NFTs as POAPs must be non-transferable
Late last year, Adidas organized a virtual event to announce its entry into the Metaverse. In doing so, Adidas rewarded each participant in that event with an NFT in the form of a so-called POAP (Proof of Attendance Protocol) and the note, "Keep it safe - it might come in handy." POAPs are NFTs that confirm that the owner participated in something, completed something, or accomplished something. However, because NFTs are transferable, they can be traded on marketplaces such as OpenSea, so it is not mandatory to participate in something to own one. However, in order to be able to clearly prove participation, awards, achievements, or even the status of a particular person, these NFTs must be non-transferable. This is where Soulbound tokens come into play.
What are Soulbound Tokens (SBT)?
Soulbound tokens are still a relatively new and theoretical construct in the Web3 world. Vitalik Buterin - the founder of the Ethereum Blockchain - first mentioned in early 2022 that he was inspired by World of Warcraft for the concept of soulbound tokens. In the video game, game items that cannot be transferred to other players due to their properties are "soulbound items" - i.e., items that are soulbound or tied to a specific person and thus non-transferable. The point behind this is that owning special items or weapons would lose meaning, as it would be unclear whether you were actually playing the game to earn the item, or just investing money to pay for the item. Non-transferable items also exist in the real world in the form of a passport, personal certificate, or driver's license. By the end of 2022, there should be the first concrete use cases with Soulbound tokens.
Why do people collect POAPs?
POAPs open up innovative ways to reliably record and collect life experiences. This is because POAP collectors receive a cryptographically secured badge every time they participate in events. Typically, collectors enjoy exclusive benefits from the POAP issuer. For example, collecting a certain number of POAPs can grant exclusive access to private communities or limited edition products via Token Gate. POAPs can also be considered a status symbol, as collectors build reputations through verifiable records of special achievements or participation. This gives certain POAPs a certain value, which is why even one titled 999 Club recently sold for over $20,000. Very remarkable, considering that these can usually be acquired for free.
Implementation of non-transferability in practice
We have already highlighted how NFTs work as transferable tickets for events in a previous article. Opportunities for event organizers, however, who care about non-transferability can implement solutions that do the verification. For example, thanks to blockchain technology, it is possible to transparently see whether the current owner of the POAP is actually the initial recipient or has struck on the secondary market. In addition, NFTs can be bound to so-called ENS names, which enables a certain personalization of the NFT. The Ethereum Name Service (ENS) is a naming system based on the Ethereum blockchain. The purpose of this is to put a human-readable name like "minth.eth" on machine-readable identifiers of the cluttered Ethereum addresses. In order to create non-transferability, it is a prerequisite that the user attaches an important and personal ENS address to the POAP, which he is not willing to transfer.
NFTs are characterized by their transferability
NFTs in their current form have many of the same properties as SBTs and are therefore ideally suited as digital proof of ownership. This is because, with the help of the underlying technology, the ownership of the NFT can be clearly proven and cannot be forged. Since property can change hands, NFTs are the ideal digital certificate to prove ownership. However, in order to make a token person-specific, transfer must not be possible. Traditional crypto wallets that store NFTs are also not suitable for storing SBTs due to interoperability. Therefore, the Ethereum founder proposes to use the term "soul" for the respective repository of SBTs. These can be linked to any institutions such as universities, employers or hospitals and exclusively grant them the right to deposit personal SBTs in the respective "soul".
Currently, POAPs are transferable and thus not soulbound or personal. This may also have its justification in some cases for security reasons. For example, it is not uncommon to transfer valuable or personal NFTs to a secure ledger. However, in the example of Adidas, in which the sports brand wants to reward actual event participants, the POAP loses its purpose to some extent due to its NFT characteristics, as they were quickly sold to the highest bidder. Thus, at first glance, it is difficult to determine whether someone owns the Adidas POAP because they actually participated in the event or whether the person bought it from a participant because of the added value after the event. This is important because blockchain technology can be used to link exclusive added values to tokens that the brand may want to make available exclusively to loyal customers such as event participants or repeat buyers.
With the help of SBTs, it can thus be clearly proven that something was actually executed, completed or confirmed by the owner due to their immutability and transferability. The immutable and permanent link between tokens and persons could revolutionize proof of ownership and thus the issuing of official, licensed or medical documents in the future.
Create your own POAP
We always recommend a well thought-out concept that focuses on both the business goals and the target group of the company. In our Discovery Workshop, which on the one hand imparts knowledge in the area of NFT, Metaverse, Blockchain and Web3 and on the other hand outlines a first project idea in a joint session, we jointly lay the foundation for a long-term and successful entry into Web3. You are welcome to use the contact form below to arrange an initial, non-binding consultation with us. We look forward to your inquiry!