Robert Holloway is a columnist and an award-winning ombudsman at DL News. Views expressed are his own.
My New Year’s column contained no predictions, but it hazarded a guess about the future: crypto could add yet another word to the language in 2024 in reaction to increased regulation and supervision of the industry.
I am now prepared to go out on a limb and nominate a candidate for the dictionaries: soulbound.
It occurs in a paper titled “Decentralised Society: Finding Web3′s Soul,” co-authored by Ethereum founder Vitalik Buterin and published in May 2022.
As far as I can tell, soulbound has so far occurred only once in a DL News report.
Our Brussels-based regulatory correspondent Inbar Preiss used it on February 2 in an article about the EU’s Markets in Crypto-Assets Regulation, or MiCA, which comes into effect this year.
The European Securities and Markets Authority, or ESMA, is holding consultations to decide what kind of crypto assets should fall under MiCA and which should be regulated under existing securities laws.
Generally, if a crypto asset behaves like bonds or shares, it would no longer fall under crypto laws described in MiCA. That means, for example, if a security is “transferable,” or tradeable on capital markets, it’s not covered by the law, Inbar wrote.
Certain tokens that cannot be traded, like loyalty programme awards or so-called soulbound tokens, would also be excluded from the law.
ESMA has already said that the classification of crypto assets should be made on a case-by-case basis. Discussions are due to continue until the end of April.
One difficulty is how assets can comply with EU rules against money laundering or the financing of terrorism without compromising crypto’s commitment to privacy.
On February 13, the IOTA Foundation said it had resolved the conundrum with a step-by-step system which begins with remote identification and culminates in the creation of a soulbound token.
The concept of “soulbound” tokens is likely to be scrutinised by regulators in the months ahead. And that could bring it to the attention of the media and of lexicographers.
In their paper, Buterin and his co-authors Puja Ohlhaver and E. Glen Weyl wrote: “we illustrate how non-transferable ‘soulbound’ tokens (SBTs) representing the commitments, credentials, and affiliations of ‘Souls’ can encode the trust networks of the real economy to establish provenance and reputation.”
The inverted commas around “soulbound” and “Souls” indicate that the writers thought they were using the words in new or unusual ways.
Commenting on Buterin’s paper for ledger.com, editor Kirsty Moreland explained that “soulbound tokens are non-transferable. After acquiring one, it is always in your personal wallet and identity.”
They are, therefore, “ideal for digitally representing assets that cannot be acquired by purchasing, such as certificates of competence, reputation, medical records, etc,” she wrote.
After all, simply having that tokenized Harvard medical degree transferred to your wallet doesn’t make you a doctor.
Since they allow the management of data in token form, rather than on a central database, “SBTs are the logical next step in blockchain’s pursuit of true decentralisation.”
The expression soulbound predates Buterin’s paper, however. And even imbues many of the same non-transferable qualities.
It is the name of a one-woman business, set up in New York in 2017 to supply jewellery which, in the words of its website, is “designed to capture the mystical essence of video games.”
The term soulbound, it says, “is used in video games to describe items that cannot be given to another player. Items that are soulbound are typically rare and powerful.”
Once you acquire an item of Soulbound jewellery, you are supposed to keep it for life – much like its crypto counterpart.
Googling soulbound shows that it is already in heavy use in popular video games, including “Minecraft,” “Goliath,” “World of Warcraft” and “Warhammer.”
It also occurs in the titles of many sci-fi and fantasy novels such as “Soul Bound” by Courtney Cole, published in 2012, and the Soul Bound saga by the prolific James E. Wisher.
The former spins a tale of the goddess of a daughter cursed to drink souls. The latter recounts the travails of a young man bound to adventure whether he likes it or not.
Since games and books like these are inspired partly by Norse myths or by the Icelandic sagas, it seemed likely that the word soulbound would appear in those classic works of literature. But my search has so far been unsuccessful.
Soul and bound — past tense of the verb to bind — are ancient words. Both were imported into English from Germanic languages such as Old Saxon, Old Dutch and Old Norse.
They evolved into their modern forms about 600 years ago.
Each of them exists in compound nouns and adjectives such as soulmate and soul-searching or snow-bound and spellbound, but they were not joined until recently.
Shakespeare used them in close proximity but in order to contrast, rather than to associate, them.
Towards the end of the tragedy “King Lear,” the king tells his daughter Cordelia:
“Thou art a soul in bliss; but I am bound upon a wheel of fire.”
The contrast between Cordelia in Paradise and Lear in Hell gives a hint at why the words must be kept separate. Might it have been heretical to imply that a soul could be bound, or anything bound to it?
An exception is suggested by the title of the 19th-century hymn Jesus, Bind my Soul to Thee, composed by William Stevenson.
If there are any theologians working with the financial regulatory services, perhaps they could shed some light on the question.
Buterin, one of Ethereum’s highest cardinals, appears to be closer in line with Stevenson. Binding tokens to souls – or addresses – means your identity and accomplishments will remain forevermore on the blockchain.
Stripped of its romance, soulbound tokens may also play a key role in reimagining our digital identities, another key sticking point for regulators in the EU.
Do you know of an earlier use of soulbound, or another meaning? If so, I would be pleased to hear from you at robert@dlnrews.com