In this article, I want to take a deep dive into the mechanics of NFT credentials and how it works.
Web3 users can earn relevant credentials by participating in events and participating in protocol governance.
Tokenized credentials have different value than other types of NFTs. Its value is based on its acquired identity. Interestingly, the vast majority of tokenized credentials today are transferable, so in theory, you could sell them to anyone. This may seem self-defeating, but it’s not nonsense.
The most popular form of micro-authentication in Web3 is by tracking your attendance at events. POAP, an acronym for Proof of Attendance Protocol, is an NFT assigned to attendees at conferences, community calls, hackathons, and other offline and virtual events.
Innovative tokens like POAP originally came from the NFT community. I remember the 2019 NFT.NYC and Consensus events experimenting with tokenized tickets. As NFTs have grown in popularity, so has the demand for commemorative NFTs that can prove “participation in the event.”
Demand for POAPs has exploded in recent months, and this trend will continue as more dapps and DAOs introduce tokenized reputation systems and be able to prove “you were at the event” The social attributes behind the tokens are also valuable.
But POAP doesn’t tell you exactly what you did in that activity.
Participation, especially valuable participation, is truly meaningful. Below is an example of an NFT credential from theGraph, an indexing protocol for querying decentralized networks such as Ethereum and IPFS. Different contributors get different credentials. This form of reputation is richer and more nuanced.
Another question about tokenized credentials is whether they should be transferable. Cryptocurrencies and NFTs are transferable, but the credentials are different in nature. Cryptocurrencies and NFTs are assets. They can be bought, sold and transferred without affecting value. In fact, the value of a property is simply what someone else is willing to pay for it, and actually needs to change hands for price discovery.
A credential, on the other hand, is issued to a specific person and has the greatest value relative to the person who acquired it. For example, my California license to practice law is of enormous value to me, but it is of zero value to others.
In order to preserve value, it seems that tokenized credentials should remain in the hands of whoever acquired it, and be non-transferable. But can this be achieved?
In 2018, ERC 1238 was proposed, a standard for non-transferable tokens (aka “badges”). Strangely, not many tokens have implemented the ERC 1238 standard, so non-transferable tokens haven’t really caught on.
The POAP (Proof of Attendance Agreement) you receive when you join the project community call, the credentials you get from completing the Rabbithole task, and even the ShadowySuperCoder NFT you receive when you deploy a smart contract on Ethereum are ordinary NFTs that can be transferred to anyone .
Another great example of a transferable credential is the KYC token initiative announced by Wyre in 2018. The idea is that if you go through the KYC process on Wyre or another regulated platform, you can choose to receive a KYC token. KYC tokens will allow you to trade compliantly on decentralized exchanges that do not collect user identity information.
From the beginning, I liked the idea, but I was skeptical about its mechanics. The biggest problem is still transferability. What’s the point of issuing KYC tokens to someone if they can transfer it to someone else?
Wyre’s KYC token has other issues that make it difficult to implement at scale, but it’s not about compliance. I’m still a big fan of this idea and hope another team will try it out.
But this begs the question…why haven’t we seen more non-transferable NFT credentials?
“Anon” is an anonymous account on social media. It is increasingly common for people to maintain one Twitter account using their real name and photo, and another account under a pseudonym (anonymity) and profile picture.
In September, Snoop Dogg publicly announced that he was the man behind a @CozomoMedici Twitter account focused on NFT investing. There are still people who doubt whether Snoop is really Cozomo, but the point is, people do like to use aliases online.
To be honest, Cozomo is a very good writer, not necessarily Snoop.
One of the main arguments in favor of transferable credentials is that people want to have a second or third online persona without worrying about the reputation their real persona has built.
I have multiple wallet addresses (aka financial roles) for security reasons. Best practice is to spread your digital asset portfolio across multiple wallets. Even if one of my wallets loses access or gets hacked, the other wallets are not affected. It is also convenient to transfer NFTs back and forth between wallets as needed.
Another reason is privacy. I will use one wallet address to link my real name to publish articles on Mirror, and use another wallet for liquidity mining. In this way, my financial transactions are completely separate from my writing.
As I discussed in last week’s question, privacy will be a defining issue for Web3, both politically and socially.
On-chain and off-chain activity
A degree is only valuable if it is trusted. That’s why HR will call your alma mater to verify your degree, or previous employers to verify your position and performance.
On-chain activity — like voting on governance proposals, deploying smart contracts, or disbursing a loan on Compound — is easy to verify because the blockchain maintains a history of your address’s activity.
Off-chain activity is different.
From a reputation building perspective, some of the most impactful actions we take are done off-chain. Earning an advanced degree or license to practice in a specific field is a physical activity. It might be valuable to bring its certificate into Web3, but it’s more difficult to implement.
First, unless the issuer is crypto-native, they may not issue tokenized credentials.
Second, you have to trust the issuer.
In the advanced degree example, the person verifying the NFT degree would either need to contact the school to confirm, or confirm that the NFT was sent to the individual from a wallet address verified by the school.
This is one of the many reasons why physical assets are difficult to tokenize on the blockchain. Creating tokens is easy. The hard part is tying on-chain tokens to off-chain assets.
Token airdrops are a popular way for new projects to financially incentivize users. So what about the credential airdrop? A new project airdrops tokenized credentials to wallet addresses that hold similar credentials in other communities or applications. I’ve also always called this concept “Vampire Reputation”. It sounds overly dramatic, but it’s fascinating.
I’m wondering if a new decentralized application can airdrop the same reputation and tokens to all superusers on competing applications and grab market share overnight?
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/tokenized-credentials-and-transferability/
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