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What Are Soulbound Tokens? (All you should know)

Once purchased and acquired by an individual, soulbound tokens, which are tokenized assets that resemble NFTs, are not transferable. They are employed to carry out particular functions, such as maintaining digital identities.

Non-fungible tokens are physical or digital assets that demonstrate ownership of a certain object. NFTs cannot be duplicated, unlike other kinds of blockchain assets, and in most circumstances, NFT ownership of an NFT can be bought and sold.

You can also read: What is Highstreet (HIGH)?

A recent Twitter survey revealed that many NFT owners are driven by the desire to profit from their investments. On exchanges like OpenSea, projects like Bored Ape or CryptoPunks can sell for a lot of money.

This makes it possible for NFTs to be traded with the highest bidder. Three people including Ethereum co-founder Vitalik Buterin, attorney Puja Ohlhaver, and economist Eric Weyl met in May 2022 to discuss their ideas for a totally decentralized society. Thus, the Soulbound token concept tackles the drawbacks of NFTs and other decentralized systems.

What are SBTs?

A non-transferable NFT that is unique to a person or thing and can serve as evidence of accomplishment, an attribute, or affinity is called a soulbound token. The passing of a driving test or earning a degree are two possible use-case examples for SBTs.

The accomplishment in either of those cases would be tokenized as an SBT on a blockchain, like Ethereum, with additional standards, and connected to a Soul.


A Soul is a component of a person’s web3.0 identity, similar to a decentralized CV, in the form of a wallet that stores or distributes SBTs. A Soul does not correspond to a person’s official identity or a legal company.

This implies that you may have a nested family of Souls (wallets) storing SBTs, each of which is related to a single aspect of your personal accomplishments or traits, such as your educational background, professional background, or past health conditions.

SBTs’ primary distinguishing feature is that they aren’t intended to be transferred, but rather earned. In this way, they draw on two current blockchain-based concepts, notably the Proof of Attendance Protocol (POAP) and Proof of Humanity.

How can SBTs be used?

As of September 2022, the concept and its applications are still being researched. The white paper claims that SBTs could advance Web3 by lowering dependency on centralized structures in Web2.

For instance, it has been noted that many users keep their cryptocurrency secure using custodial wallets from businesses like Coinbase or Binance. Additionally, to assist them in selling their work, NFT artists frequently use centralized platforms accessible on websites like OpenSea or Twitter.

Additionally, Soulbound tokens aim to prevent blockchain from being “hyper-financialized” and to dissuade people from using NFTs as status symbols. It can be challenging to determine who to trust in Web3 due to its pseudonymous and unreliable character. By establishing socially verified reputations, SBTs aid.

How much trust the community is willing to place in a team or individual is strongly influenced by their reputation.

Instead of interacting with someone with a proven track record with confidence, you’re definitely more cautious when working with someone who has a reputation of defrauding investors or failing to complete tasks.

How do SBTs work in Web3?

Soulbound tokens function similarly to NFTs, with the exception of their non-transferability, which is another reason why Vitalik Buterin, the creator of Ethereum, refers to them as non-transferable NFTs. Tokens are non-fungible, or not exchangeable because each one is unique and non-transferable.

Souls have the ability to issue themselves self-certified SBTs. To transmit an SBT to the address of another Soul, however, is a common practice used by other Souls or SBT producers. It is possible to publicly validate the SBT, its issuer, and Soul’s address on the blockchain. Because of this, anyone may easily find or show a Soul’s trust circles.

Web3 and its ecosystem of decentralized solutions have rapidly expanded, enabling a range of innovations that are upending the status quo in numerous worldwide businesses.

Despite its significant advancement, Web3 is still hampered by a number of problems that are preventing it from moving further.

Because of concepts like proof of work, proof of stake, smart contracts, and public/private keys, some of these issues have been overcome, while others are still prevalent in the ecosystem. One of the key problems is the lack of confidence in web3.

Because of its high level of privacy and anonymity, web3 struggles in this area, which is essential for every human relationship and business transaction.

Web3 protocols are now very dependent on the centralized web2 architecture that it was designed to replace.

The trust gap in web3 might be filled by soulbound tokens, which could act as the linchpin. Due to their non-transferability, they can be used to build social identities that allow protocols and individuals to function on the basis of confidence while yet maintaining privacy.

SBTs, or soulbound tokens, may offer benefits that alter how we currently understand social identities in the real world.

For example, NFTs can be used to advertise content creators, support crowdfunding initiatives, and show what a person owns and can afford. SBTs, on the other hand, expand on the NFT idea by providing people with a method of identification and reputation validation that goes beyond monetary gain.

SBTs let users to view a person’s immutable history prior to doing business with them. SBTs, for instance, might be used to verify a candidate’s experience prior to hiring them. Before renting a house to someone, one can observe their SBTs. SBTs have a lot of positive potential benefits for society, and they may even make it possible to realize a totally decentralized society.

What are examples of SBTs in action?

SBTs are currently simply a concept on paper. Glen Weyl, who contributed to the initial SBT whitepaper, predicts that there will be a variety of SBT use cases by the end of 2022.

Binance just developed its own SBT, Binance Account Bound. The first-ever SBT to be released on the BNB Chain, the BAB token is non-transferable and worthless. By serving as a digital verification tool for users who have finished their KYC with Binance, BAB intends to address concerns with identity verification in Web3.

BAB tokens can be used by third-party protocols outside of the Binance ecosystem to airdrop NFTs, halt bot activity, and support DAO governance voting among other things.

SBTs have recently gained popularity in Web3. Theoretically, SBTs might give users the ability to build their own digital reputations and assess that of others on the blockchain. We’ll have to wait and see if an SBT can act as Web3’s “identification card.”

In conclusion

Many web3 problems are seen to have a possible answer in the SoulBound project. We can utilize it online as a modification of social identity. However, it is still in its infancy and is not yet prepared for widespread use. Therefore, it will take some time before you can take use of its advantages, such as the easy manufacture and distribution of NFTs and the capability to conduct DeFi lending.

The SoulBound project is still viewed as promising despite criticisms about its potential. It demonstrates that the web won’t be as cold or impersonal as some have predicted. In the virtual world, identities are still necessary.

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Reza Siavashi
Reza Siavashi is a seasoned marketing professional with over seven years of experience, specializing in social media marketing, digital advertising, content strategy, and marketing analytics. He holds an MBA in Commercial Management and is known for his creative and forward-thinking approach. Reza is passionate about ethical marketing and social responsibility, and is currently exploring opportunities that align with these values.

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