Soulbound tokens (SBTs), also known as non-transferable NFTs, cannot be sent out of your wallet once they are received.
SBTs expand the use cases of NFTs, and could encode records like employment history or academic credentials, or prove event attendance or early adoption. Because of their potential, SBTs could become an essential building block of a decentralized society (DeSoc).
In this article:
What is a soulbound token (SBT)?
A soulbound token (SBT) is a type of NFT that is not transferable from one wallet to another.
NFTs, or non-fungible tokens, are units of data, such as images, music, and GIFs, that are stored on the blockchain. Non-fungible means that each NFT is unique and cannot be replaced.
When NFTs are created (minted), they are written to a blockchain. The minting process ensures the authentication of each NFT by providing a digital signature that is used to track NFT ownership. This signature also tracks the movement of NFTs as they are sent or sold.
However, unlike other NFTs, once received by an address, a soulbound token cannot be transferred. An SBT is linked to your wallet, thus potentially your identity, forever.
Linking SBTs to an individual's wallet makes them powerful tools for establishing and verifying identity and reputation in a digital decentralized society (DeSoc).
Video tutorial: What is a soulbound token?
Where did the idea of soulbound tokens originate?
The concept of soulbound tokens was introduced in a 2022 whitepaper by Puja Ohlhaver, E. Glen Weyl, and Vitalik Buterin: Decentralized Society: Finding Web3’s Soul.
The whitepaper discusses how soulbound tokens could encode trust networks and reputation.
The name was inspired by World of Warcraft (WoW), a videogame in which special items, such as a sword or shield, are bound to a soul, i.e. a specific player.
In terms of soulbound tokens, a "soul" could refer to the institution, individual, or entity that issues an SBT, or the wallet that owns the token.
What are possible use cases for soulbound tokens?
Possible use cases for soulbound tokens include verifying identity and/or reputation, representing credentials, proving attendance, gaming, and providing exclusive access.
Verifying identity and/or reputation
Governments or institutions could issue an SBT to prove your identity
Employers or clients could issue SBTs for work experience
Your collection of SBTs could act as a resume or CV
Representing credentials
High schools could issue SBTs for diplomas
Universities or colleges could issue SBTs for degrees
Institutions or entities could issue SBTs for any academic achievements
Proving attendance or participation
Organizers could provide SBTs to attendees to prove they were at a conference or other type of event
Platforms can issue SBTs to early adopters to prove they participated in a launch
Gaming
Just like in WoW, SBTs could be issued in the form of special items
SBTs could also be issued for progress like level achieved or finishing a game
Providing exclusive access
Artists or creators could offer exclusive access to their work
Companies or other entities could issue SBTs to grant special access
Whereas NFTs prove ownership and ascribe financial value to digital items, SBTs could encode non-financial qualities, such as reputation, knowledge, experience, and attendance, and act like tickets or passes to provide access to promotions or events.
What are the potential downsides of soulbound tokens?
What good is it to gain the world, just to lose your soul?
Potentially losing crypto if you don't save your 12-word secret key is bad enough. But what if you lost the deed to your house? Or the university degree you spent years earning?
Managing information that secures your wallet, such as your 12-word secret key, private keys, or passkeys, is even more crucial as important information and documents are stored on the blockchain.
Find a tutorial on backing up your wallet here: How do I always have access to my wallet with my 12-word secret key?
Other possible dangers of soulbound tokens include being airdropped without the receiver's consent, used to implement an Orwellian social credit system, or both.
However, the potential of SBTs could outweigh their risks.