is the right set of logics for a truly networked society where the thing that is at its core is not a set of individuals. It's not a set of centralized entities.

Starting point is 00:44:55 It is the fabric of relationships, the complex fabric of relationships that connects things. and actually allowing systems to represent and compute over that. And that's, you know, to me, what decentralized society is all about. And so would sole bond tokens then also help mitigate against civil attacks, which are when, you know, for instance, one entity creates multiple wallets to give this illusion of representing many people, or is that not possible? Because a part of me was like, well, you could just have AIs that are creating these different souls with these different soulbound tokens, but maybe not.

Starting point is 00:45:29 I don't know. maybe it would be hard to do that. Well, it's an interesting point, and it's exactly why we recommend in implementing this to actually start with humans and human actual bona fide human relationships with really rich communication channels. Because if you did, say, try to bootstrap the system

Starting point is 00:45:49 off of just AIs, fabricating relationships, then it sort of pollutes all the signals. So it is better to have, Silban tokens actually reflecting memberships. And if you have a sort of sufficient level of real sociality, then you can start to like differentiate between like what are bot wallets and bot relationships because they frankly are those relationships that are outside of your social context, right? And are just kind of like floating in a network that is very disconnected from yours or even from any other sort of social being. So it is really important to start these networks

Starting point is 00:46:28 with sociality and not have them overrun by bots. But to answer your question, yes, it could very much help with civil resistance because those souls that have more SBTs that are, say, reputable SBTs can be differentiated from those, you know, bot souls that have just sort of farmed and accumulated fake SBTs. Oh, so it sounds like civil attacks will then be possible with soulbound tokens as well. Well, I mean, some form of simple attack is always going to be possible at some level, right? But I think this is a very powerful mitigation technique for simple attacks.

Starting point is 00:47:09 So let's imagine that people have their LinkedIn, like the set of things that are in LinkedIn in their wallet in this world, just again, to make it very concrete. So first of all, some set of credentials that you can have in LinkedIn are going to be more recognizable than others to certain people, not to others. So it's not a universal thing. It's not like these are the good ones and these are the bad ones. They're going to be Taos that are going to be recognized by some people. And other people will recognize the Harvard's and the J.P. Morgan's of the world. And other people will recognize like different African American community groups and whatever. So it's deliberately pluralistic.

Starting point is 00:47:45 And we don't think there's going to be like one, like this is a reputable institution and this is not. It'll be contextual. But in those contexts, there are going to be like any, organization that's trying to validate people, maybe some Dow or whatever, is probably going to have some white listed and maybe some gray listed set of affiliations that make sense to them. And there are going to be ways of differentiating whether something is the same person or not in most context. So if someone has a rich CV there and there are two different entities coming along that went to different universities

Starting point is 00:48:26 during the same years. Now, maybe that could be the same person. Maybe they went to two universities at the same time, but it's not very likely. You know what I mean? So there's usually going to be elements in that track record that are going to be very likely

Starting point is 00:48:41 to be inconsistent with that being two people. And certainly very inconsistent with it of being more than two people. So even if you could do a little bit of civil attack, it's going to be hard to do a lot. And I think in some ways, more importantly, it also deals with thought, would call soft civil attacks, which is not that you literally get a fake identity, but rather that you

Starting point is 00:49:00 get someone who's completely uninvolved, some complete rando off the street, but who just is your friend, and you bring them in. That's going to be much, much harder in this world because you're going to have that substrate of social relationships and affiliations to either identify a civil or even if you don't identify a civil, show that this person is so correlated with the other person and the things that I recognize that are so connected that, like, they should basically be lumped together and not treated as separate entities. So at the moment, optimism, which is one of the layer twos on Ethereum, has begun releasing the tokens that are going to be part of its governance structure. And one of the aspects of its governance will be that they will have something called

Starting point is 00:49:49 the Citizen's House, which will be used, which is where sold-bound tokens will be used. And used. I don't think they've released like too many details, but I wondered, first of all, if you had worked with the team on how they might use them or in general just, you know, based on what you've seen, what your thoughts are on either how they might be used in optimism or just in Dow's generally. So I didn't personally work with optimism. I think the Talek probably had some influence there and helping them think through it. And I haven't looked carefully at their model. but I do think it is a first step, but what I would like to see is more protocols

Starting point is 00:50:29 and more DAOs having soul-bound tokens. And once you actually have the sort of plurality of representations of your memberships and affiliations, and you can really start to do cool things like we're talking about, like mitigating civil attacks and having richer forms of pluralistic governance. So I think it is a first step, but I haven't looked at it too carefully to comment on what ways I think it could be improved or not.

Starting point is 00:50:55 I don't know if you have thoughts. I don't think they've released enough details for me to get clarity. I've definitely talked to people at optimism over the course of years about this several times, but not since the Vitali paper came out. So I don't know what influence happened in what way. But I do know that Gitcoin is getting down a similar route. They're strongly thinking about using an interaction between ceramic and the verifiable credential standard to give people various SBT like things to represent everything from physical location

Starting point is 00:51:31 to memberships or contributorships to different open source software projects and to start doing these types of analyses and we've been in close touch with them and in fact you're the second podcast that we're doing on this topic this week the first one was with Kevin and we talked quite a bit about the interactions with the get hoined ecosystem on that. Oh, cool. I'll have to check that episode out. And it's been on my list forever to have Kevin on the show here, actually. So I will also have to make that happen.

Starting point is 00:52:03 What do you feel needs to happen next for this concept of soulbound tokens to kind of really take the next step? So I'm planning a research agenda around this. And I think a research community convening around the different questions, community recovery, a primary question, and a lot of the incentive compatibility issues we raise around privacy and say splitting yourself amongst multiple souls and gaming. All of this is going to be intersectional research. Glenn, you're doing the same on the academic front. Maybe you want to talk about that. Yeah, I'm working in a bunch of different ways that will become more public soon.

Starting point is 00:52:44 Try to create a network of academic researchers to make the study of these types of questions into like a field the same way that AI or cryptography are fields that we can that can actually do experiments with and tackle some of these questions in collaboration with people that are actually out there experimenting with them you know in the wild not just the web three community but also what's going on in Taiwan there's a lot of interesting stuff there there's things going on in video games so there's actually a variety of contexts where there are experiments with these going on and they don't need to be tied to any particular infrastructure, whether it be VCs or chains. They can be just done on centralized servers as well. I mean, they're relevant in many contexts, I believe,

Starting point is 00:53:30 even though I think they'll reach a higher potential if they're grounded in a more complete network community foundation. But I think all those things can be really useful experiments. And I agree with Puja that one of the most pressing is these community recovery wants. Another one that I think is really powerful and important is what I would call socially programmable privacy. We discussed this in the paper. It's the idea that we need to move beyond the notion of what's often called minimal disclosure where like you get a credential and you can reveal about it whatever you want to one where social groups can specify disclosure procedures. So like it could be the case that take like GitHub for example or something. It might be that I get a credential,

Starting point is 00:54:14 but I am not allowed to disclose that I'm a contributor without also disclosing the names of the other contributors because that is, you know, credit, sharing and whatever. So like, or you might want it to be the case that before disclosing something, I need to check in with someone. Right. So I actually think what we want, because it, you know, it reveals information about them.

Starting point is 00:54:39 What we actually want or what I want is not privacy and the individual I can reveal whatever I want or not way, but rather that social groups can together co-determine what's revealed to whom and how. All right. Well, this has been a really interesting discussion. I think we'll sort of have to see how things play out over the next year or so because, you know, as we mentioned,

Starting point is 00:55:05 I think people are going to be experimenting a lot with this concept. So where can people learn more about each of you in your work? I guess Twitter. I don't know. I don't really have a public research page, but I work at flashbots and we're, we're thinking about the problem of MEV and I see that as a special case around what Glenn just talked about, programmable privacy and moving away from, if you think about it, batch auctions are kind of the sort of collective group data cooperatives that Glenn is referencing.

Starting point is 00:55:36 So if we can solve this problem with atomistic transactions and in Ethereum, we actually you can solve that in a lot of other more use cases. In some sense, it's actually probably the hardest on-chain problem to solve from the perspective of programmable privacy. So that is what I spend my time doing. Anyone's free to reach out to me on Twitter. Always happy to talk about research. Yeah.

Starting point is 00:56:02 Can you just give your Twitter handle? At Pooja Ulhaver. And you can follow me on Twitter at Glenn Weil, Radical Exchange, website, and blog carry a lot of materials I produce. And I also have a website, glenwild.com and, you know, SSRN. So there's a variety of places to interact with my work. Perfect. Well, thank you both so much for coming on Unchained. Thank you, Laura. Thanks for having us. Thanks so much for joining us today to learn more about soulbound tokens, Glenn and Fugia. Check out the showments for this episode. Unchained is produced by me, Laura Shin, without from Anthony Youen, Matt Pilchard, Mark Murdoch, Shoshok, and Cailcase.

Starting point is 00:56:43 transcription. Thanks for listening.

Unchained - How Soulbound Tokens Could Reduce Speculation and Improve DAO Voting - Ep. 360

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