As the popularity of Web3 and non-fungible tokens (NFTs) continues to dwindle in the crypto industry, Vitalik Buterin, the co-founder of Ethereum (ETH), is suggesting his own vision for the future of NFTs by introducing “Soulbound”.
What Does Soulbound Property Mean?
Soulbound is a property of an item that makes it non-exchangeable by mail or auction trading. It usually increases the value of the item on the secondary market.
Since it’s impossible to sell or transfer Soulbound items, users sometimes trade their accounts in exchange for money. However, SBTs could eventually “vest” into transferable tokens in the future, according to a paper titled, “Decentralized Society: Finding Web3’s Soul.”
In the paper, the accounts are referred to as “Souls” and tokens held by the accounts as “Soulbound Tokens” (SBTs).
The paper reads in part:
“We refer to the accounts as “Souls” and tokens held by the accounts as “Soulbound Tokens” (SBTs). We initially assume publicity despite our deep interest in privacy because it is technically simpler to validate as a proof-of-concept, even if limited by the subset of tokens people are willing to publicly share.”
The concept of “programmable privacy” was later introduced in the paper for richer use cases.
The paper reads further:
“Imagine a world where most participants have Souls that store SBTs corresponding to a series of affiliation, memberships, and credentials. For example, a person might have a Soul that stores SBTs representing educational credentials, employment history, or hashes of their writings or works of art. In their simplest form, these SBTs can be “self-certified“, similar to how we share information about ourselves in our CVs.”
According to the paper, the true power of these mechanisms surfaces when SBTs held by one Soul (account) can be issued or attested by other Souls (accounts) that are counterparties to these relationships.
Citing a good example, the paper says the Ethereum Foundation could be a Soul that issues SBTs to Souls who attended a developer conference. Also, a University could be a Soul that issues SBTs to graduates.
Soulbound Tokens Have the Potential to Change the Industry
In terms of blockchain and Web3, Ethereum co-founder Vitalik Buterin believes that Soulbound tokens have the potential to transform the industry.
The implementation of SBTs will enable blockchain-based ecosystems to have numerous advantages in creating market standards, measuring decentralization, compensating strategic behavior, and lots more.
In a nutshell, Soulbound tokens create identity and representation of users by giving them unique traits. Unlike NFTs that represent what someone can afford, SBTs will stand for who a person is.