What Are SoulBound Tokens & Why They're Going To Take Intellectual Properties To The Next Level 🚀

Throughout history, ownership of land, stocks, arts and currency has been verified through documentation. On the internet today, we don't verify ownership in this way. Every day large amounts of intellectual property (IP) is pirated without any proof of ownership. In this article I am going to explain how Soulbound Tokens (SBTs) solve the issue of IP ownership on the blockchain or Web3 space, stopping piracy using a verified timestamp on the transaction to prove who owns what at each moment in time, including potential use cases for SBTs beyond IPs.

PS: If you'd like to read the whitepaper by Vitalik Buterin for Soulbounds, please click here

What is Intellectual Property(IP)?

An intellectual property, or IP, is a legal right over an original work of art, literature or science. It can be a patent, trademark or copyright. These protections are given to the authors of these works in order to prevent others from using their creations without permission.

There are two types of intellectual properties: patents and copyrights.

Patents protect inventions and discoveries. They are usually granted for 20 years, but can be extended to as much as 25 years with some conditions (see patent extensions).

Copyrights protect original works of authorship such as books and music. They last for 70 years after the death of the author (or if they were anonymous or pseudonymous, 70 years after publication).

Intellectual Property protection in the digital era

Intellectual property is a broad concept that covers a wide range of creative ideas, such as inventions, designs and artistic works. Intellectual property law exists to protect those creative ideas and their commercial exploitation.

However, with the explosion of the internet and social media, intellectual property is no longer confined within national borders or even physical ones. It can now be used by anyone anywhere in the world at any time. This has lead to a growing number of cases where people have tried to copy other people's designs, music or text without permission or attribution.

As more and more people enter into business online it becomes harder for entrepreneurs to protect their products from being copied by others who may wish to benefit from their hard work without giving them anything in return!

Why NFTs haven’t solved the problem of Intellectual Property protection

For the most part, NFTs have not solved the problem of Intellectual Property protection.

The problem is that there are many intellectual properties that don’t have a physical manifestation or have a very narrow scope. For example, we have a lot of patents that cover software or business processes but they can’t be easily represented as NFTs because they are intangible or have limited applicability.

Even in cases where NFTs could be used to represent some kind of Intellectual Property (IP), there is a risk of losing the ownership rights over these assets if the issuer does not maintain custody over them. This is because NFTs can be transferred from one person to another without any involvement from the issuer (e.g., by trading them on an exchange).

So, while NFTs are a great tool for representing certain assets like loyalty points or tradable coupons, they are not suitable for all types of assets. For example, we would not want to issue a NFT that represents our company shares because if someone stole that token and sold it on an exchange then our company would lose its value overnight!

The Solution

The only if we can have an asset which is unique, can be ownable but is tied (bound) to only an individual(soul) throughout its lifetime. And that is exactly a Soulbound Token(SBT) is. In simpler words, they are an extension of an NFT (ERC-721), which means they posses all properties and features an NFT but they can not be transferred.

A Soulbound token is owned by an individual and has no value outside of that person. It can be used to represent any type of asset, not just digital assets like NFTs or ERC-721 tokens.

Soulbound tokens are very similar to NFTs but with a key difference: they have an expiry date. When the token is created, it has a set amount of time it will live (in seconds). Once this time has passed, the token can no longer be used by anyone and is removed from the blockchain.

Similarly, Digital Patents and Copyrights can be assigned to a soul on the blockchain. This means that the ownership of a digital asset can be transferred from one person to another without any middleman or third-party involved.

A soulbound token is created by an individual and can only be used by that person for a certain period of time. It cannot be transferred from one account to another without losing its value.

This is the same way that physical assets are bound to a person. If you sell your house, for example, it is no longer yours and cannot be used by another person. The same applies to a digital asset like an ebook or online course.

Use cases of SBT beyond Intellectual Properties

There are many use cases of Soulbound Tokens but will only discuss a few and top ones:

• Ownership of digital assets

The ownership of digital assets like NFTs are heavily relied on a centralized system like OpenSea. And imagine having these sources down. For example, a temporary downtime in OpenSea saw the NFT profile pictures of people on Twitter taken down.

But with SBTs, creators or artists or even DAO can mint their assets or even recover directly from the souls. And the more SBTs a Soul possess, the easier it becomes to prove the legitimacy of the Assets, allowing creators, DAOs and artists to build a reputation on the scarcity of an item.

• Defi Lending

Lending is already a high-risky business be it in Web3 or outside in traditional Finance. And for the same reason, Decentralized Platforms like Aave provides collateralized loans, which may not be an ideal solution for someone who can not match the value in collateral. Whereas, in traditional finance, anyone can apply for the loan and the credit rating systems help the lenders to evaluate and asses.

But SBTs can help to build a similar credit ratings system in decentralized world, which can be adapted by all the lenders in the space.

• In-game Assets

This might be one of the famous use case of SBTs. Now games can provide in-game assets to a soul like unique achievements, rewards, exclusivity, and can even leverage an in-game marketplace to buy or sell these assets. Gamers can sell these assets on secondary markets like OpenSea, which in turn can be bought by another soul.

• Sybil Resistance Attacks

The current model of coin voting in most DAOs poses system risks for a Sybil attack as an individual can effectively buy up 51% of a DAO's token to gain control over the protocol.

Additionally, most token holders in a DAO don’t have the expertise required in making critical decisions.

• Souldrops

Crypto projects usually form new communities by launching airdrops or carrying out token sales. But this process is often subject to Sybil attacks and it fails to attract the right community.

With the concept of Souldrops as mentioned in Vitalik Buterin's whitepaper, projects can attract the right communities by conducting airdrops based on computations from the SBT or other tokens within a Soul.

For example, a project based on improving sustainability can airdrop governance tokens to Souls that have SBTs signifying their involvement in different sustainable activities in the past.

Takeaway

Soulbound tokens are a complete solution to the problem of providing intellectual property protection in the digital space.

The platform provides a single, unified way for artists, authors and other creative types to register their work and then generate revenue from its use.

In the past, this has been a difficult process because of the layers involved in registering intellectual property rights. Now, Soulbound makes it simple for artists to register their work with a simple click of a button.

Soulbound is also set up so that content creators can collect royalties for each time their work is used. This could include anything from music downloads to movie screenings or even live performances.

Conclusion

I'll be pushing out the next blog on how to create a Soulbound Token in Solidity. So if you're not following, please follow so that you do not miss the upcoming exciting articles.

If you'd like to read about my journey from zero to a Tech Lead without a CS Degree, you can do just that here. Thank you for your time!