Proof of Utility — Adjustable Soulbound NFT Reward Mechanism for On-chain Behaviors

MAO DAO
5 min readMay 28, 2022

Making more items in the crypto space “soulbound” can be one path toward an alternative, where NFTs can represent much more of who you are and not just what you can afford. —— Vitalik Buterin.

By XiaoMaoGe, N_0

In January, Vitalik Buterin presented the theories of soulbound token in his blog article, and mentioned that NFTs with social signaling value could be soulbound.The topic related to defining NFT utility has been discussed for a long time in the NFT field. There are some concerns and discussions from the NFT community:

  • NFT utility has no tech standard and onchain framework,and is not easy to be quantified on blockchain.
  • NFT owners cannot choose what utilities they want, but passively wait for airdrops.
  • There is no on-chain framework where project founders and users negotiate together to set and maintain a behavior reward under strict supervision.

It is gratifying to learn that some NFT projects are still trying to make some innovations about the NFT utility. For example, Moonbird’s Nesting mechanism adds the important dimension of time into the value of NFT on the blockchain.

In the process of creating and operating NFT projects, we also increasingly feel that Soulbound Token (SBT) can play a very important role in solving these problems.

What if NFT holders’ benefits could be soulbound?

NFT — Holder’s Soul & onchain behavior
- Owner’s behaviors (hodl & flip) decide how many Soulbound Token (SBT) they can get.

NFT’s Soulbound Token — Holder’s benefits
- Soulbound Token (SBT) can be used to unlock the rewards & benefits from the project.

The purpose of the mechanic is clear: NFT owners can actively choose and unlock which benefits to obtain, rather than passively receiving unknown airdrops when checking their wallets.

For example, it is popular for PFP NFT projects to airdrop derived nft collections (e.x. banners, pets) as holders’ rewards after the main PFP NFT launch. Usually, NFT owners just wait for these surprising airdrops. Try to think: if more NFT projects choose to use the new Soulbound token mechanic, holders will have more freedom to choose what rewards they want to get.

What is NFT Soulbound token (SBT) and how does it work?

To better understand SBT, You can understand the soulbound token as the wishes to the dragon in Dragon Ball. But this wish is chosen to pick different utilities that can be delivered by different NFT projects based on their own roadmaps and resources.

  • Non-transferable token issued by NFT projects
  • Total amount limited, but projects can decide when to issue additional tokens
  • Can be used to unlock benefits that projects delivered
  • NFT owner’s on-chain behaviors (e.x. holding time…) decide if they can get the Soulbound Token

Time (how long you hold your NFTs) is an important factor that determines the value of your NFT. Inspired by Moonbird, we create the ⏰ HODL CLOCK which is the key component of the non-custodial staking mechanism.

Through the on-chain proof of holding nft within a certain period of time, nft owners can obtain the corresponding Soulbound Token which is also on-chain. Besides, the mechanism can also establish the NFT holder’s on-chain honor and reward system.

A fine-grained behavior-based reward mechanism

As the NFT market evolves, the original utilities might not be popular any more. In order to keep growth, the project researcher/founder must search new game principles for NFTs all the time.

Is there a long-term fine-grained reward mechanism for NFT project that adapts to different gameplay?

For example, If NFT project A encodes a new resource in their smart contract, we could use the following template to define all possible reward mechanisms.

Name of game: Compete for HODL reward
Game members: NFT tokens
Resources: Clock associated to each NFT token
Action space: {mint, transfer by owner, transfer by broker, burn}
Reward function:

Action leads to the modification of resources.
Reward is calculated based on resources that each member holds.

We implement the resource modification function in the smart contract:
token_id.mint ⇒ token_id.clock :=0
token_id.transferByOwner ⇒ token_id.clock += time
token_id.transferByBroker ⇒ token_id.clock :=0

Afterwards, we tune the reward function based on resources:

reward = match token_id.clock with
0 ⇒ “Not royal”
[1..a] ⇒ “Bronze”
[a+1..b] ⇒ “Silver”
others ⇒ “Gold”
end

Following this paradigm, adding a new game principle is just like fill out a form:

Name of game: #a string describe the rule
Game members: #a set of identities
Resources : #a set of variables stored in the smart contract
Action space: #a set of functions defined in the smart contract
Reward space: #a set of utilities guaranteed to game members

Reward function:
Resource mapping:
f: #Action space ⇒ #Resources
Parameterized reward mapping:
g: #parameter_list * #Resources ⇒ #Reward space

Different from the majority of NFT roadmaps and the Moonbird’s nesting system, this Soulbound Token + Hodl Clock + Reward mechanism aims to design a fair and long-lasting NFT economic system with adjustable parameters. It will give each NFT holder a non-transferable on-chain certificate that their behavior is appreciated by the community, with innovations:

  • Not only the NFT itself, but also the way to operate the NFT is stored as part of NFT’s value.
  • This design creates an on-chain framework where the project and users negotiate together to set and maintain a behavior reward under strict supervision.

We, MaoDAO M³ Labs, start to use the SBT mechanism for Ready Players Cat Holders, and try to develop this mechanism into a one-step and widely-used protocol for more NFT projects to adopt.

For example, our Pass NFT — RPC NFT’s holders can start their HODL CLOCK to get Soulbound tokens then actively choose different benefits powered by MaoDAO M³ Labs which related the new NFT collection Ready Player Soul, the NFT on-chain raffle infrastructure NFT Luckbox, and Twitter NFT tracking plugin BlockTracker. (More detailed information will release in the next version)

Reference

Soulbound
https://vitalik.ca/general/2022/01/26/soulbound.html

Decentralized Society: Finding Web3’s Soul
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4105763
为什么“灵魂绑定代币”是个好主意|预言家周报纸
https://orangexyz.mirror.xyz/dMr6F43Aiz79vuZgO0d392BgG8elD86osAZ_xhsCRc

--

--

MAO DAO

NFT & Gaming DAO a.k.a Metaverse ape organization from the East