Ethereum co-founder Vitalik Buterin, lawyer Puja Ohlhaver, and economist/social technologist E. Glen Weyl released a whitepaper in May that described Decentralised Society (DeSoc) and Soulbound tokens (SBTs) in detail. The term “Soulbound” came from the World of Warcraft game and was previously mentioned in Vitalik’s blog in January. Soulbound Tokens are digital identity tokens that represent a person or entity’s characteristics, features, and accomplishments. SBT issuance is limited to “Souls,” which represent blockchain accounts or wallets and cannot be passed on.
Unlike regular NFTs, SBTs can never be transferred. These types of tokens are linked to a special blockchain address called a Soul. Soulbound items cannot be sold or transferred. Once collected, Soulbound objects are “bonded” to the player’s “soul.” Soulbound tokens represent a person’s identity, held on a blockchain. This data could include medical records, work history, and any other type of information that makes up a person or entity. The wallets that hold or issue these records are called “Souls.”
The Soul could be seen as a digital wallet where people store different aspects of their lives. By having verifiable souls and SBTs, people can build up a Web3 reputation based on their previous actions and experiences. On the other hand, a Soul might represent someone who distributes SBTs. For example, companies may be Souls that provide each worker with an SBT. A digital country club could give out SBTs as proof of membership.
The idea and its applications are still being studied as of September 2022. According to the white paper, SBTs could help move Web3 forward by reducing reliance on centralized structures in Web2. SBTs are attempting to move us away from the “hyper-financialization” of blockchain and discourage the use of NFTs as status symbols. The pseudonymous and trustless nature of Web3 can make it difficult to know who to trust.
SBTs help by creating socially verifiable reputations. A team’s or individual’s reputation greatly influences how much faith the community is willing to place in them. You’re probably more careful when working with someone with a history of cheating investors or not finishing projects instead of dealing confidently with someone with a solid track record.
– Properly managing medical record – Storing digital ID cards and membership – Enables certifying your achievements, such as job history or education – A method of verifying that guests have actually attended an event – much like a ‘Proof of Attendance Protocol.’
– Allow users to establish verifiable, digital reputations based on their prior conduct. This may help you monitor a user’s decentralized finance (DeFi) borrowing track record and provide loan – Introducing a voting system that uses a person’s reputation to decide how they vote in a decentralized autonomous organization. This could help reduce the risk of Sybil attacks on DAOs. – Using social recovery to gain access to an individual’s lost private key
At this moment, SBTs only exist on paper. However, Glen Weyl, who helped write the original SBT whitepaper, believes that by the end of 2022, there will be multiple use cases for SBTs. In recent weeks Binance has also created its own SBT, Binance Account Bound (BAB). The BAB token is non-transferable, has no monetary value, and is the first-ever SBT issued on the BNB Chain. BAB aims to tackle identity verification issues in Web3 by acting as a digital verification tool for users who have completed KYC with Binance.