On 17 December 2021, Adidas organized a virtual event to announce its metaverse launch. The sportswear brand rewarded its fans with a POAP (proof of attendance protocol). Just like the majority of NFTs, POAPs are ERC-721 tokens, and their purpose is to demonstrate that the owner attended the related event.
On the event page of the Adidas metaverse launch, the company shares that the token proves its owner was there from the beginning. This is not exactly the case, however. Because POAP tokens are transferrable, you can trade them on a secondary marketplace like OpenSea. That means the current owner of an “Adidas into the Metaverse” POAP didn’t necessarily attend the mentioned event.
In order to prove attendance, NFTs must be non-transferable. That’s where Soulbound tokens come in.
Another brainchild of Vitalik Buterin
Soulbound tokens were first introduced in a blog post by Ethereum’s co-founder Vitalik Buterin in January 2022. In that post, he mentioned that he was inspired by World of Warcraft’s “soulbound items,” which are powerful game items that, once acquired, can’t be sent to other players. He emphasized that POAP tokens would work better if represented as Soulbound NFTs.
Proof-of-attendance is just one of the many situations that can benefit from this concept. You can also prove you’re the actual holder of your skill certifications or other educational degrees thanks to Soulbound tokens.
Vitalik expanded on the idea with E. Glen Weyl and Puja Ohlhaver in a paper titled Decentralized Society: Finding Web3’s Soul, in which the authors explain how Soulbounds tokens (SBTs) can be used to establish a decentralized identity reputation. In the paper, it’s also mentioned that SBTs can fulfill this function by representing commitments, credentials, and affiliations. As a result, they can be the building blocks of a decentralized society (DeSoc).
How can we use Soulbound tokens?
While a regular NFT represents a tradable asset, an SBT represents a token with no monetary value and is permanently attached to a person or an entity.
SBT is still mostly a theoretical concept. But the foundational principles allow us to imagine potential applications. Since they’re mainly designed as identity reputation tokens, we can think of use cases like
- educational credentials
- employment history
- medical records
- driver licenses
- crypto-specific cases based on personal reputation, such as taking DeFi loans or protection against Sybil attacks.
In the paper, the authors suggested using the term Soul to represent an account of an individual, like a crypto wallet. Souls can also refer to the issuers of the SBTs. They can be associated with any entity, like a university, an employer, or a hospital.
People can have multiple Souls, each representing a specific part of their lives. They can, for example, have one Soul for professional certificates and another for health-related documents. A Soul can contain multiple SBTs.
What are some Soulbound tokens with actual use cases?
Binance is launching the Binance Account Bound (BAB) token, which is essentially an SBT. Its purpose is proof of identity. Every Binance user who completes the know-your-customer verification process will be able to mint the BAB token and participate in multiple projects to earn rewards.
xHashtag is building #SoulSwag tokens for creating work-related credentials, like skill certifications that showcase one’s proficiency in a particular type of task. xHashtag is distributing #SoulSwag for free in partnerships with other projects to let the users record their accomplishments for completing certain tasks. Another use case of xHashtag is to improve the DAO voting process. By analyzing a person’s collection of #SoulSwag tokens, DAOs can determine whether their voting power is legitimate.
Some web3 projects allow minting Soulbound tokens by providing the necessary interface SDK and API, like Idexo.