What Are Soulbound Tokens (SBTs)?
5 min read · · Korean original
Contents 6
Soulbound Tokens (SBTs) are digital identity tokens that represent the traits, features and achievements that make up a person or entity. Soulbound Tokens are issued by "Souls," which represent blockchain accounts or wallets, and cannot be transferred.
This article is a translation of the Binance Academy article What Are Soulbound Tokens (SBT).
Introduction
Soulbound Tokens (SBTs) are a concept proposed in May 2022 by Ethereum co-founder Vitalik Buterin, lawyer Puja Ohlhaver, and economist and social technologist E. Glen Weyl.
The whitepaper "Decentralized Society: Finding Web3's Soul" lays out the foundations of a fully decentralized, user-controlled society (DeSoc) and how Soulbound Tokens can work as credentials in everyday life.
What are Soulbound Tokens?
Soulbound Tokens are non-transferable tokens that use blockchain technology to represent a person's identity. They can include medical records, work history, and any type of information that makes up a person or entity. A wallet that holds or issues Soulbound Tokens is called a "Soul."
People can have multiple wallets (or Souls) that represent different parts of their lives. For example, someone might have a "Credentials Soul" for their work history and a "Medical Soul" for their health records. Souls and Soulbound Tokens let people build a verifiable digital Web3 reputation system based on their past actions and experiences.
On the other hand, a Soul can also represent the entity that assigns Soulbound Tokens. For example, a company could be a Soul that issues Soulbound Tokens to each of its employees. A digital country club could issue Soulbound Tokens to verify membership.
The logic of "soulbound" comes from the popular online game World of Warcraft. Players cannot sell or transfer soulbound items. Once a soulbound item is used, it is "bound" to the player's "soul" forever.
Now think about the concept of non-fungible tokens (NFTs). Today, most NFTs prove ownership of digital art or collectibles such as the Bored Ape Yacht Club. People can buy or trade NFTs, and can even show off their wealth with them.
Soulbound Tokens extend the NFT concept into unique, non-transferable tokens. While NFTs represent assets and property, Soulbound Tokens represent the reputation of a person or entity. Also, unlike NFTs, Soulbound Tokens have no monetary value and cannot be traded once they are issued to a wallet.
How can Soulbound Tokens be used?
Soulbound Tokens can be used in many ways. Here are a few examples of how they could be used in everyday life.
1. Education – When you graduate from university, you receive a certificate proving that you completed the required courses. The university could be the Soul that issues Soulbound Tokens, and students could be the Souls that receive them. The Soulbound Token stores the student's credentials, proving their qualifications and showing that they are a member of that university. Simply put, Soulbound Tokens can work as proof of attendance.
2. Job applications – Job seekers could submit their entire work history and professional certifications using official Soulbound Tokens issued by their previous companies and institutions. The Soulbound Tokens serve as proof of their skill certifications.
3. Health records – You could present a Soulbound Token holding your medical records to a doctor or healthcare provider. Soulbound Tokens would replace processes such as filling out paperwork, checking medical history, and answering questions over the phone.
Soulbound Tokens in Web3
Trust is one of the key elements of the Web3 industry. In a system designed to be trustless, how can you trust someone's reputation? Let's take lending as an example. Similar to traditional bank credit scores, Soulbound Tokens could track a user's DeFi borrowing history and various metrics that determine their risk profile.
Soulbound Tokens can also be used for decentralized autonomous organization (DAO) voting. Instead of the current governance model based on how many tokens members hold, DAOs could issue Soulbound Tokens that assign voting rights based on users' interactions with the community. This model would give priority voting rights to the most dedicated users with good reputations.
Besides creating reputation-based voting systems, Soulbound Tokens could improve the integrity of DAO voting in the future. Right now, one of the biggest threats to DAOs is the Sybil attack.
In a Sybil attack, an individual or a group of malicious actors buys up most of the governance tokens and takes down the DAO. Those with the majority of voting power can manipulate proposals and steer the project's direction in their own favor. The public and verifiable nature of Soulbound Tokens can help detect and block malicious actors from entering a DAO, which in turn can prevent fraud and Sybil attacks from happening.
What Soulbound Tokens are actually in use?
Glen, one of the co-authors of the Soulbound Token whitepaper, expects a variety of Soulbound Token use cases to emerge by the end of 2022.
Binance recently announced its own Soulbound Token called BAB (Binance Account Bound). The BAB token is the first Soulbound Token issued on BNB Chain; it cannot be transferred and has no monetary value. BAB aims to solve the problem of identity verification in Web3 and works as a digital verification tool for users who have completed KYC.
Beyond the Binance ecosystem, third-party protocols can use BAB tokens to airdrop NFTs, prevent bot activity, and encourage DAO governance voting.
Closing thoughts
Soulbound Tokens are a hot topic in Web3. In theory, Soulbound Tokens let people build their own digital reputation and judge the reputation of others on the blockchain. However, it remains to be seen whether Soulbound Tokens will become the "ID card" of Web3.
