29. Soulbound Tokens – what are they, and how do they work?
Soulbound tokens can have a real impact on development and the way it is formed in Web3. Well, even though their name is super unintuitive – “soul” does not suit us in the crypto industry – they can change the way we relate to each other, manage communities or how we share information.
In today’s lesson, we’ll explain what these tokens with the “soul” are , to what part of Web3 they belong, how they work and where they can be used.
What are Soulbound Tokens (SBT)?
In May 2022, this phrase was used for the first time. This kind of proposal tokens came from E. Glen Weyl, Puj Ohlahaver and Vitalik Buterin. Soulbound Tokens are to be a fundamental block in the Decentralized Society – the new trend of Web3.
However, before we go into more detail about new souls, we need to remind ourselves what DeSoc is.
Decentralized Society (DeSoc) is based on cooperation between network users. Gloriously, it’s about to changeWeb3 to something more exclusive, democratic and decentralized.
And it is here, on a white horse like Roland, that our “souls” enter. Soulbound Tokens are the basic element of Decentralized Society. Our new non-transferable tokens are meant to represent our commitments, affiliations, traits, properties, and even achievements. At the same time, they create social relationships on Web3 networks.
About the new one generation of the Internet i Metaverse, almost everyone says. Both of these terms are gaining popularity in the industry of cryptocurrencies, and more and more people are working on their development. What exactly is all this Web3?
This is the next generation of the internet, which puts virtually every aspect of the web in the hands of users. Its main feature is to be fully decentralized. Currently, most of the platforms we use or web applications are in the hands of global corporations. We are talking about Google, Facebook, or Instagram.
Web3 assumes that centralized servers will be distributed over computer networks. In terms of usability, it will not differ much from Web2, the Internet as we know it. However, a lot will change in terms of content ownership. In Web3, the ownership of the data will be transferred to the creator, and he will help with this blockchain technology, tokens and cryptocurrencies.
Proponents of the next-generation Internet point out thatWeb3 will abolish censorship and effectively eliminate global giants from the technology industry. Moreover, the distributed network will guarantee fairness and no need to save data (cookies) without the user’s consent.
How do Soulbound work?
We don’t have any formal specification yet for Soulbound Tokens. They are still only in the idea phase, although some of their features have already been outlined. We will share with you what we know ☺
- Soulbound Tokens, they are non-transferable. They have no market value and cannot be transferred to another wallet.
- They are mainly used to issue credentials and references. SBT is to be distributed among members of some group or institution. Interestingly, Soulbound Tokens may certify to other SBTs. That is, SBT MicroStrategy can issue references to Soulbound Tokens for the “soul” of a former employee. This helps us avoid false credentials.
- Since they have no market value, according to Vitalik, they can help solve problems related to fraud and theft, which are becoming more and more common.
- Soulbound Tokens will increase trust. “Souls” will allow users to research an artist in depth before they support his project.
- Tokeny Soulbound are issued and stored in accounts (wallets) named “Souls”. They can be associated with individuals, companies, etc. In Decentralized Society one man can have many souls.
However, we remind you that the system still does not exist. Therefore, its exact mechanics are unknown. For now, we are left with speculations and guesses. However, we can be sure that Vitalik Buterin will definitely surprise us.
As with the social recovery model. This is a proposed solution to protect your “Soul” wallet from being hacked or losing the key to your address. Thanks to it, users choose their guardians who help them in such situations. Keepers have access and the ability to change the private key. So, the community will be able to help in the recovery process.
Not knowing the full mechanism and their functionality, one could presume that the potential Soulbound Tokens are unlimited. We will look at:
- Proof of education – companies, looking into someone’s Soul Wallet, could verify the candidate in terms of his experience, certificates or even completed courses.
- Virtual Wallet – completely safe, which contains your confidential data in the form of a token Soulbound.
- Medical history – also represented by the “soul”.
However, we have to wait a bit to see Soulbound in full glory.
- Binance has released Binance Soulbound Tokens BAB as one of the forms of authentication.
- The name “Soulbound” comes from Vitalik’s favourite game, World of Warcraft. You can read more about this interesting personality. We profiled him here.
Looking now, we see that Soulbound Tokens can become a fundamental element of Decentralized Society. A community that is formed because of common goods, network, and property will be governed by “souls”. However, we have to wait for the full presentation of these new, interesting tokens.