Explained: What Are Soulbound Tokens And How Do They Work?

What are Soulbound tokens?

Soulbound tokens, also known as SBTs, are digital identity tokens that represent a person’s or an entity’s qualities, traits, and accomplishments. It advances the use of NFTs because it is built on blockchain technology. NFTs cannot be duplicated or falsified, but they can be sold or transferred. They are connected to a blockchain by a special identification code. But when an NFT is created to serve as a Soulbound token, it is never able to leave your Soul. The Soul here is a reference to your personal wallet. SBTs aim to transform the idea of NFTs into something more than just cash and bragging rights, such as an exclusive, non-transferable token.

Thus, Soulbound Tokens are Non-Transferable Tokens (NFTs) that are tied to your identity. The unique identifying information of an individual or entity, including personal data and history, such as age, qualification, education, health records, and professional accomplishments, is stored on a blockchain network that is connected to them.


History of Soulbound tokens

Ethereum co-founder Vitalik Buterin first broached the subject of Soulbound tokens in a blog post in January 2022. In the article, he talked about powerful “Soulbound items” that can be found in the well-known fantasy game World of Warcraft. These items have the distinctive property of being unable to be sold or traded to another player once they have been acquired. He claimed that many of the characteristics of rare and epic items in a massively multiplayer online game are shared by NFTs in their current form.

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How do Soulbound tokens work?

Despite the fact that there are currently no formal Soulbound token specifications, it is possible to summarise the fundamental operation of SBT from the whitepaper created by Vitalik and his collaborators. The non-transferability of SBTs is one of their primary distinguishing characteristics. Soulbound tokens are not designed to have a market value and as such cannot be sold or transferred to another wallet, in contrast to current NFTs and token standards like the fungible ERC-20 or the non-fungible ERC-721. This is due to the fact that they are connected to the Souls. What precisely are “Souls” then?

SBTs are produced by accounts known as Souls and are kept there. SBTs, which Souls possess, are used to establish provenance and reputation. Souls can stand in for people, groups, businesses, or other entities, as was previously mentioned. In a decentralized society, a person can have multiple Souls because souls are not expected to have a 1:1 representation of humans (DeSoc).

Uses for SoulBound Tokens

SBTs can be used in a variety of situations. Some of them consist of:

1. Education History

It is acceptable as proof in prestigious institutions like education. Students’ respective certificates can be found in the institution’s Soul wallet once they graduate. The SBT would be in possession of the student’s credentials, demonstrating its legitimacy. SBTs include personal information, individual accomplishments, and employment credentials in accordance with this idea. So, in the event of job searches or employees looking for better opportunities, it can also be used as a digital resume.

2. Applicants for jobs

SBTs can be used to store professional certifications and work history. However, which is similar to how they are used in the educational sector. Companies can provide their employees with SBTs that detail their work history, the projects they have worked on, their accomplishments, and other information that they can later use in interviews or when looking for new employment. SBTs will serve as certificates of skill proof in this situation.

3. Health records

The ability to switch doctors or apply for insurance more easily is made possible by having a medical record as an SBT. It lessens the discomfort of having to confirm one’s identity, present medical records, and explain medical history when changing doctors.

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Uses for SoulBound Tokens in Web 3

1. NFT trading

SBTs are able to weed out bad actors who use well-known artists’ names incorrectly to deceive buyers into purchasing NFT collections. Then, how does this operate? Genuine NFT artists can connect SBT to both their Soul and their NFT collection. The SBT of the NFT collection can then be compared to the Soul of the artist by NFT collectors. Buyers may purchase the NFT if the SBT matches; otherwise, it may be determined to be a fake NFT. SBTs, therefore, aid in confirming the legitimacy of an NFT collection.

2. Governance

Early adopters of Defi protocols receive airdrop tokens in exchange for their faith in and support of the project. These tokens represent voting privileges. But under the current circumstances, any wealthy individual or organization can purchase these tokens from the early adopters, influencing voting rights without actually earning them. People who are willing to shell out a lot of money to buy political power frequently stand to gain directly from their ability to sway elections. Early adopters can be guaranteed that control remains in the hands of users. However, who genuinely cares about the protocol by being given non-transferable Soulbound tokens?

SoulBound Tokens’ Limitations

There have been questions raised about issues such as key loss based on Buterin and his co-writer’s submission. Will users “lose their soul” forever if they can’t access their original wallet and the SBTs stored there can’t be transferred to another wallet? Furthermore, the sensitive nature of the information stored there raises serious concerns about the security of using SoulBound Tokens.

Earlier, Buterin and his team demonstrate that SBTs have a recovery mechanism built to ensure that kegs can be recovered through a particular “guardian” selected by the keyholder. In the latter case, they claim that the SBTs can be either public or private at the user’s discretion. This aids in preventing the online exploitation of users and their data.

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How do you reclaim your lost Soul?

One of the drawbacks of Soulbound tokens is losing your Soul. There is a chance of losing your keys to your Soul and thus losing the data or SBT stored in such cases. Buterin, on the other hand, has proposed a solution for its recovery.

SBTs facilitate a type of recovery known as “community recovery,” which is similar to social recovery. It is a strong method that connects a Soul’s recovery to its memberships in various communities. It also provides a diverse range of real-time relationships for security. SBTs represent a person’s participation in various communities. However, some of these are off-chain, such as membership in a club or church, and others that are on-chain, such as participation in a DAO or protocol governance. Recovery of a Soul’s private keys would require consent from a qualified majority of the Soul’s communities in a community recovery model.

Some examples of SBTs

  1. Keeping track of medical records.
  2. Keeping digital ID cards or memberships safe.
  3. Certifying accomplishments such as job history or education.
  4. Verifying event attendance, similar to a Proof of Attendance Protocol.
  5. Allowing people to create verifiable digital reputations based on their previous actions.
  6. This could make it easier to track a user’s Defi borrowing history and make loans to them.
  7. Introducing reputation-based voting for governance models of decentralized autonomous organizations (DAOs). This could also assist DAOs in mitigating Sybil’s attacks.
  8. Using social recovery to gain access to a person’s misplaced private keys.

Currently, are there any Soulbound tokens?

SBTs are still in the conceptual stage right now. Glen Weyl, a co-author of the original SBT whitepaper, predicts that by the end of 2022, there will already be some early SBT use cases.

The first SBT to be released on the BNB Chain, Binance Account Bound (BAB), was launched by Binance on September 8, 2022, making it the industry leader in SBT deployment. By acting as a digital verification tool for Binance users who have finished KYC, BAB aims to address identity verification issues in web3. It has no monetary value and cannot be transferred.

The future of soulbound tokens

Blockchain aims to give regular people control over their data and how it is used, not just to store value. With the emergence of SBTs, the average person is in control of their data and can choose how to manage it and who can access it. This may seem insignificant, but it represents a significant improvement over the centralized model of data storage that we currently accept. In other words, SBTs are the logical next step in blockchain’s quest for true decentralization.


According to Vitalik Buterin, Soulbound tokens are a foundation for a decentralized society. SBTs are helping to build a DeSoc by establishing digital identity and provenance. Even though the idea of a decentralized society may seem abstract, there are still useful applications to be thought about. A new phenomenon called SBTs is likely to revolutionize the web3 ecosystem. Also, to elevate the idea of NFTs above simply owning works of art and bragging rights. SBTs have numerous applications in web3, Defi, and even daily life.

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