When the blockchain space was bustling with NFT hype, Vitalik Buterin (Ethereum co-founder) thought otherwise – with his recent white paper release that describes Soulbound Tokens (SBTs) and Decentralized Society (DeSoc). If you’re a gamer, you would be familiar with the term ‘soulbound’ as the popular term hails from the World of Warcraft game. 

I’ve heard about Soulbound tokens but wish to know in-depth about them – is that you? This blog revolves extensively around an NFT token like soulbound that could help you make informed decisions.

Understanding SBTs

‘Soul’ is not an usual tech-specific word – which sounds strange and unintuitive in the crypto context. But then, it was Vitalik Buterin’s white paper that used the term ‘soul’ in a technical context for the very first time. 

A soulbound token is one that, once received, cannot be transferred (but is revocable, though). You cannot share or sell them once they are in your wallet. They owe you something. A Soulbound Token is something you have in your Soul wallet eternally after receiving it. The issuer can only burn the Soulbound token. Vitalik knows the tokens owned by the accounts as “Soulbound Tokens” and the accounts themselves as “Souls” (SBTs).

If Not Transferable, then What’s the Use Case?

A token, whether fungible or non-fungible token (NFT), is transferable from one account/wallet to another. However, a soulbound token belongs to the holder’s wallet (‘Soul’) for the rest of their life. Simply put, the soulbound tokens are non-transferable and can only be burned by the originator. 

Let’s say:

A Decentralized Autonomous Organization (DAO) hosts environmental conferences, where the community owner can issue SBTs – which is called the ‘Souldrop’ in Buterin’s white paper.

Or else, imagine when universities begin to issue graduation certificates on-chain to their scholars. We’re seeing certificate thefts and misuses in the real world – which the SBTs could prevent. An SBT, encompassing the degree details, is forever an indication of the degree that is not transferable. 

What if Web3 companies wish to hire blockchain experts for their projects? SBTs would help those companies cross-verify the candidature – hiring could become simpler with Soulbound tokens in a few years. Who knows – these companies could be embracing Soulbound token development to leverage in one way or another. 

How Could SBTs Work?

(At the time of writing) Soulbound tokens are merely an idea – none knows how they work (maybe, Buterin!). But then, the Buterin (co-written White paper) had traces of operating mechanisms. SBT’s primary feature is non-transferability – unlike today’s multi-niche NFTs. Also, the Soulbound tokens are not designed to enjoy a market value. 

When issued by other wallets that attest to these social connections, Soulbound tokens will act as an extended resumé. They are only given to different addresses, often called soul addresses, by SBT makers. Once transferred, they will remain at that wallet address for their existence. 

Are SBTs Prone to Hack?

I could only reminisce a popular axiom:

 
It may sound strange, but nothing is unhackable in the blockchain space. However, what matters is how blockchain projects deploy recovery concepts. Buterin advocated a social recovery concept in his white paper, which deploys community members as ‘guardians’ who will modify the private keys of the wallet. 

It remains to be seen what happens when the guardians pass away or choose not to participate – the white paper doesn’t seem to have an answer for that, as of now! 

SBTs will be easier to recover in the event of theft, according to Buterin, if a bigger community is allowed to participate in the recovery process. Recovering a Soul’s private keys “would require consent from a qualified majority of a (random subset of) Soul’s communities,” the authors write.

What Differs Soulbound Tokens from Non-fungible Tokens (SBTs vs NFTs)?

Now, let’s discuss the key distinctions between non-fungible tokens (NFTs) and Soulbound tokens (SBTs) . We have heard a lot about NFTs and how they enable token holders to possess a unique asset that is kept on the blockchain. These NFTs might serve as a digital duplicate of a real-world item or as digital proof of ownership for anything held on the blockchain.

Most frequently, we link NFTs to pictures, memes, apes, and punks. NFTs, however, could be used in a wide variety of different applications. We have observed many businesses releasing their NFT collections to gain more media attention.

Where Could SBTs Go from Here?

Vitalik Buterin’s co-written White paper indicates that the Soulbound tokens could go mainstream by 2024. However, in the meantime, SBTs could be incorporated into the Web3 projects here and there. It remains to be seen how it unfolds – whether it becomes a foundational element of the Decentralized society or becomes a passing fad. 

Conclusion

Soulbound tokens hold unforeseen potential – no doubt about that. But then, those tokens going mainstream is practically far away!If you wish to embrace the NFT token like Soulbound as a business model, best of luck. Or else, if you want to perceive a business model around a white-label NFT marketplace, AppDupe can assist you!