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29. Soulbound Tokens – what are they, and how do they work?

In the fast-moving world of blockchain and Web3, some ideas have the potential to redefine how we see identity, reputation, and trust online. One of the most intriguing concepts in this space is Soulbound Tokens (SBTs). Despite the unusual name, these tokens could shape the way we interact, build communities, and verify information in the decentralized web.

What Are Soulbound Tokens (SBTs)?

The idea of Soulbound Tokens first appeared in May 2022, introduced by E. Glen Weyl, Puja Ohlhaver, and Ethereum’s co-founder Vitalik Buterin. Their vision? A new type of non-transferable token that captures a person’s credentials, achievements, memberships, or affiliations – all tied to their digital identity.

These tokens are at the core of a concept called the Decentralized Society (DeSoc), a vision for Web3 that focuses on collaboration, transparency, and digital ownership without relying on big tech companies or central authorities.

Why “Soulbound”?

The term “soulbound” comes from gaming – specifically World of Warcraft, where certain items are bound to a character and can’t be traded. In crypto, a Soulbound Token is tied to a single wallet (called a “Soul”) and cannot be sold or transferred. Once it’s in your wallet, it stays with you – just like your reputation in real life.

These tokens aren’t meant to hold monetary value. Instead, they function like proofs – confirming that you completed a course, joined a community, attended an event, or earned a credential. They could even be used to verify other SBTs. For example, a university could issue a token confirming your degree, and an employer could validate it by issuing their own reference.

How Do Soulbound Tokens Work?

There’s no final technical standard for SBTs yet – the idea is still being developed. But here’s what we know so far:

  • They’re non-transferable: You can’t send them to someone else.

  • They’re non-tradable: They don’t have a market price.

  • They’re verifiable: They can prove facts about you, like your skills or achievements.

  • They’re issued by trusted entities: A company, university, or DAO might give you an SBT.

  • They’re stored in “Souls”: Think of these as wallets tied to your identity.

SBTs aim to improve transparency and trust in Web3, while reducing scams and fake identities. Since they have no monetary value, they’re less attractive to hackers and scammers.

Where Can SBTs Be Used?

Even though SBTs are still in the concept stage, there are already many use cases being explored:

  • Proof of education – A company could check your wallet and instantly verify your degrees or certifications.

  • Digital resumes – Imagine a secure, tamper-proof CV stored in your wallet.

  • Medical records – Personal health data tied to your Soul wallet.

  • Event access or credentials – Tokens that prove attendance or participation.

  • Community governance – Proving you’re part of a DAO or online collective.

They could even be used in systems like “social recovery,” where a group of trusted people help you recover your wallet if you lose access.

Example: Binance’s Soulbound Token

In 2022, Binance introduced its own Soulbound Token called BAB (Binance Account Bound), designed as a form of decentralized identity verification. It was one of the first real-world applications of the concept.

The Bigger Picture: Web3

Web3 is the next generation of the internet – built on decentralization, privacy, and user ownership. Unlike Web2, where tech giants own your data, Web3 gives that control back to you. Blockchain technology and tokens like SBTs make this shift possible by turning identity, trust, and data into secure, user-owned assets.

Pros and Challenges

Advantages:

  • Increased privacy and trust: SBTs can verify who you are without exposing personal details.

  • No risk of trading or fraud: No one can steal or sell your token.

  • Better community building: Membership, participation, and reputation can all be tracked and verified on-chain.

Challenges:

  • Still conceptual: There’s no official standard yet.

  • Adoption required: SBTs need widespread use by trusted institutions.

  • Ethical concerns: Some worry about tying identity too tightly to blockchain records.

Summary

Soulbound Tokens could become the building blocks of a new digital society, where identity, reputation, and achievement are managed transparently and securely. They’re not about money or speculation – they’re about trust, community, and proof of who we are online.

Whether this concept becomes a reality depends on how developers and users adopt and adapt it. But one thing’s clear: Soulbound Tokens could help define what it means to “own” your identity in the age of Web3.

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