Thanks to NFTs, crypto wallets will soon enable users to prove their credentials without using third-party background checks.
The function of crypto wallets has changed significantly over the last few years. They initially secured token holdings or served as art galleries with nonfungible tokens (NFTs). Today, they’ve become like bank accounts for many, and soon, they will offer even more functionality by enabling digital curriculum vitae (CVs).
In a May 2022 paper, Ethereum co-founder Vitalik Buterin and others introduced the concept of “Soulbound tokens” (SBTs). Buterin and his co-authors argued that credentials on a blockchain offer many advantages to establishing provenance and reputation.
Nonfungible tokens will serve as essential building blocks
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SBTs are like PoAPs, but they are non-transferable and, therefore, bound to a wallet. That’s because people should not be able to buy credentials that do not represent their own accomplishments. Thus, those tokens should not have a direct monetary value. Binance announced in September that it would introduce the Binance Account Bound (BAB) token as proof of identity for Binance users.
Increasing the utility of DeFi lending
Another interesting project is the Lens Protocol, which was built by the Aave team. Lens is a composable and decentralized social graph that allows the hosting of various social media applications. Users receive a Lens handle in the form of an NFT, which is their user account for all decentralized applications (DApps). Every interaction with the Lens account is saved and linked to the handle.
One might wonder why a decentralized finance (DeFi) giant like Aave is suddenly starting a social media platform, but it makes sense. Aave, like all DeFi lending and borrowing platforms, only allows overcollateralized loans. The reason for this is that there is a lack of information from the users compared to loans in traditional finance (TradFi), which do not have to be overcollateralized because banks have more information about their clients.
By creating Lens and a trusted reputation mechanism for user wallets, Aave can start offering uncollateralized loans as in TradFi once reputations have been established. This is just one of the many benefits of on-chain reputations.
The gig economy will drive adoption
While many are skeptical that this usage will become popular, it makes perfect sense. The number of people who work in the so-called gig economy, such as freelance coders, designers and bloggers, is constantly growing. Projects have to pick the right talents for their needs.
Establishing a culture of confirming credentials on-chain and holding them in a wallet will help such people build up a reputation faster and allow employees to check on the CV, as trustworthiness can easily be verified. For this, the concept of SBTs makes much sense, as those NFTs should not be tradable.
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Many Web3 projects have small teams without a professional HR department to check candidates’ credibility. But with digital CVs, it will become much easier to verify credentials. One could even imagine automatic employment becoming feasible if a candidate’s wallet holds the required credentials.
It’s unclear if Web3 CVs will win mainstream adoption, as that also depends on the general adoption of crypto-related infrastructure and improvements in UI and UX. But we can predict with great confidence that, at least within crypto, they will become the norm.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.