In early May 2022, an article titled “Decentralized Society: In Search of the Soul of Web3” was published. Its authors are Microsoft Research New lead researcher Glen Vail, FlashBots strategy advisor Pooja Olhaever, and Ethereum Foundation co-founder Vitalik Buterin. In it, they first introduced the concept of Soulbound tokens, or tokens “bound to the soul.” In this article, we will explain what they are and where they can be used.
What are Soulbound tokens and their place in Web3
Soulbound tokens are non-fungible digital identification tokens that reflect important information about a person or organization, such as:
- social characteristics;
- achievements;
- other factors affecting reputation.
They are NFT tokens that are stored in a specific private cryptocurrency wallet, but differ in that SBTs cannot be sold or transferred to other users. They are unique and cannot be transferred to another blockchain address.
Web3 as a technology is used with finite digital assets, but little is said about social relationships in this context. Soulbound tokens (SBTs) should become the main building block for creating a decentralized society (DeSoc) and influence the further development of Web3. Perhaps the idea of the authors of the article will become an integral part of future user interaction in Web 3 and beyond.
“Imagine a world in which most participants have souls that store SBTs corresponding to a range of affiliations, memberships, and credentials. For example, a person may have a Soul that stores SBTs representing documents of education, work experience, or hashes of their writings or works of art. The true power of this mechanism is revealed when SBTs belonging to one Soul can be issued or attested to by other Souls that are counterparties to these relationships. These counterparty Souls can be individuals, companies, or institutions. For example, the Ethereum Foundation could be a Soul that issues SBTs to Souls who attended a developer conference. A university could be a Soul that issues SBTs to graduates. A stadium could be a Soul that issues SBTs to long-time fans,” the authors of the concept claim.
In other words, Soulbound tokens are intended to create a kind of “trust network” between “souls,” which includes accumulated data on the reputation and important social characteristics of the SBT owner. This helps other users better understand the owner of a given token.
SBTs are an innovative way to encode social relationships, allowing for a more decentralized and collaboratively defined sociality in Web3. With the Soulbound concept, it is possible to organize decentralized societies (DeSoc) with the ability to jointly manage and make decisions within common projects and organizations.
How Soulbound tokens can be used
- Identity verification. SBTs are suitable for user authentication, document signing, and identity verification.
- Controlling access to private communities. Soulbound can be used on social networks to create private communities that are only accessible to users with a certain number of SBT tokens.
- Loyalty programs. SBTs can be used to create new loyalty reward systems, allowing SBT holders to access various privileges and services not available to regular users. This increases customer loyalty and helps companies retain their audience.
- DeFi lending. SBTs can represent traditional credit reports and create credit history on the network, forming a decentralized credit rating system.
- Education history. After graduating from university, graduates receive a diploma certifying that they have completed the required courses. It can be digital, for example, in the form of an SBT. Each university can issue its own token certificates. They can contain information about academic performance and skills.
- Resume. SBTs can be used when looking for a job. They can contain previous places of employment, professional achievements, and portfolios. In this case, SBTs serve as proof of qualifications.