Soulbound NFTs
Soulbound NFTs or Soulbound Tokens are NFTs that are non-transferable, making them ideal for managing permanent records. Soulbound tokens cannot be bought and sold and are not designed to have market value. Instead, they can be issued by individuals or by another entity to symbolize an accomplishment or identity. They are held in wallets known as Souls.
The concept was first discussed in a blog post by Buterin in early 2022. He gave an example from popular fantasy game World of Warcraft in which there are powerful “soulbound items” that cannot be transferred or sold to another player once picked up.
This idea later published by Buterin and his colleagues in the article “Decentralized Society: Finding Web3’s Soul.” Soulbound tokens are described as non-transferable digital tokens that represent social identity in a decentralized society. According to Buterin, SBTs will function as a comprehensive suite of tools for online users to preserve and protect their identity.
Soulbound tokens cannot be bought and sold and are not designed to have market value. Instead, they can be issued by individuals or by another entity to symbolize an accomplishment.
Use cases of SBTs
Soulbound tokens expand the use cases of NFTs. They can be used for immutable records such as employment history, work experience and academic credentials. They aim to represent the holder’s social identity by containing their commitments, credentials, and affiliations.
tokens can be used in fields like education, professional spaces (as a digital resume), mementos of attendance to major programs. They are perfect tools to act as Proof of Knowledge.
The fact that they are non-transferable means that they are tied to the user for life. The owner of the token can then control who has access to the data contained within the token. It can also revoke that access when they see fit. So SBTs offer a solution for individuals who want maximum control over their personal data. Allowing the management of data in token form, rather than kept on a central database.
Brands could issue soulbound NFTs to their customers for purchasing a specific product, or perhaps release limited-edition items with SBTs attached. This way you can avoid speculative buying, where some people quickly buy up the whole batch of limited-edition sneakers or bags and then re-sell them on eBay for several times the original price.
Some well known use cases are:
1. Identity Verification
SBTs can be used as an identity, like;
· Single-Sign-On
· Proof-of-identity for institutions
· Reputation staking for mutual credit and community credit
· Creditworthiness affirmation to access financial products
· Executive memberships
2. Medical History
Your own medical history can be stored as a SBT so that it can enable a seamless process while switching hospitals or seeking insurance. It helps eliminate the bottlenecks of verifying one’s identity, past medical records, and explaining medical history.
3. Education
Proof-of-education. When you graduate from a University, you get a diploma with a transcript of the courses you’ve passed. Your University can issue a SBT for you that would effectively store your credentials, proving that you hold legitimate qualifications and are a member of that respective University. SBT can function as required proof of your attendance at the University.
4. Awards
If you want to give someone an award for his/her accomplishments, you wouldn’t want him/her to sell it, right? The award is given to the person for their own achievements, and you want to honor and appreciate them by giving an award. Reselling would be meaningless. Soulbound tokens can provide this.
Also, suppose a company wants to reward people with an NFT each time they attend an event or a training program. If the company gives these rewards as a SBT, a soul-bound NFT would make digital events more tangible, rewards more lasting, and, in the end, bonds with customers more permanent.
SBTs also help create unique rewards and achievements for game players. As SBTs are non-transferable, they will always remain with the same user, so players can accumulate rewards over time and showcase their progress. This encourages players to continue playing, providing a sense of satisfaction when achievements and milestones are reached. This is especially true of games that have built up massive communities. Gamers deserve to be shown more appreciation from the studios for the time and value they bring to the game, and SBTs can facilitate this.
Risks of SBTs
Briefly, soulbound NFTs are digital assets that exist on a blockchain which can be used to represent anything from an ID to a trophy and stay with the bearer for a lifetime.
The bearer of the soulbound tokens must be aware of the fact that if he/she loses his/her private key of the wallet, then there is no way to reach that wallet again. Since these tokens are immutable and act as identifiers for individuals on the blockchain, a high level of security is required on both the wallet and token levels. Proper safeguards are necessary to ensure that user data is safe and can only be accessed by authorized users. Greater standardization and review processes for both tokens and wallets are required to ensure that the necessary security features are implemented.
Conclusion
Soulbound NFTs offer a new way to bring permanence and ownership to the metaverse and web3 world. Soulbound NFTs allow people to truly immortalize events, ideas, and secure ownership indefinitely in a digital world. A soulbound NFT would make digital events more tangible, rewards more lasting, and, in the end, bonds with customers more permanent.