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Soulbound Tokens (SBTs) Explained

Soulbound Tokens (SBTs) Explained

Vitalik Buterin, a co-founder of Ethereum, has recently brought up the brilliant idea of a fully decentralized society (DeSoc) and has suggested a solution to make it a reality: Soulbound Tokens or SBTs.

Simply put, Soulbound Tokens are non-transferable identity and reputation tokens. SBTs allow individuals to make use of blockchain technology to verify all of their information, such as their education, work history, credit score, medical history, professional certifications, etc.

Arguments going on if SBTs provide a more streamlined and trustworthy way of verifying information. To find an answer to this question, we did a full study on the topic and offer the results here which cover everything you need to know about the tokens that could change future life.

What are Soulbound Tokens (SBTs)?

Non-fungible tokens, or NFTs for short, are digital tokens of information that use blockchain technology. Every NFT comes with an identification code and metadata, which makes an NFT unique with no falsifiable data. According to the smart contracts made for NFTs, regular NFTs can be sold or given away for free. In other words, they aren’t tied to one specific person or organization and can be delivered from one person to another.

Soulbound tokens, on the other hand, are permanent, non-transferable NFTs that can’t be given away or transferred to others from a private blockchain wallet. It means that there is only one owner for SBTs throughout their existence.

Some SBTs may act like real-life achievement badges, just like the badges gamers may receive in a video game if they complete a specific task or set a milestone. However, SBTs can be received for completing a degree, earning professional certification, winning an award, etc. In fact, SBTs serve as a way of verifying an important achievement to others.

Though, SBTs may go further than just achievements. They can be tied to a myriad of other traits, features, and personal information. For example, an SBT could be used to verify your name, birthday, political affiliations, charitable giving, criminal record, medical history, nationality, religious upbringing, military history, and more. There is no limitation to the possibilities.

To sum up, it could be said that Soulbound tokens are every bit of factual information about individuals broken down into individual NFTs and stored in their private blockchain wallets. This feature could be practical for well-known characters, athletes as well as scientists.

How does a Soulbound Token work?

How does a Soulbound Token work

Soulbound tokens are like extended resumes that are issued by other wallets certified by social relations. Only SBT creators can issue them to other addresses, known as soul addresses. Once these tokens transfer to Soul, they will stick with that wallet address for the entire life span.

SBTs can be proof of individuals’ achievements. For example, everyone may claim graduation from Harvard university in their profiles, though it would be more reliable if they support their claim with information recorded on a blockchain. In this respect, SBTs can be not only evidence of real achievements rather than claims but also distributed amongst members of a group or institution as proof of affiliation. This would make it next to impossible for people to claim false credentials.

Additionally, if an NFT artist has her own SBTs on her art, she finds out the huge role of SBTs in how much trust community members are willing to place in an NFT in their artworks. A good example of this is Azuki collection which reached record-low floor prices after it was revealed that the creator had a history of abandoning projects. With SBTs, the Web3 community will be able to check for themselves if an individual can be trusted. Thus, people can use SBTs to make more informed decisions regarding what projects deserve their support.

However, many ask the question if they may have stuck with the souls others may send to them. The team has a solution for it. They stated that SBTs must include features that let individuals hide an SBT from public view or destroy it. However, since the system doesn’t exist yet, the actual mechanics of this remains unclear.

What happens if you lose your Soul?

Unfortunately, the NFT market has experienced a lot of hacking cases, even with big names and collections. Therefore, when it comes to SBTs, everybody finds it vital to have proper safeguards or contingency plans in place to prevent bad actors from taking identity theft to a whole new level.

Buterin proposed a community-wide adoption of something known as the “social recovery model” to put an end to the problem. The team provided a social recovery feature so that users can appoint a set of individuals or institutions as “guardians.” These guardians have the ability to access and change the private keys of a user’s wallet if there is an access problem on the user’s behalf. With this model, the authors note that recovering a Soul’s private keys would “require a member from a qualified majority of a (random subset of) Soul’s communities to consent.” Therefore, by granting a wider community to help assist the recovery process, SBTs will be more easily retrievable upon theft.

The use cases of Soulbound Tokens?

1. NFT Art

NFT art a use cases of Soulbound Tokens

NFT artists can link Soulbound tokens to their NFT collections and help NFT collectors ensure about the tokens belonging to them. Therefore, artists can eliminate bad actors from the NFT space who sell random NFT collections in the name of famous artists.

Artists could also issue a linked SBT stored in their Soul. Thus, artists can affirm an SBT to their NFT membership in a “collection” and assure for whatever scarcity limits the artist wishes to set. Accordingly, SBTs can help NFT creators and artists to build their reputations among the NFT and digital art community.

2. DAOs


SBTs can also be implemented in DAOs to prevent Sybil attacks. In the Sybil attack, the attacker acquires 51% voting power to pass the malicious proposal. These attacks are too dangerous for DAOs as they can provide direct access to attackers.

SBTs can turn down this risk by computing over SBTs to differentiate between unique Souls and probable bots. As the result, Sybil souls do not get the chance to find voting power.

3. Uncollateralized Lending

Lending NFTs is common in the DeFi space now. Soulbounds tokens can serve as a mechanism to identify the background or calculate credit scores of borrowers as conventional financials do.   

4. Certifications and Documentations

Certifications and Documentations a use cases of Soulbound Tokens

SBTs can also play a vital role in the future of documentation and certifications.  Since soul can issue infinite Soulbound tokens, it can provide the digital network to change the course of documentation from paper to paperless. Institutions and universities may make use of SBTs to award degree certificates to graduates or undergraduates.  

5. Proof of Presence

Proof of Presence a use cases of Soulbound Tokens

SBTs can serve as proof of presence for special occasions, events, web conferences, seminars, or others. Also, the event organizer or host may issue SBTs to the limited person and keep in contact with a controlled crowd for their purpose.     

6. Digital CV

digital cv a use cases of Soulbound Tokens

individuals may also have SBTs and manage them according to their requirements to deal with different Web 3.0 platforms. Even SBTs can also reflect skill sets and abilities if they are added to individuals’ Souls as a digital portfolio or CV for Web 3.0 and DeFi consumers.

When will SBTs be available?

According to Vitalik Buterin, Soulbound Tokens (SBTs) could be launched by the end of this year as an initial rollout. The launch will be a part of his ambitious vision to create a “decentralized society” by 2024.

Advantages of Soulbound Tokens

  • Discover the advantages and disadvantages of SBTs, the latest innovation in the blockchain space.
  • SBTs enable the creation of better trust relationships in decentralized environments.
  • SBTs allow DeFi lending platforms to issue uncollateralized loans.
  • SBTs can significantly improve the voting mechanisms in DAOs.
  • SBTs can help in employing the right candidate for a job.

Disadvantages of Soulbound Tokens

  • SBTs may reveal too much sensitive information about a person.
  • SBTs are a new concept and trying them out now may still be quite complicated.
  • SBTs may come under criticism for being energy-intensive if they are launched on proof-of-work blockchain.

About Nicolle

She is an Indian Freelance writer. She loves thinking, learning, and writing about all things Web3.

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