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Soulbound Token: Non-transferable NFT

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On 17 December 2021, Adidas held a virtual event to announce the launch of its Metaverse. The sportswear brand rewarded its fans with a POAP (Proof of Attendance Protocol). Like most NFTs, POAPs are ERC-721 tokens, and their purpose is to demonstrate that the owner was present at the corresponding event.

On the adidas Metaverse launch event page, the company shares that the token proves its owner has been there from the beginning. But this is not right. Since POAP tokens are transferable, you can trade them on secondary marketplaces such as OpenSea This means that the current owner of the “Adidas into the Metaverse” POAP was not present at the said event.

To prove presence, NFTs must be non-transferable. That’s where Soulbound Token comes in.

Another brainchild of Vitalik Buterine

Soulbound tokens were first introduced in January 2022 in a blog post by Ethereum co-founder Vitalik Buterin. In that post, he mentioned that he was inspired by World of Warcraft’s “Soulbound Items”, which are powerful game items that can be acquired once. Will not be sent to other players. He emphasized that POAP tokens would work better if presented as soulbound NFTs

Proof-of-attendance is one of many situations that can benefit from this concept. You can prove that you are the actual holder of your skill certification or other educational degree, thanks to Soulbound tokens.

Vitalik E. expanded on this idea in a paper titled Decentralized Society: Finding Web3’s Soul with Glen Weyl and Puja Ohlhaver, where the authors explain how SoulBounds Tokens (SBTs) can be used to establish a decentralized identity reputation. In the paper, it is also noted that SBT can fulfill this function by representing commitment, credentials and affiliation. As a result, they can be the building blocks of a decentralized society (DeSoc).

How can we use Soulbound tokens?

While a regular NFT represents a tradable asset, an SBT represents a token that has no monetary value and is permanently attached to a person or entity.

SBT is still mostly a theoretical concept. But basic principles allow us to imagine possible applications. Since they are mainly designed as identity reputation tokens, we can think of similar use cases

  • Educational credentials
  • Employment history
  • Medical records
  • Driver’s license
  • Crypto-specific cases based on personal reputation, such as taking out a DeFi loan or protecting against Sybil attacks.

In the paper, the authors suggest using the term soul to represent an individual’s account, similar to a crypto wallet. Soles may also refer to issuers of SBTs. They can be associated with any entity, such as a university, employer or a hospital.

People can have multiple souls, each representing a specific part of their life. They may, for example, have one soul for professional certification and another for health-related documents. A soul can have multiple SBTs.

What are some Soulbound tokens with actual use cases?

Binance is launching the Binance Account Bound (BAB) token, which is basically an SBT. Its purpose is to prove identity. Every Binance user who completes the know-your-customer verification process will be able to mint BAB tokens and participate in multiple projects to earn rewards.

xHashtag is creating #SoulSwag tokens to create work-related certifications, such as competency certifications that demonstrate one’s proficiency in a specific type of work. xHashtag is distributing free #SoulSwag in partnership with other projects where users record their achievements for completing certain tasks. Another use of xHashtag is to improve the DAO voting process. By analyzing a person’s collection of #SoulSwag tokens, DAOs can determine whether their voting power is valid.

Some Web3 projects allow the creation of SoulBound tokens by providing the necessary interface SDKs and APIs, such as Idexo.



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