Why Soulbound Tokens Could Create a Digital Caste System

SBTs are designed to be non-transferable and permanent, creating an unforgiving ledger of past actions. This eliminates the possibility of redemption or societal forgiveness, a core human concept.

• Permanent Exclusion: A single on-chain misstep (e.g., a defaulted loan SBT) could permanently bar access to credit markets.
• No Right to Be Forgotten: GDPR compliance becomes impossible, locking users into their digital past.

The antidote is to replace permanence with programmability. Attestations, like those from Ethereum Attestation Service (EAS) or Verax, can expire or be revoked by the issuer.

• Contextual Validity: A credit score SBT can expire after 2 years, forcing periodic re-evaluation.
• User-Initiated Burning: Protocols like Sismo allow users to aggregate and selectively reveal credentials, maintaining agency.

Transparent SBTs enable hyper-efficient, automated discrimination. Smart contracts can be coded to exclude wallets based on immutable identity markers.

• Algorithmic Redlining: Lending pools could auto-deny loans to wallets holding SBTs from specific DAOs or jurisdictions.
• Sybil Resistance Backfire: Projects like Gitcoin Passport aim to prove humanity, but the scoring mechanism itself could become a gatekeeping tool.

Privacy is not optional. ZK proofs allow users to prove a property (e.g., "I am over 18" or "my credit score is >700") without revealing the underlying SBT data.

• zk-SNARKs/STARKs: Protocols like Semaphore or zkEmail enable anonymous group membership and credential verification.
• Minimal Viable Identity: Users disclose only what is necessary, breaking the link between identity and transaction history.

Who issues the SBTs controls the system. If reputation is dictated by a handful of entities (governments, corporations, dominant DAOs), they become the new digital landlords.

• Gatekeeper Risk: Platforms like Galxe or Orange Protocol that issue achievement SBTs wield immense power over user identity.
• Vendor Lock-in: Your web3 reputation becomes tied to the issuing platform's continued existence and policies.

Shift from centralized issuers to peer-to-peer or community-validated attestation graphs. This mirrors real-world reputation, which is built from many overlapping social proofs.

• Peer-to-Peer Attestations: Systems where your colleagues, clients, or community members can vouch for you, as conceptualized in Vitalik's original SBT paper.
• Reputation Aggregators: DeFi protocols would query a decentralized network of attestations, not a single source, to score credibility.

A single, immutable record of financial missteps (e.g., a defaulted loan SBT) becomes a permanent scarlet letter. This data, unlike traditional credit reports, cannot be disputed, forgotten, or expire after 7 years.\n- Permanent Exclusion: Blocks access to future DeFi credit markets like Aave or Compound.\n- No Path to Redemption: The system lacks a "rehabilitation" mechanism, cementing a financial underclass.

Protocols like Ethereum Attestation Service (EAS) or Gitcoin Passport become the arbiters of "good" identity. Their scoring algorithms are opaque and could be gamed or biased, granting systemic advantages.\n- Algorithmic Bias: Scoring models may inadvertently favor specific demographics or behaviors.\n- Centralized Curation: A handful of entities control the reputation infrastructure for the entire ecosystem.

SBTs for work history (e.g., from Coordinape or SourceCred) create an immutable ledger of past performance and compensation. This prevents career pivots and traps workers in a reputation silo.\n- Wage Lock-In: Future employers see your entire salary history, destroying negotiation power.\n- Reputation Silos: A bad review from one DAO permanently stains your profile across all DAOs using the same standard.

From NFT communities to governance in DAOs like Uniswap, access is gated by SBTs representing past participation or holdings. This creates a feedback loop where the "in-caste" accrues more power and airdrops, while newcomers are perpetually locked out.\n- Compounding Advantage: Early adopters get more governance power and rewards, widening the gap.\n- Permanent Outsiders: New users face a wall of requirements they can never meet, stifling ecosystem growth.

GDPR's "right to be forgotten" is technically impossible with immutable SBTs. A token linking to an old, controversial social post or association becomes a permanent social liability.\n- Context Collapse: Actions from one phase of life (e.g., college) are judged in all future contexts.\n- Censorship Resistance Backfire: The very immutability that protects against censorship also prevents personal growth and redemption.

The threat isn't SBTs, but their naive implementation. The fix requires building expiration mechanisms, revocable delegations (like EAS schemas), and portable reputation that users can curate.\n- Time-Bound Tokens: Attestations that auto-expire, mimicking real-world credit report cycles.\n- User-Curated Profiles: Systems like Disco that allow individuals to present a selective, contextual identity.