What Are SoulBound Tokens Or SBT? Are They Important?
One of the co-founders of Ethereum and well known as Vitalik Buterin is currently working on a major new Web3 project. Buterin and his co-authors outline their vision for a completely decentralized society (DeSoc) and how we could make it a reality in a white paper titled “Decentralized Society: Finding Web3’s Soul.” Their response? That something dubbed “Soulbound Tokens” will be something we have to make (SBTs).
SBTs are essentially non-transferable reputation and identity tokens. They enable people to use blockchain technologies to authenticate their information, including their education, employment history, credit score, medical history, professional qualifications, etc.
The concept is somewhat controversial
Some contend that SBTs offer a more efficient and reliable information verification method. Some liken it to the totalitarian social credit system in China. Which is the most accurate vision? That is not exactly a simple thing to say. Here, we go in-depth and cover everything you need to know about the trinkets that have the potential to alter your life.
— Metis 🌿 (@MetisDAO) February 14, 2023
Soulbound Tokens (SBTs): What are they?
A non-fungible token (NFT) is a blockchain-based digital information (data) token. Because each NFT has its unique identification code and set of metadata, each one is distinct, and its data cannot be altered. Normal NFTs can be purchased or distributed without charge. They are not affiliated with any one particular individual or group, in other words.
As permanent, non-transferable NFTs, soulbound tokens cannot be transferred or removed from your blockchain wallet.
The idea behind Soulbound Tokens appears to have been inspired by the video game World of Warcraft (WoW), which also inspired Buterin’s creation of the Ethereum network. An item’s ability to be “soulbound” in World of Warcraft prevents it from being sold or sent to another player. With this in mind, it is simple to understand where the concept and term of SBTs originate.
Some SBTs might function as real-life equivalents of the achievement badges you earn in video games when you do a specified activity or surpass a predetermined milestone. However, you get an SBT for finishing a degree, obtaining professional certification, winning an award, etc., rather than a badge for beating an opponent or rescuing the princess (or prince!). Your matching SBT would prove to others that achievement, even if it were for something as specialized as being the top kickball expert in the world.
SBTs, though, aren’t simply about successes. They can be connected to a wide range of different characteristics, features, and individual details. For instance, an SBT might be used to confirm information about you, such as your name, birthday, political opinions, charitable contributions, criminal history, health history, nationality, upbringing, religion, and military service. There are countless options.
The important thing to remember is that Soulbound tokens are all factual data about you that has been separated into individual NFTs and kept in your blockchain wallet.
What are Soulbound Tokens used for?
SBTs can be given out to group or institution members as evidence of membership. By designating Harvard as their alma mater on Facebook, anyone can claim to have attended Harvard. But with SBTs, you would need Harvard’s “Soul” (i.e., their private wallet) to give your “Soul” (i.e., your private wallet) an SBT of a degree before you could assert that. This would make claiming fake credentials all but impossible.
Some people in comments and DMs think $5 for some entertainment and a PFP and soulbound tokens is too much and not worth it, because they get nothing in return.
Many aren’t interested in a product or art at all. https://t.co/gPYUsD5ztL
— Luqius (@LukasNerdwelten) March 7, 2023
Similarly, Buterin and his co-authors claim that since the tokens cannot be exchanged or moved between wallets, they may help “address some of the problems afflicting decentralised finance, such scams, and theft.” They think this is where the mechanism’s genuine power lies because NFT thefts are getting more frequent.
Furthermore, the level of trust that the community is willing to place in an NFT artist or project is greatly influenced by reputation. We’ve seen this time and again, like when the Azuki collection’s floor pricing hit a record-low level following the disclosure that the inventor had a history of giving up on projects. The Web3 community can independently verify whether a person is trustworthy, thanks to SBTs. People will then be better equipped to decide whether projects deserve their support.
No, ideally. According to the researchers, the system must include capabilities that enable users to hide an SBT from the public’s gaze or delete it. However, the real workings of this are still unknown because the system isn’t currently in place.
What occurs if your soul is lost?
What happens if a hacker steals your Soul wallet? What if you misplace the key to your Soul address, for example? Unfortunately, this is a very real worry. The NFT community is plagued with thefts, as was already reported. Therefore, it’s crucial to have adequate precautions or backup plans regarding SBTs to stop criminals from elevating identity theft to a new level.
Buterin suggested that the “social recovery model” be widely adopted as a solution to this issue. Users of social recovery can choose a group of people or organizations as “guardians.” If a user’s wallet is compromised, these guardians have the power to access and modify the user’s private keys. According to this concept, obtaining a Soul’s private keys “requires a member from a qualified majority of a (random subset of) Soul’s communities to approve,” the authors write.
This doesn’t precisely address the problems, though. For instance, if the individuals designated as guardians have passed away or if the ties have ended, it may be difficult for an individual to retrieve stolen SBTs. What happens if a group of guardians decides to attack someone they disagree with? The outcomes might be disastrous.
Buterin thinks that SBTs will at least be more easily recoverable upon theft by enabling a larger community to help with the process.
Uses for soulbound tokens
Right now, it seems that there are countless uses for SBTs. Even if almost anything may be thought of as an SBT (or an NFT, for that matter), it’s possible that official documentation was the first kind of content to become Soulbound.
One of the most well-known applications for SBTs may soon be proof education. Businesses could check a potential employee’s Soul Wallet to see if they are currently in school or if they have any credentials. Even official identity might be able to coexist as an SBT. Consider an immutable digital passport that authorities might update when people travel and seek visas.
Or perhaps a safe virtual wallet that houses your ID, credit report, and banking details and enables financial institutions to quickly conduct business with their clients. Even one of the most well-known cryptocurrency exchanges, Binance, announced plans to give SBTs to users in the future as a kind of credential.
SBTs can be given out to members of a group or institution as evidence of membership, as previously noted. Of course, until Buterin’s DeSoc is successful, this probably won’t happen frequently. Companies and consumers may find it advantageous to use SBTs for security reasons, much like Binance would utilize Know Your Customer (KYC) rules, which are intended to safeguard institutions against fraud, corruption, money laundering, etc., to issue SBTs.
However, not all SBTs will have monetary or official overtones. SBTs may include:
- A holder’s medical background.
- Details on their exclusive memberships.
- A list of their accolades.
- Other information.
Other tokens, however, could not be as advantageous to owners given that official channels make it simple to apply impactors like criminal records and poor credit scores to someone’s Soul Wallet. Yes, use cases that deal with identity can seem a little futuristic. However, in a time of profound fakes, reality distortion on social media, and political mistrust, the ability to swiftly check information’s integrity is becoming priceless.
What are the negative aspects of SBTs?
SBTs can reflect our personal information and make it impossible for scammers to pose as us, but they also have other uses. They might be used to sell tickets to events, conduct special airdrops (also known as “Souldrops”), and provide other advantages to people in a particular group.
The tokens serve various purposes, representing our personal information and making it impossible for scammers to pose as us. They might be used to sell tickets to events, conduct special airdrops (also known as “Souldrops”), and provide other advantages to people in a particular group. For instance, it would be simple for a group to give reunion tickets to every graduate from a particular period.
Naturally, the inverse is also accurate.
Bad actors might utilize SBTs to track down, harm, and attack members of particular communities. Concerning regulating bodies, the possibility is especially problematic. Holders of a particular SBT might, for instance, be prohibited access to facilities, be denied medical treatment and travel authorizations, lose their right to vote, and more.
A database of SBTs, according to the authors, might be used to “automate red-lining of disfavored social groupings or even target them for cyber or physical attack, implement restricted migration laws, or offer predatory loans,” among other dystopian possibilities.