Soulbound Tokens (SBT) are a concept proposed in May 2022 by Ethereum co-founder Vitalik Buterin, lawyer Pooja Olhaver, and economist and social technologist Glen Weil.

Together, they wrote a whitepaper called Decentralized Society: Finding Web3's Soul. It contains the basics of a fully decentralized, user-run society, as well as examples of how Soulbound Tokens (SBTs) can be used as credentials for everyday life.

2. What is SBT?

2.1 Definition and Purpose

Soulbound tokens (SBTs) are digital, non-transferable IDs on the blockchainThey can contain health information, resumes, and other data that characterizes a person or organization. These tokens are issued and stored in a wallet called Soul.

2.2 Functionality

Each person can have several such wallets that reflect different areas of their life. For example, you can have a portfolio for work and a medical card for health information. Such a system will allow you to create a digital and verifiable reputation in Web3 based on previous experience and actions.

At the same time, Soul wallets can be owned not only by people, but also by organizations. For example, a company can issue SBT to its employees, and a digital country club can issue it to clients of a certain status.

2.3 Origins of the Concept

The concept owes its unusual name to the popular online game World of Warcraft, from which the creators took the idea of ​​binding.

Some items in World of Warcraft cannot be sold or traded. Once in the inventory, they are permanently bound to the "souls" of players.


2.4 Comparison with NFTs

Imagine applying this principle to non-fungible tokens (NFTs). Most of them are currently art pieces or collectible assets, like the Bored Ape Yacht Club. NFTs are bought, sold, and displayed as a symbol of status and wealth.

However, the new concept of SBTs transforms non-fungible tokens from a means of exchange and bragging rights into unique and non-transferable data. That is, NFTs represent assets and property, and SBTs represent the reputation of a person or organization. Unlike NFTs, SBTs have no price and cannot be exchanged once issued in a wallet.

3. How can SBT be used?

3.1 Study History

After graduating from university, graduates receive a diploma for completing the required courses. This can be digital: an educational institution can become a Soul account that issues SBT to students’ Soul accounts. Such a token can contain information about academic performance, confirm skills, and study at the university. Simply put, SBT can be proof of completion of training.



3.2 Resume

When applying for a job, applicants can provide official SBTs from previous places of work, which contain their portfolio and professional achievements. In this case, SBTs are proof of qualifications.

3.3 Medical Records

SBTs with health information can speed up the change of doctors or medical institutions. Perhaps, with such tokens, there will no longer be a need to waste time filling out documents, checking medical history, and making phone calls.

4. Why SBT is needed in Web3

4.1 Trust in a Trustless System

Trust is one of the main challenges of the Web3 industry. How can we trust someone’s reputation in a system that is inherently trustless? Let’s say we want to lend money to someone. SBTs can replace the credit score that banks usually calculate. Such tokens can track a user’s DeFi loan history and other metrics to determine their risk profile.

4.2 Governance in DAOs

SBTs could also transform voting in decentralized autonomous organizations (DAOs). Under the current DAO governance model, the more tokens a user holds, the more weight their vote carries. Instead, organizations could use historical SBTs and distribute votes based on community activity. This would make voting more about the reputation of users rather than the size of their wallets.

4.3 Protection Against Sybil Attacks

In theory, SBTs could also protect voting from Sybil attacks, one of the most serious threats to the current DAO governance model.

In a Sybil attack, a malicious actor or group of malicious actors seizes control of the DAO by acquiring a majority of the governance tokens. They can then manipulate voting patterns and change the project to their advantage. Since SBTs are public and auditable, they can be used to identify such malicious actors and keep them out of the DAO, thus preventing Sybil attacks.


5. Real-life examples of SBT

5.1 Current Status

As of August 2022, SBT is still just a concept. Glen Weil, one of the co-authors of the SBT whitepaper, believes that the first use cases for such tokens will appear by the end of 2022.

5.2 Binance Account Bound (BAB)

Binance recently announced the launch of its own SBT called Binance Account Bound (BAB). The BAB token is non-transferable, has no price, and is the first SBT on the BNB Chain blockchain. BAB is designed to solve identity verification issues within Web3 and serves as a digital verification tool for KYC-certified Binance users.

BAB tokens are used in the Binance ecosystem and third-party protocols, which can use them for NFT airdrops, bot protection, DAO voting optimization, and more.


6. Conclusion

SBT is a hot topic in the Web3 conversation. In theory, such tokens will allow users to create their own digital reputation on the blockchain and verify the identities of other network participants. For now, it remains to be seen whether SBTs can become the “identity card” for the Web3 era.