Soulbound tokens are the key to your digital identity. Learn more about them:

https://medium.com/the-capital/soulbound-tokens-are-the-key-to-your-digital-identity-learn-more-about-them-22b1b1269b7b?source=rss----c4037b4d8519---4

Even Vitalik Buterin likes this tech! It is time we get appropriate blockchain identities. And Soulbound tokens can do that!

“NFT project worth $XYZ thousand rug-pulled.”

“NFT creator admits guilt, says art is stolen.”

“Random NFT with no utility sold for $100,000.”

Honestly, no wonder the mainstream NFT narrative is terrible. You would associate something with negativity when everything you hear about it is negative.

Additionally, every new technological advancement is met with scorn and suspicion in its early days. And NFTs happen to be relatively young. We should give them some time to flourish.

So, how do you change this perception?

The easiest method is to establish a counter-narrative. The current narrative states that NFTs are terrible and useless. However, turning that around can be easy if there are practically useful NFTs.

The tech behind NFTs:

A refresher of NFT tech before we dive deeper into the topic:

An NFT is a blockchain-based token that doesn’t share its characteristics with other tokens of the same ‘kind.’ An NFT may come in a collection of multiple tokens, each of which can have different values based on market relevancy. This property separates NFTs from regular cryptocurrency tokens.

A fungible token (like Ethereum) shares its value with similar assets. 1 ETH = 1 ETH. An NFT, however, doesn’t necessarily equal another NFT of the same collection.

This non-fungible property of an NFT is the basic building block of soulbound tokens.

Now imagine an NFT in your digital wallet that you cannot burn, transfer or transact. What would such a token accomplish?

So what are soulbound tokens?

If you cannot get rid of a token, then it is stuck in your crypto wallet by definition. As such, that token becomes a part of your wallet’s proof of identity. And in turn, it becomes proof of your on-chain identity.

As more technology comes into the blockchain world, your blockchain wallet will serve the function of your digital email. And this ‘email address’ will be managed by these soulbound tokens. This newly established digital identity will allow you to engage with more tangible Dapps.

Photo Credits || This laptop gets its personality from the stickers. Similarly, your wallet will get its identity from soulbound tokens!

Due to blockchain’s decentralized and pseudonymous nature, many real-world practical applications are difficult. Suppose the government created a tax filing portal on the Polygon blockchain. You could connect your Metamask for it, but is it enough? What about the documentation and proof of income?

The current tax filing procedure has a lot of confidentiality behind it. You don’t want everyone to track every dollar you make. And government documentation and identity proofs do the identity safety bit.

Photo by Towfiqu barbhuiya on Unsplash

Another example:

If you play video games, a user tag/code comes with your profile.

You can change everything in your account (cosmetics, characters, weapons, etc.), but you cannot eliminate that code.

That code is your IDENTITY in the game’s databases.

The use case for soulbound tokens in the real world!

So, how do you establish this on-chain identification?

You use soulbound tokens. Souldound tokens are immutable and un-transferable tokens that are identity-proof for a crypto wallet. If your digital identity is in your wallet, then that wallet belongs to you! Any transactions signed via that wallet are done so by your legal blockchain representation.

The government provides digital copies of one’s identity in most of the world. And these digital certificates can then be used for further stuff. Here in India, you can use a program called DigiLocker. Users can submit their digital certificates and identity proofs on this app, and the validity of these digital copies is the same as physical documents.

Similarly, crypto wallets can be set up for documentation. Once you have set up all your documentation, you can easily access all governmental services.

Ethereum’s co-founder Vitalik Buterin and DiscoXYZ’s CEO Evin McMullen were on the Bankless podcast and discussed the topic. Vitalik believes in the credibility of this tech. Worth a listen!

https://medium.com/media/c0a4155a8325ac32060a2185cca6c8ae/href

But why do soulbound tokens have to be NFTs?

NFTs of the same collection/category can have wildly different information. Sure, you could use standard ERC-20-based tokens. But that would require setting up new smart contracts for EVERY SINGLE DOCUMENT AND IDENTITY. And that is just wildly inefficient.

Therefore, you set up an NFT factory. Take in the user’s raw data, churn out a document in the NFT format, and stick it to the user’s crypto wallet!

Back to the taxing matters…

Coming back to our tax example, the new filing method can look like this:

  1. You collect all your required data as NFTs in your wallet.
  2. You sign in to the dapp with your crypto wallet.
  3. You authenticate your transaction with whatever Soulbound NFT is the requirement.
  4. Your work is complete. Congrats!

As more companies enter the blockchain world, transactions will only become more complex. Gone are the days when your only mark on the blockchain was exchanging Ethereum for USDT. Web3 will require digital identification like we have emails now. And soulbound tokens will fulfill that need.

Want to learn more use cases of soulbound tokens in web3-based e-commerce? Recently, I wrote a thread on the topic! You gotta check it out for more cool stuff!

satvik.eth Ξ on Twitter: "The mainstream NFT narrative is pretty bad these days.Go to any regular person and say you kinda support NFTs. Chances are, you won’t be given much positive attention.And much of this criticism is valid with all the scams… pic.twitter.com/iB5UnCGEIT / Twitter"

The mainstream NFT narrative is pretty bad these days.Go to any regular person and say you kinda support NFTs. Chances are, you won’t be given much positive attention.And much of this criticism is valid with all the scams… pic.twitter.com/iB5UnCGEIT

(Follow me there)

If you want more such articles going deep into the various building blocks of the blockchain ecosystem, then follow me for the ride!

Check out our new platform 👉 https://thecapital.io/

https://twitter.com/thecapital_io

https://medium.com/media/3b6b127891c5c8711ad105e61d6cc81f/href


Soulbound tokens are the key to your digital identity. Learn more about them: was originally published in The Capital Platform on Medium, where people are continuing the conversation by highlighting and responding to this story.

A comprehensive guide to ZK Rollups

https://medium.com/the-capital/a-comprehensive-guide-to-zk-rollups-32d71b9af109?source=rss----c4037b4d8519---4

Layer-2 solutions keep blockchains running faster. ZK Rollup is a type of L2 solution. Here is how it works:

ZK Rollups are a class of layer-2 technology deployed on the Ethereum blockchain for faster and smoother processing of blockchain data. Layer-2 solutions are additions to a blockchain that increase the base blockchain’s functionality, speed, or security.

Using ZK Rollups for blockchain transactions not only reduces the load on the blockchain but also increases the throughput.

Working of ZK Rollups

How do ZK Rollups work?

It is important to remember that blockchains are just a collection of computers running the same software. Therefore, blockchain operations, like exchanging Bitcoin and USDT, are just mathematical functions. And performing these mathematical functions requires computational power and storage.

But what if the system cannot afford to run a blockchain node? Well, you outsource it to a computer that CAN handle these transactions. This is the working principle of ZK Rollup technology.

Photo by Simone Secci on Unsplash

How it works:

  1. External computers connect to the Ethereum blockchain. These computers are not part of the blockchain. Additionally, the tech behind these computers needn’t be web3 at all. If a calculator can perform the calculation, why bother with a smart contract?
  2. The input data is sent to external computers (ZK rollups). These ZK rollups then compute and store the data.
  3. Logs and proofs of the transaction are sent back to the Ethereum blockchain.
  4. The blockchain uses the output data in the logs to conduct further transactions.

What does ZK Rollup stand for?

There are two parts to this name. Let us understand them both separately. ZK Rollup = ZK (Zero Knowledge) + Rollup

Zero-knowledge refers to the knowledge-sharing policy of ZK Rollups. When your blockchain’s data is sent to the external computational device, that device is only there for computing. The computer isn’t given any context about the transaction. It doesn’t know whether the output will be for a P2P transaction or a smart contract.

Rollups refer to the ‘rolling-up’ of transaction data in bundles and shipping them to the external validator. The data is then transacted in batches, and the result goes back to the layer-1 blockchain.

Yes, the ZK part is much more complex than the Rollup part!

But why would the Ethereum blockchain trust a random off-chain transaction?

When setting up a ZK Rollup on a node, appropriate smart contracts are deployed to connect the Rollup with the Ethereum blockchain. These smart contracts act as the bridge between the external computer and the blockchain.

Additionally, these smart contracts verify the validity of each transaction.

In a layer-1 system, the transaction is performed and verified by the blockchain. But in a ZK Rollup-based system, the transaction is done by the Rollup.

The blockchain is only there to take the transaction to its destination!

Prominent ZK Rollups:

Photo by Joshua Golde on Unsplash

If ZK Rollups are so great, then what are some projects using the tech?

I’m sure you have heard of at least a couple of these:

  1. Immutable X: Immutable X is a DeFi trading platform built on the Ethereum blockchain for NFTs. Immutable is based on a type of ZK Rollup technology called Validium. In theory, validium-based systems can go to 9000 TPS!
  2. Loopring: Loopring is one of the most popular Ethereum layer-2 solutions. I’d say it counts somewhere in the top 5 solutions near Arbitrum and Optimism.
  3. zkSync: The zkSync era is here! zkSync is constantly popular on Twitter. Its mission is to make Ethereum popular and it is doing that job very well.
  4. Polygon Hermez: Polygon is EVERYWHERE. If you are building on Ethereum, you WILL come across a Polygon solution for whatever you build. It’s absurd!
    I wrote a whole about this phenomenon here:

satvik.eth Ξ on Twitter: "@0xPolygon is arguably the most ambitious and widely known #crypto project worldwide.(Apart from @ethereum and @Bitcoin, of course!)But I believe Polygon is on the path to creating a @Google-like empire.🧵👇https://t.co/yDJjW2l6qZ / Twitter"

@0xPolygon is arguably the most ambitious and widely known #crypto project worldwide.(Apart from @ethereum and @Bitcoin, of course!)But I believe Polygon is on the path to creating a @Google-like empire.🧵👇https://t.co/yDJjW2l6qZ

Want the tl;dr version of this article? Recently, I wrote a Twitter thread about ZK Rollups and their version. Make sure to follow me over there!

satvik.eth Ξ on Twitter: "Layer-2 solutions have been a consistent narrative in the #crypto circles for a long time.One of the ways L2 is implemented is by using #zkRollup technology.Here is all you need to know about ZK Rollups🧵👇https://t.co/c5Ele6iJaF / Twitter"

Layer-2 solutions have been a consistent narrative in the #crypto circles for a long time.One of the ways L2 is implemented is by using #zkRollup technology.Here is all you need to know about ZK Rollups🧵👇https://t.co/c5Ele6iJaF

If you want more such articles going deep into the various building blocks of the blockchain ecosystem, then follow me for the ride!

Check out our new platform 👉 https://thecapital.io/

https://twitter.com/thecapital_io

https://medium.com/media/3b6b127891c5c8711ad105e61d6cc81f/href


A comprehensive guide to ZK Rollups was originally published in The Capital Platform on Medium, where people are continuing the conversation by highlighting and responding to this story.

Phygital assets are replacing online shopping. This is all you need to know!

https://medium.com/the-capital/phygital-assets-are-replacing-online-shopping-this-is-all-you-need-to-know-a2348344b1ed?source=rss----c4037b4d8519---4

One of the most interesting topics I have learned during my time in this industry is the concept of phygital assets. On paper, it’s a simple concept. Phygital = Physical + Digital

For mathematically challenged folks, a phygital asset is a physical asset sold digitally. “But what’s so special about it? I shop from Amazon all the time.” -You, probably.

Photo by Christian Wiediger on Unsplash

Sure, the concept of e-commerce has been done to death. Perfected even. So, what makes phygital assets different?

First, phygital sounds way cooler than e-commerce, so that’s a positive! But the current apps and websites facilitating e-commerce build it using web2 technology. The difference is in the approach. The term ‘phygital’ is used only in the context of web3 technology. Here is how it works:

  1. You buy an NFT representation of your asset from the NFT marketplace.
  2. The ‘receipt’ of your transaction transfers to your crypto wallet as an NFT.
  3. Once deposited, no third party can legally interfere with the content of your crypto wallet.
  4. Your order gets delivered through traditional supply chains like UPS, FedEx, etc.

Difference between the online and phygital shopping

Privacy and profiling

Traditional web2 transactions on websites like Amazon collect a LOT of user data. Multiple trackers and bots are snooping around and building your user profile during an Amazon transaction. Then, you are served ads based on your digital identities and browsing patterns. And in an age where information is the most influential resource, you do not want to just give it away for free!

In the web3 ecosystem, things run differently. Things are much more decentralized. As such, no dedicated entity is monitoring your browsing data. So, there isn’t a central player that can manipulate your browsing habits with their technical inputs.

Access to user’s data

Secondly, as things stand right now, web3 offers more privacy than web2. Try signing in to Amazon, and you will be prompted to add your email, phone number, address, and your user data as directed by their ‘privacy’ policy.

Now log onto any blockchain-based online store, and the most you will connect is your wallet and an email. And this is where decentralization kicks in. Even if the dApp wanted to collect, there isn’t enough data to make user profiles. Therefore, you won’t be getting spammed after buying a Nike NFT!

A blockchain based-system doesn’t need excessive user data

Ease of access

My roommate ordered a Bluetooth mouse from Amazon a few days ago. The package he received was of a different product. He tried to raise the issue, but the mouse had already been delisted. And thus, he couldn’t access the order details. What a situation!

What followed was a week-long tussle, complaint escalations, and headaches. Fortunately, the issue was resolved later.

The inability to access the transaction details won’t be a problem in phygital transactions. The receipt is directly deposited to the user’s crypto wallet as an NFT. As such, both parties have access to the transaction records around the clock.

And since no one can snatch your NFT without your permission, the receipt will always be there with you. Should you need it, of course!

Photo by Jason Dent on Unsplash

Data validity

There is a concept called Oracles in the blockchain tech-sphere. Since blockchains are just a network of computers transferring files as tokens, there is no concept of the outside world for a blockchain. If you ask the Ethereum network to send some ETH from one wallet to another, it will do so gladly.

However, the same Ethereum blockchain has no concept of yesterday’s tennis match. There are specialized tools for adding off-chain information to a blockchain. The data is verified by validators, and the score will be added to the dApp that wants to make a sports-based, well, dApp.

This system allows active fact-checking, as the data has to be corroborated by multiple people before being published. As such, the amount of wrong information that can pass through a system is reduced.

In traditional systems, there is generally just one intern filling out the data sheets, and they have to ensure accuracy.

Data verification is essential in complex economic systems like online luxury goods purchases. Such a system not only increases credibility but also encourages better business practices. And the more eyes there are to process a problem, the better the chances to spot a mistake.

Oracles are a fascinating topic in themselves. I should probably cover them!

Current progress:

Tons of traditional brands are embracing NFT technology in the current crypto and blockchain market. The most frequent criticism of NFTs is their lack of utility. Sure, a $1000 profile picture might resell for a lot more, but it was just seen as overpriced art on a blockchain.

Messari on Twitter: "Major brands have progressed from simple PFP launches to issuing "phygital" collections: NFTs tied to physical assets.In 2022, the trading volume for the fashion NFT sector was nearly $1.3B, the majority of which stemmed from the collaborative efforts between @Nike and @RTFKT. pic.twitter.com/xHvHmZi0sp / Twitter"

Major brands have progressed from simple PFP launches to issuing "phygital" collections: NFTs tied to physical assets.In 2022, the trading volume for the fashion NFT sector was nearly $1.3B, the majority of which stemmed from the collaborative efforts between @Nike and @RTFKT. pic.twitter.com/xHvHmZi0sp

However, phygital assets allow the NFT to take its place as a certification and not just as cool monkeys. For example, last year, the total fashion phygital NFT sale was over $1.3 Billion, led by Nike and Adidas!

And this number was in a year that saw most cryptocurrencies plummet in value. As more mainstream brands start selling in the web3 infrastructure, this number is bound to increase.

Image credit: StockX

But yeah, never mind, €7000 is too much. Let’s just scrap the whole operation!

If you want more such articles going deep into the various building blocks of the blockchain ecosystem, then follow me for the ride!

Check out our new platform 👉 https://thecapital.io/

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Phygital assets are replacing online shopping. This is all you need to know! was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.