Home Why is the idea of Soulbound tokens (SBT) great?

Why is the idea of Soulbound tokens (SBT) great?

Cryptos

5 min read

Soulbound tokens (SBTs) are a new type of non-transferable cryptographic asset. Soulbound tokens represent a person's digital identity. These tokens are therefore unique and non-transferable.

Unlike non-fungible tokens (NFTs) , they cannot be used or owned by other people. In fact, the whole point of SBTs is that they are unique and refer to a single entity (person, object, diploma, etc.).

Before even imagining the challenges that such technology could face, it is clear that its success could increase the level of decentralization of our societies.

This article is written to explain to you what soulbound tokens are and how do they work?

What is a Soulbound token (SBT)?

Soulbounds are linked to a “Soul” address, which acts as a wallet dedicated to Soulbound tokens (SBT). Users will therefore be able to own Souls which store the SBTs they hold.

In fact, anything that cannot be transferred can be considered a soul bound token. For example, your identity, your diploma, your health passport are unique objects. They cannot be transferred.

Soulbound tokens (SBTs) are a type of non-fungible, non-transferable token (NFT) that allows for the decentralized tracking of a person's social origins. This is yet another use case for blockchain that could serve our immigration services far better than our often-falsified passports. This is just one concrete example of what soulbound tokens could be used for.

—>Read: NFT royalties: Lifetime commissions on the sale of your artwork

How did World of Warcraft bring about the idea of SoulBound tokens?

The concept of soulbound tokens (SBT) emerged during 2022. They are the brainchild of three major figures in the crypto ecosystem, the most well-known of whom is Vitalik Buterin, the co -founder of Ethereum.

The idea is that people could possess wallets (souls) containing items that represent various aspects of their lives. These could include medical records , diplomas, professional skills, and so on.

The idea comes from the online game World Of Warcraft. Players do not have the ability to sell or even transfer items tied to a player's soul. Items picked up by players are forever tied to the player's soul.

This is how the idea of a soul-bound token was born in Vitalik Buterin 's mind . However, it's important to know that the question of digital identity, and even that of non-transferable tokens, has often been debated within the ecosystem and among cryptographic researchers.

What can Soulbound tokens be used for in concrete terms?

The use cases are numerous and here are some concrete examples:

--> Degrees : Certificates and diplomas will most likely be the best-known and most widely used forms of Soulbound Tokens (SBTs). SBTs would then store all the student's information and irrefutable proof that the degree is valid and legitimate. How many people use fake degrees? With SBTs, the problem of fake degrees will be solved.

–> Health records : Here again, medical records present a practical application. We each have a unique medical record with a history specific to each individual. Thus, a health record could ultimately improve the lives of millions of people through the practical application of this technology. Abroad, for example, all hospitals could access a patient's medical history with just a few clicks. This would simplify the monitoring of a person's treatment.

These are just two examples, but there are many more practical cases. Likewise, it is also on web 3 that soulbound tokens could find a major and very useful use.

SBTs, a practical case for Web3?

Vitalik Buterin claims to see it as the future of digital identity and a unique springboard for the development of Web3 in general.

Indeed, as we've seen with the need for doxing (identity disclosure) for some developers, it's sometimes essential, if not indispensable. For example, it could provide the necessary "trust" for certain protocols. The crypto industry has suffered far too much from rug pulls , rekt , and other scams facilitated by anonymity . SBTs could then clean up the crypto industry through simplified identity verification.

Web3, this new generation of internet technology, which is based on a decentralized infrastructure, has indeed forged an alternative financial system to the traditional system, but it remains (still) dependent on Web2. Indeed, decentralized finance (DeFi) does not yet offer successful solutions such as unsecured loans. For example, in this specific case of crypto loan, SBTs could provide information on people's credit scores. We could track borrowing history, etc. in order to provide more relevant financial services.

Most developers and artists who create NFTs still rely on platforms like OpenSea and Twitter . DAOs (Decentralized Autonomous Organizations) are still dependent on centralized entities like Discord. For Vitalik, SBTs are there to solve all of these problems.

What are the SBTs that can be used today?

If you are looking for an SBT that you can use now, know that Binance was the first exchange to launch its own SBT. This is called the Binance Account Bound (BAB). It is the first SBT token launched on the BNB chain. This token is used for digital identification on Web3. For example, users who have completed the KYC process can then use SBTs for verification on other services in a simpler way.

What is the difference between SBTs and NFTs?

Non-fungible tokens (NFTs) are used today primarily as certificates of ownership. So, in essence, NFTs are transferable and this is even what makes them so useful and relevant for the art world. Certificates of ownership must be transferable. This is not the case for identity, for example, or diploma. This does not transfer and that is why soulbound tokens are so useful. An SBT has no monetary value and cannot be traded unlike an NFT.

Once it is issued to a wallet, an SBT cannot be moved.

Note: There is no financial advice in this or any other article on this site. This is information of which you are the sole judge and master. Be responsible with your investments and only invest as much as you are willing to lose.

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