Think of an NFT that is unique and just for you. You cannot buy it from any market, nor can it be sold or transferred to anyone. This is one of the interesting features about Soulbound Token, so what is special about Soulbound Token, let’s find out with Weakhand in this article.
What is Soulbound Token (SBT)?
Overview of Soulbound Token
Soulbound Token, also known as non-transferable NFT, is a digital asset that is permanently tied to a wallet address of a specific individual. This means that once a user mints their Soulbound Tokens, they cannot be sold or transferred to other wallet addresses.
Soulbound Tokens can therefore be used in verification systems, authorizations, achievement-based certificates, and more generally as items that can only be earned instead of purchased.
What is Soulbound Token?
History of the birth of Soulbound Token
The origin of Soulbound Token comes from Ethereum founder Vitalik Buterin in his blog post talking about “Soulbound” and how it can be applied in the current blockchain context.
In Vitalik’s Blog post discusses the meaning of the item “Soulbound” in popular games like World of Warcraft and how the same concept can be applied to NFTs to create provenance and reputation in the blockchain. In World of Warcraft, a “soulbound” is a powerful item that cannot be transferred or sold to other players. These items often require completing a quest or defeating a powerful monster, and they are an important aspect of the game’s mechanics. This makes the game challenging and ensures that the player needs to actively engage in difficult missions to collect the best items and get the maximum experience from the game.
How Soulbound Token Works
As noted above, one of the most important features of the Soulbound Token is its non-transferability which is completely different from today’s more popular token standards. For example, the ERC 20 standard is for tokens such as: ETH, … or ERC 721 is the basic standard for NFTs such as Bored Ape Yacht Club (BAYC), Azuki, ….
Soulbound Tokens will be like an extended resume issued by other wallets to authenticate these social relationships. This helps Soulbound Token to be used for the purposes of building a decentralized society (DeSoc).
Soul Addresses also known as SBT Creator can create and issue Soulbound Tokens to other wallet addresses. When a wallet address receives Soulbound Tokens, they will be permanently attached to this wallet address for the duration of its existence.
All information about Soulbound Token and SBT Creator is publicly stored on Blockchain, so anyone can look up all information related to the lifecycle of a Soulbound Token.
Pros and Cons of Soulbound Token
Advantages of Soulbound Token
- Soulbound Token allows for better trust relationships in a decentralized environment.
- Soulbound Token enables Defi lending platforms to issue unsecured loans.
- Soulbound Token can significantly improve the voting mechanism in DAO.
- Soulbound Token can be used to provide certificates and titles to participants.
Disadvantages of Soulbound Token
- Privacy: The fact that all user information is publicly stored on Soulbound Token compromises user privacy in blockchain operations.
- Dupe Soulbound Owners: Some people obtain SBT by acting for the benefit of the community but instead secretly maintain and use another major wallet for their own benefit.
The Difference Between Soulbound Token And NFT
NFTs are transferable tokens stored on the blockchain, representing a specific proprietary asset that can be: art, games, videos, etc. The applications of NFTs are unlimited For example, there are some similarities between NFTs and Soulbound Tokens but there are also some key differences, and these differences are reflected in their use cases. Below is a table comparing the features of each token type:
|
|
NFTs |
Soulbound Tokens |
|---|---|---|
|
Use |
NFTs represent ownership of assets |
Soulbound Tokens represent information about their holders |
|
Trading capabilities |
NFTs can be exchanged, bought or sold |
Soulbound Tokens cannot be transferred or traded |
|
Token approval |
Most NFTs cannot be revoked when sold or transferred |
SBT Creator is recoverable through a community recovery model |
|
Ability to split |
NFTs are unique and cannot be divided |
Soulbound Token contains information about users that can be broken down into individual NFTs |
Soulbound Token Use Cases
Use cases of Soulbound Token
Currently, the potential applications for the Soulbound Token seem unlimited. Here are some common use cases of Soulbound Token:
- NFT Ownership: Artists and creators can use Soulbound Token to combat counterfeiting by linking to their art profiles.
- Administration rights & decentralization: Current projects are using Tokens to vote on governance decisions on the platform. However, this is easily manipulated by whales and large organizations, so Soulbound Token helps overcome this drawback, helping voting rights be distributed more evenly among community members.
- Unsecured loans: Lending platforms can rely on Soulbound Tokens from user wallet addresses to score credit for collateral-free loans.
- Achievement items in the game: Current web3 games can apply Soulbound Token in their system to reward members with outstanding achievements in an event or certain event.
- In addition, Soulbound Token can be applied in many real-world fields such as being used as some identification documents such as driver’s license, passport,…
summary
The introduction of the Soulbound Token concept can take Crypto to the next level by optimizing community-driven governance and funding. However at the present time, Soulbound it’s still too early and there’s too much to explore and know for it to be implementable and viable in Crypto. Above is all the information I provide about Soulbound Token, hope everyone has useful knowledge about Soulbound Token.
