According to the Co-Founder of the Ethereum blockchain, Vitalik Buterin, Soulbound tokens (SBTs) are “the future” of Ethereum and Web 3.0. They are non-transferable but revocable tokens linked to a ‘soul’ address.
NFTs are designed to be transferable — you can buy, sell and trade these digital assets over an exchange. It’s a feature that has fuelled their rise to popularity. Some of the most sought after NFTs have been bought, sold and traded for millions of dollars.
But what if NFTs were not transferable? What if they were truly yours? After all, there are some things you cannot sell. Think of your college degree, your birth certificate or your Aadhaar number. What if these things could be represented by an NFT that is tied to you for life?
Earlier in May, the Co-Founder of the Ethereum blockchain, Vitalik Buterin, published a research paper “Decentralized Society: Finding Web3’s Soul.” While the paper looks to outline the future of Web3 and the Ethereum blockchain, it also describes a non-transferable type of non-fungible token, something Buterin refers to as Soulbound tokens (SBTs). These tokens cannot be transferred, and you can hold them in a wallet called ‘soul’ forever.
What are Soulbound tokens (SBTs)
According to Buterin, Soulbound tokens (SBTs) are “the future” of Ethereum and Web 3.0. They are non-transferable but revocable tokens linked to a ‘soul’ address. In their simplest form, these SBTs are much like how we share information about ourselves on our CVs. But its power lies in the fact that these SBTs held by one Soul can be issued or attested by other Souls. For example, a school could be a soul that issues degrees in the form of SBTs to graduates.
Also Read: A look at the most expensive NFTs ever sold
How would Soulbound tokens help us?
As mentioned earlier, Soulbound tokens could be used to represent all sorts of personal information, from university degrees to personal records and even your professional qualifications and work experience.
Soulbound tokens can also be used for event ticketing. After all, event tickets are also usually non-transferable, making it a perfect use case for SBTs. In combination with events, SBTs could also be used to create exclusive airdrops, which Buterin refers to as ‘Souldrops’.
Say there is a DAO looking to create a community of environmentalists and issue them a certain number of governance tokens. The DAO can souldrop these tokens to only those individuals who attended a selection of environmental programs and conferences. The DAO knows who attended these programs because the attendees have an SBT entry token.
SBTs can also be used to represent our credit reports. This will provide lenders with a full-proof credit profile of a borrower. Even the loan itself can be accompanied by a non-transferable but revocable SBT. Once the loan is repaid, the SBT could be burned or replaced with a proof of payment. As such, it would prevent people from hiding their outstanding loans.
How do you not lose your Soul?
Soul wallets will be used to store some of our most important life achievements. Therefore, you have to wonder what happens if you lose/forget the key to your soul address. We all know the pain of misplaced documents and the troublesome procedures of issuing duplicates. However, Buterin has suggested some very convenient recovery procedures in his paper.
Also Read: What is the NBA Top Shot NFT collection?
He has described a community recovery process. It’s a model that relies on your trusted relationships to regain ownership of lost SBTs. Basically, recovering the lost keys of a Soul address would require the consent of a Soul community member.
Users can curate a set of “guardians” and give them the power to change the keys of their soul wallet. These guardians could be close friends, family members, trusted institutions, etc. These guardians could authenticate the owner of the soul address through a conversation, a face-to-face meeting and numerous other methods.
While this does sound great, there are some hiccups too. For instance, there is always the risk of people falling out with their guardians or the guardians passing away. Keeping this in mind, Buterin’s paper said that the precise details to make this recovery model work would need some experimentation.
When will SBTs be rolled out for use?
Buterin hopes to have Soulbound tokens (SBTs) available for early use on the Ethereum blockchain by the end of this year. This is all part of his larger plan to create a “decentralized society” by 2024.