What are Soulbound Tokens? A Deep Dive into this Non-Transferrable NFT

NFT

• Soulbound tokens (SBTs) are non-transferable, non-tradeable digital property representing your identification and achievements in Web3.
• As SBTs can set up provenance and popularity, these tokens might even see widespread adoption in DeFi, social media, and plenty of extra features of our life.

Again in Could, Ethereum co-founder Vitalik Buterin printed a paper about soulbound tokens (SBTs), describing them because the constructing blocks for a decentralized society (DeSoc). One of many paper’s co-authors, Eric Glen Weyl, predicts that SBTs shall be obtainable for early use by the top of 2022 – with the 2024 upcycle to give attention to them.

How may this innovation assist form the way forward for Web3 then? Let’s dive in to search out out extra.

What are Soulbound Tokens?

Merely put, soulbound tokens are everlasting, non-transferable NFTs that characterize your identification and achievements in Web3.

These tokens are held in a crypto pockets known as Soul, which is usually a particular person, establishment, or any entity. In concept, you’ll be able to have as many Souls as you need, however you’ll be able to solely maintain a particular SBT in a single Soul, which can’t be transferred to a different Soul.

As an illustration, you’ll be able to’t combine up the SBT of your college diploma with the SBT of your World of Warcraft achievements. Equally, if in case you have a credential Soul that holds your whole {qualifications} and achievements, you received’t be capable of switch that to a different pockets.

With this limitation in place, soulbound tokens will help set up provenance and popularity, and thus, resolve the problem of belief in Web3. Notably, Souls and SBTs can even act as the muse for a decentralized society (DeSoc), the place social interactions and human relationships matter in constructing Web3 identities.

To grasp how SBTs will revolutionize the panorama of Web3, let’s check out among the precise functions of SBTs.

Actual-life functions of soulbound tokens

1. Unbiased credit score scoring:

In response to Buterin, credit score scoring within the conventional monetary ecosystem is, at finest inefficient and, at worst, discriminating. Many lower-income folks can’t construct up their credit score scores, as they discover it troublesome to incur a debt and pay it again. To not point out credit score scores typically include a racial bias too.

With that in thoughts, DeFi platform Masa Finance has lately launched Masa Soulbound Id to allow mainstream on-chain credit score adoption. It permits folks to attach their conventional and cryptocurrency accounts. And from there, create a decentralized credit score report as a soulbound token. This enables customers with good credit score scores (with out bias) to simply entry decentralized loans and different monetary merchandise.

2. Stop bots manipulation in social media:

When you’re a long-time Twitter person, you’ll have in all probability come throughout many faux bots spamming right here and there on Twitter. In that case, soulbound tokens will help by making a human-only social media platform. Right here’s how.

Take Proof of Humanity, as an example, it’s a system that mixes social verification with video submission to create a Sybil-proof listing of people. In different phrases, permitting you to create a Soul tied to your IRL (in-real-life) identification. Customers are restricted to 1 account per particular person, and every can solely be vouched for by an already confirmed identification.

By integrating identification Souls, it’s potential to have a social media platform that eliminates bots. Actually, it’s simpler to fight on-line harassment as nicely by linking again to the person’s IRL identification.

3. Fulfil Know Your Buyer (KYC) necessities:

An important instance of that is the Binance Account Certain (BAB) token, which is an SBT used as proof of identification for KYCed customers in Binance. Better part is, customers can show this token of their wallets, and third events can use it as a part of their verification course of.

Apart from, KYC tokens can be utilized to stop bots from accessing monetary merchandise and introduce a better degree of belief into the DeFi ecosystem. Because the KYC token wouldn’t show the person’s private information, this presents much-needed privateness to people on the similar time.

4. Tickets and POAPs

At present, many tickets and POAPs (Proof of Attendance Protocol) are issued within the type of NFTs to attendees of a specific occasion. NFT tickets, nevertheless, are simply transferrable and might typically be resold at an exorbitant value. For that motive, merely holding an NFT ticket doesn’t show that you’ve got attended an occasion.

At present, just a few tasks concern POAPs within the type of soulbound tokens. DeQuest, a metaverse questing platform, is likely one of the few to experiment with SBTs.

The way it works is that gamers will full duties to study totally different blockchain video games and earn an SBT for that. Whereas the token intends to confirm {that a} participant has attended a particular sport tutorial, the use instances will probably broaden as extra occasion organizers understand the facility of SBTs.

Admittedly, soulbound tokens are nonetheless of their early days. But when carried out proper, it may create a fairer, privacy-focused decentralized society in Web3.