With SBTs, the Web3 community can check for themselves if an individual can be trusted
Soulbound Tokens (SBTs), proposed by Ethereum creator Vitalik Buterin, would form an essential building block for this Decentralized Society, or DeSoc. These non-transferable tokens represent credentials and affiliations within DeSoc and are linked to Souls, a type of address that establishes provenance.
What are Soulbound Tokens?
Soulbound tokens (SBT) are non-transferable, publicly-verifiable digital tokens that can act as a type of CV for web3 users, showing an individual’s memberships, credentials, and affiliations. The idea stemmed from the popular video game, World of Warcraft, which rewarded users with items known as ‘soulbound’, that can’t be traded or sold to other characters. Unlike NFTs and other cryptocurrencies that can be traded on the open market and transferred from one wallet to another, soulbound tokens as the name implies, are permanently bound to a wallet or account for its entire lifespan. Such wallets or accounts that host soulbound tokens are referred to as “Souls.”
Imagine having a blockchain account (Soul) that stores immutable records like educational credentials, employment history, or works detailing a person’s experiences. Similar to a CV, SBTs can help to build a user’s digital reputation among web3 solutions. However, their true potential is revealed when one Soul can issue an SBT (that can be attested by other Souls) to another Soul, meaning a community could be a Soul that issues SBTs to natives or a company that issues SBTs to shareholders.
Additionally, an individual or entity could be a Soul that endorses a person after successfully conducting business together. This concept allows a soul to show integrity, trust, affiliations, and credibility, hence enabling web3 networks that aren’t entirely built on money-oriented frameworks but are based on provenance and reputation.
How do Soulbound Tokens or SBTs Work?
Soulbound tokens would be like an extended resume, issued by other wallets that attest to these social relations. Only SBT creators can issue them to other addresses, known as soul addresses. Once these tokens transfer to Soul, they will stick with that wallet address for the entire life span. Unlike non-fungible tokens, SBTs are not able to move on the secondary marketplace such as OpenSea.
Additionally, reputation plays a huge role in how much trust community members are willing to place in an NFT artist or project. We’ve seen this time and again, such as when the Azuki collection reached record-low floor prices after it was revealed that the creator had a history of abandoning projects. With SBTs, the Web3 community will be able to check for themselves if an individual can be trusted. Thus, people will be able to make more informed decisions regarding what projects deserve their support.
However, what happens when a person or organization sends your Soul an SBT that you don’t want? SBTs are permanent, so are you stuck with them forever? Ideally, no. For the system to work effectively, the team stated that it must include features that let individuals hide an SBT from public view or destroy it. However, since the system doesn’t exist yet, the actual mechanics of this remains unclear.
When Will the Token Launch?
According to Vitalik Buterin, Soulbound Tokens (SBTs) could be launched by the end of this year as an initial rollout. The launch will be a part of his ambitious vision to create a “decentralized society” by 2024.