The Vitality of Web3 Ecosystem: An Introduction to Soulbound Tokens

Crypto developers are motivated to build a complex system based on social identities and class rather than the hyper-financialization and commodities that exist in web3 technology. Soulbound tokens can help to create such communities by giving a type of address that will help in the establishment. Soulbound tokens are a part of NFTs and are non-transferable. It holds data about individuals’ identities, reputations, and other information that may help to accelerate the process of a decentralised society. Further, you can visit

Soulbound Tokens Explained 

The founder of Ethereum Vitalik Buterin was the creator of Soulbound Tokens. He first mentioned it in the whitepapers describing that it is a part of NFTs and holds the data about individuals’ identity and reputation in society. It is the job of the whitepaper to store and issue these SBTs as souls. In an interview, Vitalik tells that some NFTs like Cryptopunks and Bored apes are now considered to be a status symbol. 

The NFTs cannot be trusted at all because it allows the transfer of data. While on the other hand, SBTs don’t allow it which makes it trustable for the users. Some NFTs such as the Proof of Attendance protocol (POAP) have unique features, POAP verifies if an individual participated in an event or not. Vitalik holds the belief that SBTs can help them to achieve the goal of building a decentralised society.

Even though Soulbound is a new concept without any specific details, the whitepaper describes its few techniques. SBTs are completely different from other cryptocurrencies and NFTs because they cannot be transferred from one wallet to another. Consequently, they cannot be inherited. SBTs are issued and stored by the wallets and these wallets are known as souls. Any individual or business enterprise or government can create a soul and then issue SBTs for several uses.

What are the use cases of Soulbound Tokens?

  • Medical records: A medical soul stores information about an individual’s health in a single place. Because of it, individuals can easily switch from one doctor to another. Medical soul also stores the data shared by different health devices.
  • Borrowing and lending: Financial institutions can issue SBTs to represent individual loans and credit worthiness. Banks can clear the tokens once repayment is done. 
  • Digital resume: A digital resume, also known as a digital badge, can assist job seekers in showcasing their educational credentials and work history. Set-top boxes (STBs) can be used to facilitate this process. Also, employers will not feel the need to call the universities and organisations to verify the information.

What are the advantages and disadvantages of Soulbound Tokens?

The two main motives of web3 are decentralising financial transactions and social community which can be achieved with the help of Soulbounds tokens. It would become a lot easier to form societies on trust when identities and memberships can be verified independently. Also, a few uses listed above clearly show how they can be beneficial for society.

Despite having these unique advantages, SBTs are highly criticised by the members of society. People usually compare SBTs with China’s authoritarian social credit system because it tracks an individual’s personal life and financial transactions to support lending. If misused, SBTs have the potential to make redlining and cause a lot of trouble. SBTs also sometimes face the same risks that NFTs do. Also, SBTs don’t support the transfer of data which means if an individual’s wallet is hacked, the thieves can easily access everything they require to steal the individual’s identity. However, the whitepaper of SBT offers a “Social recovery model” through which an individual can recover their wallet but still, there is a high risk involved.

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