SoulBound Tokens- The Next Big Innovation?
When you see the word soul, What comes to mind might be human life. But in this case, It is true in a way. Soulbound tokens are a digital representation of a person or their identity.
The web3 space is rapidly evolving, Although at this time it seems like a financial-centric industry. That narrative is coming to bear with the introduction of SoulBound Tokens.
What are SoulBound tokens?
First pitched in a blog post by the Ethereum founder Vitalik Buterin in Jan 2022.
In a bid to address the limitations of Non-fungible tokens.
He pitched the idea of a digital asset that is unique to individuals and non-transferable.
The term ‘Soul’ is quite ambiguous but describes the peculiarity of the tokens with respect to individuals.
In May 2022, in a paper published by the Ethereum founder Vitalik Buterin and His colleagues, Soulbound tokens are described as non-transferable digital tokens that represent social identity in a decentralized society.
Soulbound tokens would represent the user’s identity, affiliations, commitments, and even credentials in a decentralized society (DeSoc).
NFTs generally have been hyper-financialised as the average NFT holder is looking to make a profit from trading or flipping them.
What if there is a type of NFT that can never be transferred or sold?
Well, That’s why Soulbound tokens are NFTs that are non-transferable and they cannot be sold. They are held in a wallet indefinitely.
Why Do We Need SoulBound Tokens?
In a decentralized society, The most efficient way to ascertain pieces of information is if they are on-chain.
Following suit with the whole purpose of Soulbound tokens which is to establish an identity in a decentralized world. There would be a pressing need to be able to confirm this information on the blockchain.
For instance, How can an employer verify the certification of his employee in a decentralized society?
The answer of course is Soulbound tokens issued in the form of a certificate by an organization to the individual.
Educational Platforms like Alchemy, Ekolance, and metaschool issue certificates as NFTs to their students, These credentials are issued as SBT tokens and are peculiar to each person, and are non-transferable.
A quick example cited in Vitalik’s paper was a project implementing what is known as POAP, the “proof of attendance protocol”. POAP is a standard by which projects can send NFTs that represents the idea that the recipient personally participated in some event.
Usecases of SoulBound Tokens
Soulbound tokens are important in many different ways which include.
DeFi Lending- In the case of Loan allocation by a protocol, Trust can be conferred just by viewing your previous credit scores Now, uncollateralized loans can be given out by leveraging the real-time interactions of a Soul throughout different communities.
Sybil Resistance Attack- Sybil attack is one of the most notable system risks in coin voting with a DAO. How? A particular individual can purchase around 51% of the DAO token to gain control over the protocol governance. On top of it, the majority of DAO token holders do not have expertise in ensuring critical decisions.
SoulBound Tokens would eradicate that as its non-transferable nature would disallow any individual the purchasing power of a token that can affect major decision-making.
Souldrops- SoulBound tokens can solve this problem by ensuring airdrops on the basis of details and analysis of SBT on the Soul of a user. The concept of SoulDrop has been outlined clearly in the whitepaper by Vitalik Buterin. For instance, projects focused on enhancing sustainability could ensure the airdrop of governance tokens to Souls with tokens verifying their association with various sustainable activities.
Academic credentials- Imagine universities and colleges issuing certificates on-chain to their students that would be a game changer. These credentials are issued as SoulBound tokens and are peculiar to each person and are non-transferable.
Digital CV- Imagine your real-life Cv, But this time it is imprinted on the blockchain as an NFT, this makes it easier for cooperates to validate the identity and experience of an individual.
Reward systems- Retroactive airdrops are crucial in moving the blockchain adoption train, But with Soulbound tokens, Projects can reward their users with tokens based on their Soulbound tokens, As this will be effective in measuring the participation of each user thereby ensuring fair distribution.
Conclusion
Soulbound tokens are a game changer for the decentralized ecosystem and are rapidly going to change the worldview of the blockchain space.
Digitalizing data and bringing it on-chain is one of the most effective ways to drive global adoption.
If you enjoyed reading this piece, ensure to leave a comment or question if you have any relating to blockchain technology.
You can connect with me at AdetolaO@hotmail.com.
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