Soulbound Tokens (SBTs) are a new type of non-fungible token (NFT) that are designed to be permanently tied to a specific blockchain wallet, or a “Soul.” Unlike traditional NFTs, which are freely transferable and can be bought and sold, SBTs are non-transferable. This unique characteristic makes them ideal for representing a person’s identity, credentials, and reputation within the Web3 ecosystem.
The concept was first proposed by Ethereum co-founder Vitalik Buterin, along with Puja Ohlhaver and E. Glen Weyl, in their paper “Decentralized Society: Finding Web3’s Soul.” They drew inspiration from the popular online game World of Warcraft, where some items are “soulbound” to a player’s character and cannot be traded or sold.
The Core Difference: Transferability
This is the key distinction that separates SBTs from conventional NFTs:
- NFTs: Are about ownership and transferability. They represent a unique asset (like a piece of digital art or a collectible) that can be bought, sold, and traded freely on a market. Their value is often derived from their scarcity and market demand.
- SBTs: Are about identity and reputation. They represent a credential, a skill, or an achievement that is intrinsically linked to a person’s digital identity. Because they are non-transferable, their value is not monetary but rather tied to the trust and verification they provide.
How Soulbound Tokens Work
An SBT is a digital asset that is minted directly to a user’s blockchain wallet, which in this context is referred to as a “Soul.” The smart contract governing the SBT is coded to prevent any transfer function. This means that once the token is issued to a wallet, it cannot be moved to another wallet, sold on a marketplace, or given away.
The SBT itself contains metadata, similar to a regular NFT, which describes the credential it represents. For example, the metadata for a university diploma SBT might include the student’s name, the degree earned, and the date of graduation. This information is immutably stored on the blockchain, providing a verifiable and tamper-proof record.
Key Use Cases of Soulbound Tokens
The non-transferable nature of SBTs unlocks a wide range of powerful applications in Web3 and beyond:
- Verifiable Credentials and Digital Identity: SBTs can serve as a decentralized and tamper-proof way to prove a person’s credentials. Examples include:
- Academic Degrees and Certificates: A university could issue an SBT to its graduates, creating an easily verifiable and permanent record of their academic achievements.
- Professional Licenses and Certifications: A professional body could issue SBTs to licensed doctors, lawyers, or engineers, which can be verified by employers or clients.
- Work History: A company could issue SBTs to an employee to certify their work experience or specific skills.
- Decentralized Governance and Reputation: SBTs can be used to combat Sybil attacks, where a single person creates multiple accounts to manipulate voting or unfairly obtain rewards. By tying voting rights to a non-transferable SBT, decentralized autonomous organizations (DAOs) can ensure that one person equals one vote.
- Proof of Attendance and Achievements: An event organizer could issue an SBT to attendees of a conference or a concert, providing a permanent and verifiable record of their participation. In gaming, SBTs could be used to represent unique achievements that are tied permanently to a player’s account.
- Decentralized Credit Scoring: In a decentralized finance (DeFi) context, an SBT could represent a person’s credit history or repayment records, allowing for reputation-based lending without the need for a centralized credit bureau.
- Community Building: Online communities could issue SBTs to members for positive contributions or long-term participation, fostering a sense of belonging and rewarding genuine engagement.
