Analysis: The Dilemma of Non-Transferable Reputation Points NFT SBTs
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Analysis: The Dilemma of Non-Transferable Reputation Points NFT SBTs
To enable individuals, DAOs, and companies to start creating value for SBTs, a meaningful SBT ecosystem is needed—one that users are willing to engage with and collect.
Navigating Web3 tides with focused insights
Author: Joseph
Translation: TechFlow intern
Earlier this year, Vitalik Buterin pioneered a new era for NFTs with his article on "soulbound" tokens. This sparked numerous experiments in this "new" corner of the NFT space—Soulbound Tokens (SBTs). While some have gained attention, most haven't. Before diving into the current state of SBTs, let’s quickly review what they are and the vision they promise.
Simply put, SBTs are non-transferable NFTs that can represent many things. Their non-transferability enables them to serve as credible reputation data, including work credentials, skill certifications, and more.
The ability to build identity through an SBT ecosystem opens new possibilities for Web3. For example, it could pave the way for governance beyond token-based voting, enable uncollateralized lending proofs in DeFi, and offer methods to prevent Sybil attacks.
Notable Participants
Note: While some of these SBTs aren’t entirely "non-transferable," they exhibit other qualities of SBTs by serving as reputation data.
POAPs
Although the term "soulbound" wasn’t coined until earlier this year, POAPs have essentially been a version of SBTs since their emergence in 2019. Amidst all the NFTs focused on rarity and price speculation, POAPs take a completely different approach—they represent your participation in a physical or virtual event.
Since its inception, the concept has drawn significant attention. On Gnosis Chain (formerly xDAI), over five million POAPs have been minted since October 2020. Even during the bear market of recent months, demand for POAP minting has remained stable.
While POAPs themselves don’t convey much information, they laid the groundwork for future SBTs.
Project Galaxy
To date, Project Galaxy is one of the largest players in the SBT space, having minted nearly one million "OATs" (Project Galaxy’s equivalent of SBTs). They’ve successfully built communities incentivized to earn OATs.
There are various actions that reward OATs, such as “participating in AMAs,” “following a Twitter account,” and more recently, completing tasks in “Arbitrum Odyssey.” These incentives drive user engagement. Projects, DAOs, and companies have found this tool useful, leading many to partner with Project Galaxy to issue OATs.
RabbitHole
Also known as Rabbit Hole. Among participants in the SBT space, RabbitHole has positioned itself as a pioneer in the "proof-of-skill" category. It is an educational platform guiding users through a series of on-chain actions within specific Web3 domains. One example is their "Introduction to DeFi" guide, which includes on-chain tasks like staking ETH on Lido, supplying stETH as collateral on Aave, and providing liquidity on Uniswap. Upon completing these actions, users become eligible to mint a "RabbitHole Certificate," signifying acquired skills in that domain.
Since launching in May 2022, a total of 35,035 certificates have been minted by 17,058 unique addresses.
Noox World
Among all current participants, Noox World may have taken the most direct approach to issuing SBTs. Each SBT on Noox is earned through specific on-chain behaviors. For instance, making over 10 swaps on Uniswap allows you to mint the "Uniswap Uncommon Swapper" badge.
Since May 2022, approximately 20,000 badges have been minted from 4,250 unique addresses. Notably, all previously mentioned SBTs were free to mint, but Noox charges a 0.002 ETH fee per badge, allowing the team to accumulate around 40 ETH so far.
Interestingly, most Noox badge mints occurred in May, likely due to the SBT hype following Vitalik’s article. Since then, demand for minting Noox badges has slowed.
DeQuest
DeQuest is a niche player in the SBT space, focusing on gaming. Similar to RabbitHole, DeQuest features "quests" that guide users to learn and explore various games. In their "quest" category, nearly 5,000 badges have already been minted.
The value proposition for both users and games is clear. By completing these quests, users earn SBTs and sometimes monetary rewards. For game developers, this serves as a mechanism to grow their user base via DeQuest’s community.
Perspectives
At this stage, it's clear that the SBT space remains early, with various projects experimenting with different approaches. While some have attracted significant attention, most face a similar challenge—lack of demand.
In my view, POAP is the only project that has achieved product-market fit. Although Project Galaxy has done well in attracting users and projects, this is largely due to their business development efforts rather than organic demand. RabbitHole, Noox World, and DeQuest have all seen declining demand after initial launches.
This raises a question: If SBTs are the next big narrative, why haven’t they taken off? Simply put, today’s SBTs are not tomorrow’s SBTs.
As you can see, today’s SBTs mainly function as participation tools:
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“Attended AMA”
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“Used X’s cross-chain bridge”
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“Made X swaps on Uniswap”
Ultimately, these SBTs reveal little meaningful information about a user. They are relatively low-information and often meaningless. This means individuals, DAOs, and companies looking for insights about users holding these SBTs often find nothing valuable, rendering the SBTs themselves valueless to holders.
This places the SBT space in a bind: To get users to seriously collect SBTs, they must derive value from them. But for individuals, DAOs, and companies to start attaching value to SBTs, there needs to be a meaningful SBT ecosystem with users willing to collect them.
It’s a classic chicken-and-egg problem. Until this is resolved, I believe SBTs cannot take the next step forward.
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