Summary
Soulbound tokens (SBT) are digital identity tokens that represent the traits, characteristics, and accomplishments that make up a person or entity. SBT tokens are issued as “souls,” which represent wallets or blockchain accounts, and are not transferable.
the introduction
Soulbound Tokens (SBT) tokens are a concept proposed in May 2022 by Vitalik Buterin, co-founder of Ethereum, lawyer Poga Olaver, and E. Glen Weil, economist and social technology expert.
The technical guide, “Decentralized Community: Searching for the Soul of Web3,” lays the foundation for a fully decentralized community (DeSoc) governed by users and how Soulbound Tokens (SBT) can fulfill the role of personal information we use in our daily lives.
What are SBT tokens?
Soulbound Tokens (SBT) are non-transferable tokens that express a person's identity using blockchain technology. This may include medical records, professional history, and any type of information that constitutes a person or entity. Wallets that hold or issue these records are called “souls.”
A person can have multiple portfolios (or lives) that express different aspects of their life. For example, a person could have a “personal information spirit” to represent their professional record, and a “medical spirit” to represent their medical records. Souls and SBT tokens will allow individuals to build a verifiable digital reputation in Web3, based on their past actions and experiences.
On the other hand, Souls can represent an entity that allocates SBT tokens. Companies, for example, can create Souls, issuing unique SBT tokens to each employee. A digital private club can issue unique SBT tokens to authenticate membership status.
The logic behind Soulbound stems from the popular online game World of Warcraft.
Players may not sell or transfer Soulbound Items; once selected, Soulbound Items remain “bound” to the player’s “Soul” forever.
Now imagine applying this idea to non-fungible tokens (NFTs). Most NFT tokens today are proof of ownership certificates for artworks or digital collectibles like the Bored Monkey Yacht Club. People are buying, trading and displaying NFT tokens as a symbol of status and wealth.
SBT tokens aim to transform the concept of NFT tokens beyond money and ostentation, into a token that is both unique and non-transferable. While NFT tokens represent assets and property, SBT tokens represent the reputation of a person or entity. Unlike NFT tokens, SBT tokens hold no monetary value at all and cannot be traded after they are issued to someone's wallet.
How to use SBT tokens?
SBT tokens have a wide range of potential use cases, here are some examples that might have a use in everyday life.
1- Educational record - When people graduate from university, they receive a certificate proving the completion of the necessary educational subjects. The university may be a "soul" that issues unique SBT tokens and students become "souls" on the receiving side of these tokens. SBT tokens will store students' personal information, proving that they have the relevant qualifications and are a member of the university. Simply put, SBT tokens will perform the function of proof of attendance.
2- Applying for jobs - In theory, job applicants can send all their previous professional records and professional certificates using the official SBT codes issued by the institutions and companies they have worked for before. SBT tokens will serve as proof of skills.
3- Health Records – The process of changing doctors or healthcare providers can be made faster by using a unique SBT code that keeps a person’s medical records. In theory, the SBT token would replace the often slow process of doing paperwork, filling out forms, checking your medical history, and checking in with someone over the phone multiple times.
How do SBT tokens work in Web3?
Trust is one of the major challenges facing the Web3 industry. How can you trust someone's reputation in a system whose determination to be transparent does not necessitate trust? Let's use money lending as an example. SBT tokens can track a user's borrowing history in a DeFi system, as well as other metrics that determine their appetite for risk, similar to a creditworthiness assessment used in a traditional banking system.
SBT tokens are a proposed alternative to voting in decentralized autonomous organizations (DAOs). Instead of the current governance model, which is based on the number of tokens a member holds, DAOs could issue SBT tokens that assign voting power based on a user's interactions with the community. This model will prioritize the voting power of the most dedicated users with strong reputations.
Besides creating a reputation-based voting system, SBT tokens can increase the integrity of voting in DAOs — counteracting Sybil attacks — one of the biggest threats to the current DAO governance model.
In a Sybil attack, an ill-intentioned individual or group overthrows a DAO by purchasing a majority of its governance tokens. Those with a majority of voting power have the ability to manipulate voting proposals and tilt the project in their favor. The public and verifiable nature of SBT tokens may help detect those with malicious intent and prevent them from entering the DAO, thus deterring corruption and Sybil attacks.
What are examples of actual performance of SBT tokens?
Until August 2022, SBT tokens only exist in theory. Glen Weil, one of the co-founders who contributed to the technical guide for the SBT token, believes that by the end of 2022, there will be initial use cases for the SBT token.
Binance also announced its own SBT token called Binance Account Bound (BAB). The BAB token is non-transferable, has no cash value, and is the first SBT token ever issued on the BNB chain. The BAB token aims to overcome identity verification issues in Web3, acting as a digital tool to verify Binance users who have completed identity authentication procedures.
In addition to the Binance blockchain ecosystem, third-party protocols will be able to use BAB tokens for free NFT token distributions, preventing bot activity, facilitating DAO governance voting, and other use cases.
Concluding thoughts
SBT tokens have become an interesting topic on Web3. SBT tokens would, in theory, allow people to build their own digital reputations and evaluate the reputations of others on the blockchain. It is not yet known whether the SBT token can function as an “identity card” on Web3 or not.