If there’s one thing critics of different digital movements can agree on is their argument that in the online environment we can’t prove identity or ownership. Whether it’s the new Internet, Web 3.0, or the virtual reality the Metaverse, many are saying that even in our current situation there’s no way to prove who you really are and your identity or online data can be easily stolen. And while there have been occasions of identity theft online so far, there may be a solution for our future Internet communications.
Soulbound tokens (SBTs) may be the missing link in our digital environment – a way to say it’s us, this is our own data, and you can’t steal or alter what’s real and proven. Serving as a permanent personal record, this new digital token can be a game-changer not only in Web 3.0 but in digital communications as a whole, the same way NFTs came to prove ownership for collectors.
If this brief description of SBTs interests you, keep reading as we’ll tell you in more detail about why and how they were made and what’s their intended use.
How Did Soulbound Tokens Emerge?
If you know anything about DeFi (decentralized finances), you must have heard of Vitalik Buterin. But in case you haven’t, he’s one of the leading people behind Ethereum and ETH – the biggest programmable blockchain and second-biggest cryptocurrency in the world. We’re bringing him to your attention because he’s also behind the tokens we’re discussing here.
In a blog post in January 2022, he discussed the soulbound items from the World of Warcraft game. If you don’t know what they are, soulbound items are game items that can’t be transferred or sold to other players, they’re only the player’s who picked them. In that blog post, Buterin discussed the possibility of non-fungible tokens (NFTs) being soulbound. As the name suggests, NFTs can’t be swapped for each other, like cryptocurrencies are, their purpose is to serve as ownership proof, based on a blockchain and while they have many uses, the most popular one is connected to digital art and collectors proving they own the pieces by buying the NFTs. Back in January Buterin explored what it would mean for NFTs to be non-tradable, not a proof of collectors’ wealth, but a proof of something else that can be given from user to user.
In May 2022 it turned out that Vitalik Buterin wasn’t just making wild speculations, he had given the crypto world a hint of his intentions. Along with a team of other people, he published a paper called “Decentralized Society: Finding Web3’s Soul” which discussed an ecosystem – DeSoc (“Decentralized Society”) where hyper-financialization will be removed in the new reality and a key part of it will be played by the Soulbound tokens (SBTs).
What Are SBTs? Explaining Soulbound Tokens
Knowing their short, so far, history, let’s explain what exactly are Soulbound tokens (SBTs). As taken from the inspiration source of the soulbound items from the WoW game, these tokens can’t be sold or traded in any way. SBTs are going to serve as a digital public verification for your real-life achievements. In simple, they can be called your resume or CV in the next Internet stage, where your education, work experience, credentials, and other important information will be stored and displayed to whoever it may concern.
In What Way Do Soulbound Tokens Work?
As mentioned, SBTs are unsellable, you can’t go and trade them like NFTs and earn profit from them. They are bound to the wallet of their owner and can’t be given to anyone else. These wallets are called Souls and on the blockchain, they store your personal data.
A person, a so-called Soul, can issue their own SBTs, the same way you’d compose your own resume or CV. You can also issue an SBT for another Soul, to prove your successful work together. But not only an individual can be a Soul, institutions can do it too. That means that your school, university, company, or any kind of facility can be a Soul issuing you SBTs that you can later use to prove your participation there, as well as the whole record of performance.
This is where the potential of Soulbound tokens really shines – they can be used to connect people throughout Web 3.0 with their real data and achievements. This data won’t be changed or manipulated since it’s on a blockchain so people can be sure nobody will edit their CVs and like-minded individuals from similar backgrounds can unite through their similar interests thanks to SBTs.
How and Where Can Soulbound Tokens (SBTs) Be Used?
The intention of the Soulbound tokens’ creators is to use them as a proof of identity in various cases, including:
- A personal record, containing all of your basic data, like a resume or a CV
- A proof of your work and internship experience
- A way to receive your diploma, as a university could issue it as an SBT and then nobody can steal or falsify it
- A proof of credit score and history when applying for a loan or a lease
- A proof of attendance of an event, being a conference or other occasions that will matter for your future career
As for where SBTs can be used, according to the paper published in May 2022, Buterik and his team have made the Soulbound tokens to be a crucial part of their Decentralized Society. This society’s place is in Web 3.0 – the next stage of the Internet, presumably decentralized where users will have control instead of corporations. Another place where SBTs will be of use is the Metaverse – a virtual reality accessed through various tech gadgets, like virtual reality or augmented reality, where users communicate in the online environment as if it was real life. Both of these use cases prove ways for SBTs to be implemented in various stages of them, serving as an unchangeable proof of users’ identity and different records. They are upgrading the NFTs’ current ownership proof by removing the trading part of it and supplementing it for accomplishment and data proof.
Are SBTs Available to Use Today?
As of July 2022, Soulbound tokens aren’t available to use just yet. According to the document that announced them, SBTs will likely become ready for early users by the end of 2022 but it’ll take more than two years until in 2024 the team predicts that they’ll be in their full potential. This does sound ambitious but considering the growth that Ethereum has seen, it’s possible for Buterin and his team. Here of course we should mention the upgrade of ETH that’s been going on for a while and keeps being postponed but there’s nothing certain with technology as developers aim to perfect it to avoid any accidents. That’s why we’d rather wait a little longer for SBTs than receive a version that’s not completely good to use.
What Issues Can Arise for Soulbound Tokens (SBTs)?
As mentioned, SBTs aren’t ready for use just yet but based on their announcement paper, some people have found potential issues with this technology. Here’s what people have found worrisome about SBTs:
- Receiving SBTs is involuntary: This may be considered even discrimination as in the Decentralized Society everyone will be issued an SBT. All of your data as well as past doings will be available for everyone online. Yes, today we get our birth certificates and IDs without our say but remember that they’re not up online for the whole world to see. That’s why some people are worried this may be like authorities in the past branding people and controlling them through their past (mistakes).
- SBTs can create risk for minorities: There will likely be people who want to scam others and seeing someone’s weaknesses in their SBTs may create a risky environment online. Now many are trying to scam you on the Internet and when your data is out publicly, it may create even more occasions for malicious attacks.
These two issues have been reported by users online and though they indeed are very worrisome, the team behind SBTs has plenty of time to react. If they consider what the people who will be using it are saying, they should have time to improve the Soulbound tokens and create safer records for the digital space.
What Is the Role of Soulbound Tokens in the Digital Future?
To summarize Soulbound tokens (SBTs) after our lengthy explanation, they are non-tradable tokens that similarly to NFTs serve as proof on a blockchain except they’re not made with a collector’s or valuable purpose but serve as your CV online. That means that SBTs aren’t created to compete with NFTs, they are just a different version of tokens that provide proof of something in the online world, except Buterin, made them with non-commercial use in mind, as opposed to non-fungible tokens.