What Are Soulbound Tokens? Building Blocks For A Web3 Decentralized Society

What Are Soulbound Tokens_ Building Blocks For A Web3 Decentralized Society

Even while NFTs have been around for quite some time, they just recently came to widespread attention when a digital artist by the name of Beeple sold a collection of NFTs for more than $69 million in March of 2021. NFTs, or non-fungible tokens, are essentially tokenized forms of digital assets that allow for the buying, selling, and trading of assets.

The demonstration of ownership is one of the primary applications of non-fungible tokens (NFTs). Their user interface, which is based on the ERC-721 standard and evolved from it, includes information like ownership, metadata, and other data that is recorded on the blockchain. On the other hand, here is where the trouble lies. NFTs are restricted to ownership in their current form because of this.

NFTs have been utilized predominantly in markets that emphasize ownership of something valuable, such as the art market, the real estate market, play-to-earn gaming, and the selling of collectibles.

Notwithstanding this, NFTs can be sold to anyone interested in making a purchase, which implies that anyone can be the owner of an NFT. This indicates that their usefulness is restricted to establishing ownership; nevertheless, they are unable to prove “acquired” traits such as ability, experience, or knowledge because of this shortcoming.

An excellent illustration of this can be provided by the concept of proof-of-attendance-protocol (POAP), in which attendees of an event are rewarded with digital badges or souvenirs as a token of their presence at the event.

Even though the buyer was not present at the event, they will be able to claim ownership of the item if it is sold as a non-attendance ticket (NFT). Because of the way that NFTs are structured currently, any person’s particular merits or credentials can be passed on to other people.

Because of this, there is no way to verify the trustworthiness of the organization that issued these badges, which poses an authenticity concern. Tokens that are soulbound are being introduced as a potential solution to this issue.

What are Soulbound Tokens?

What are Soulbound Tokens

The idea behind soulbound tokens started as a new variant of standard NFT contracts that was proposed by the Ethereum Community Fund. The ECF is an organization that funds innovative projects in the Ethereum community.

An important step towards achieving this goal is collecting funds from well-known investors, including famous individuals such as the founder of Tesla and SpaceX and the CTO of Virgin Galactic.

Vitelik Buterin, Glen Weyl, and Puja Ohlhaver recently collaborated on a white paper in which they explored the prospects of the formation of a decentralized society (DeSoc) and Soulbound coins.

In this paper, they outlined the potential benefits and drawbacks of each (SBT). The video game World of Warcraft served as inspiration for the creation of the name. SBTs are examples of non-transferable NFTs that are kept in a private cryptocurrency wallet called Souls.

Once you have obtained a Soulbound token, it will always be linked to your wallet as well as your identity.

You will not be able to sell or donate the token to another person because it cannot be transferred. Because of this, they are the perfect choice for digitally representing assets that cannot be obtained through traditional means, such as certificates of competence, reputation, medical data, and so on.

Because they cannot be transferred to another person, just like the instances given earlier, this means that they are permanently associated with the user. The owner of the token will then have the ability to manage who has access to the data that is stored within the token, as well as the ability to revoke that access whenever they see fit.

SBTs provide a solution for people who want maximum control over their data since they permit such data to be maintained in tokenized form rather than stored on a central database. As a result, persons who desire maximum control over their personal information can utilize SBTs.

On the other hand, SBTs pose a problem for companies that are interested in using this data for marketing purposes.

Because of the decentralized nature of SBTs, users will have to give explicit consent whenever they want their data to be shared with third parties. This means that companies will have to work harder than before to convince consumers to share their personal information with them.

One of the biggest distinctions between SBTs and standard NFTs is that they cannot be transferred and sold. In the case of NFTs, only those who have the private key to a wallet can control their data.

This means that users cannot control who has access to their data. SBTs on the other hand can prevent anyone from accessing their data at all because it is linked to your wallet.

Because of this, SBTs provide a solution for people who want maximum control over their personal information since they allow such information to be stored in tokenized form instead of being stored on a central database.

SoulBound Token Use Cases

SoulBound Token Use Cases

Education history and work resume:

A medical staff, that works in a hospital, can transfer the history of their work experience to different institutions as well as additional proof of their skills without exposing it to external sources.

Proof of real-estate ownership:

Most transactions relating to real estate transactions require a lot of information that is incompatible with blockchain technology. Therefore, until now, negotiations between parties involved were based on two main types of documents: a title deed and a certificate that proves the possession rights in an apartment complex.

Through the use of SoulBound tokens, these documents can be replaced by a single digital token that is transferred to the new owner.

Music with proof of ownership:

BMI, ASCAP, and similar organizations that deal with royalties are introducing a new way of tracking ownership of music. This will enable artists to prove they are the owners of their music.

Auction bid:

In auctions, it is difficult to establish the identity of participants because multiple parties can participate in bidding simultaneously using different accounts. This makes it necessary to use neutral third parties who verify and record the outcome of the bidding.

Because SoulBound tokens act as a key associated with the contract, they can be used to identify participants during an auction. This can help reduce bid rigging and increase trust between bidders as well as increase competition between bidders.

Proving identity:

Instead of using multiple passports for proving identity, Soulbound tokens allow you to show different documents that demonstrate your identity.

Medical records:

It is possible that shortly, medical records will be replaced by blockchain-based medical data. This can help reach a common standard that allows medical institutions to share patients’ data easily and safely.

Recent patent applications have been published related to the technology for obtaining, transferring, and proving ownership of physical assets on Ethereum. The application outlines how a system with self-executing transactions can allow users to create smart contracts that can control access rights to physical assets such as keys and locks.

Credit history:

Blockchain-based credit history is a great idea, however, it is not practical at the moment. Because of the blockchain’s immutability, this means that all records of payments will be visible to the public.

This can be very problematic for people who do not want others to know about their financial history. SBTs protect users from these issues through private and secure data storage. This can make it easier to create decentralized credit systems that do not compromise sensitive data. Ethereum has several use cases outside of its role as a Blockchain platform.

Medical records:

A decentralized medical records system can store, manage and share patients’ and healthcare providers’ records. The system will be based on the Ethereum blockchain to ensure recordings are secure, accurate, and tamper-proof.


Ethereum is the best experimentation platform for creating a banking network. Today, banks have custody of all digital money and they use centralization to control financial systems. Utilizing Ethereum could potentially create a more decentralized way of controlling money transfers.

How do Soulbound Tokens work?

How do Soulbound Tokens work

The Soulbound token is a collection of Ethereum-based tokens that are used to transfer, secure, and manage access to services on the Soulbound network. To use the network, users must buy SBTs and create their Soulbound wallets.

The SBT token is like a smart contract on the Ethereum blockchain. It is an ERC20-compliant token which means that exchanges can easily handle trading in this cryptocurrency. The token will be used for all transactions including paying for services and for advanced functions such as unlocking paid services.

The SBT token has a total supply of 55 million tokens which were issued during the ICO. The token sale was funded through the sale of 1 million tokens in the pre-sale and 40 million tokens in the main sale. 

They are still nothing more than a concept at this point; there is no actual Soulbound Token standard available at the time of publication. Having said that, the workings of several of the mechanisms have already been described.

The non-transferability of SBTs is the defining characteristic of these tokens. SBTs, on the other hand, are not intended to have a market value and cannot be moved from one wallet to another. This is in contrast to the most common token standards that are used today, which are fungible ERC-20 tokens like ETH and ERC-721 NFTs like Bored Ape Yacht Club.

Within the framework of DeSoc, SBTs are both issued by and stored in digital wallets referred to as “Souls.” In its most basic form, souls are wallets that are used to store SBTs and establish both provenance (the place from which something originated) and reputation.

Individuals, companies, and other kinds of entities are all able to have souls attached to them. It is important to note that souls are not meant to have a representation that is identical to that of people. That is, in DeSoc, a human can possess more than one Soul.

For instance, your high school might have a Soul that distributes diplomas in the form of SBTs to its graduates. These graduates would then each have a Soul that would hold the appropriate SBT for their diploma.

You will receive this SBT in your Credentials Soul, the same place where you save your SBTs for your Girls Scouts badges and your SBTs for your National Honors Society membership.

However, this Credentials Soul is distinct from your Identification Soul, which is the part of you that is responsible for keeping track of your driver’s license and passport.

The SBTs by themselves are only descriptive and representational. How SBTs held in Souls interrelate to build emergent communities that are founded on confirmed affiliations, commitments, and credentials is a significant contributor to their power and value.

Soulbound Token Pros & Cons

Soulbound Tokens may be able to assist Web3 in accomplishing its dual objective of decentralizing centralized social networks and monetary transactions.

When identities and memberships can be independently confirmed, it is considerably simpler for trust-based groups to form out of thin air. Even the limited number of use cases presented above demonstrate the potential real-world utility of the technology in question for verification and other applications.

SBTs are essential on a more fundamental level for the successful merging of the real and virtual worlds (e.g., the metaverse). It is impossible to portray communities, families, houses of worship, teams, democratic republic, and other social constructs in the western age without “primitives” (for example, primitive data types) that represent human souls and the relationships that they support. These “primitives” are examples of primitive data types.

Despite these one-of-a-kind advantages, Soulbound Tokens have become a contentious topic within the cryptocurrency world.

The idea is frequently contrasted with China’s authoritarian social credit system, which keeps a record of each individual’s social and financial connections to support lending and other decisions. SBTs have the potential to make redlining and other issues worse if they fall into the wrong hands.

Souls and SBTs may face many of the same challenges and problems as NFTs and other tokens will. Even though it is impossible to transfer SBTs out of a wallet, there is still a possibility that you could lose access to the wallet, which would give thieves everything they need to steal your identity.

The SBT whitepaper discusses the use of a “social recovery strategy” to locate wallets that have been misplaced; nonetheless, there is still the possibility of experiencing losses.

It’s also worth noting that the idea of immutable data records stored in the blockchain does not necessarily translate well to other use cases. Although SBTs can be transferred in and out of a wallet, they are still technically unchangeable because they cannot be altered by anyone.

In a way, this is similar to the Bitcoin “blockchain,” but one discerning enough to realize that it is possible to make changes and upgrades. It is a functionality that can only be accomplished by the involved entities.

This adds to a multitude of risks that can arise with SBTs, including instances where an individual could lose their trust in the platform. As previously mentioned, this is similar to but distinct from the social credit system’s reliance on trust and reputation as critical pieces of its operation.

In a social credit system, if you lose trust in the system, you may face serious consequences. This system is supported and enforced by the government, which means that no one can oppose it.

In contrast to this centralization of power over data and reputation, the trustless nature of SBTs creates an environment wherein users are not dependent upon any such central authority for their interactions with other individuals and organizations. By definition, a blockchain is a decentralized platform that does not require any centralized authority to manage it.

The Future of SoulBound Tokens

The Future of SoulBound Tokens

The Soulbound Token framework is still in its early stages and has yet to be proven. It will be a long time before we find out whether or not the underlying idea behind SBTs will become a standard for recording human attributes that can intersect with blockchain technology and other Internet services.

Nevertheless, the basic principles behind SBTs are still at play, even though they aren’t being explicitly used yet. They are being used by organizations to verify the identities of people and things (e.g., NFTs) on web3 platforms like Ethereum.

Unlike NFTs, SBTs will be able to capture the ownership of physical assets (e.g., land). The concept of immutable records that are maintained and accessible by anyone on the internet is a concept that will continue to evolve.

Given their potential for interoperability outside of the blockchain, it’s unlikely that protocols like SBTs will disappear any time soon, especially when they may be able to improve upon how things like land titles are handled.


Sometime in the next months or so, Soulbound Tokens will officially launch as a currency. With SBTs being widely recognized as one of the top cryptocurrencies that are on the market today, we may see a lot of new businesses, organizations, and individuals start adopting this technology.

On the other hand, it is possible that we may not see widespread adoption of SBTs like cryptocurrencies because they are not quite at their full potential yet.

After all, it is impossible to jump into a project that is still under development and expect to succeed. At the same time, however, there are a wide variety of potential applications for SBTs that have not been explored or even thought of yet.

Given the high amount of speculation around SBTs and cryptocurrencies in general, the people who play an important role in making these concepts come to fruition maybe those who are closest to them.

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