The developments in the web3 landscape and blockchain technology have also fuelled the popularity of digital assets and virtual products. In recent times, non-fungible tokens have offered a significant improvement in the methods for exercising ownership over digital assets. Now, the arrival of SoulBound NFT has pointed to the possibility of introducing truly non-transferable non-fungible tokens.
Any general discussion about NFTs assumes that they are tradable assets that you can sell on a marketplace or transfer from one digital wallet to another. However, recent developments in the domain of non-fungible tokens have introduced new choices like the SoulBound tokens, a non-transferable non-fungible token. What are the new project and their relevance to the future of web3? The following discussion will help you discover the answer with a detailed introduction to the new non-transferable NFTs.
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Origins of SoulBound
The first thing in a discussion about SoulBound would refer to their origin. Interestingly, the founder of SoulBound NFT is Vitalik Buterin. The proposal for SoulBound project came forward in May 2022 with three proponents, including Ethereum co-founder Vitalik Buterin. The other two founders of the SoulBound project are lawyer Puja Ohlhaver and E. Glen Weyl, an economist and social technologist.
The tokens on SoulBound or SBTs have been tailored as the primitive building blocks in the new concept of a decentralized society. Decentralized Society on the web3 has been housed on an intersection of markets and politics, along with a wider web3 context. Some of the important principles of the decentralized society include innovative network designs, composability, bottom-up community alignment, and cooperation.
What are SoulBound Tokens?
The credibility of the founders of SoulBound, alongside the vision of employing them as a tool in the web3 landscape, reflects a lot on their functionality. What is a SoulBound NFT? This is probably the most important question one looks for in a discussion about the latest variants of NFTs. First of all, it is important to note that SoulBound is a project on paper at the time of writing. The detailed whitepaper by cofounders of SoulBound NFT Vitalik Buterin and others points out a clear description of the new category of NFTs.
SoulBound is a new non-transferable, public-verifiable digital token project which can serve as a representative of the social status of an individual on web3. SBTs can serve as a type of digital CV of an individual on the web3 landscape. The new non-transferable NFTs would include all information about memberships, affiliations, and credentials of an individual.
The basic idea behind SoulBound comes from the renowned video game World of Warcraft, where some items are soulbound. Players cannot sell or trade the “soulbound” items to other players or characters. Similarly, the SoulBound non transferable NFT project would ensure that users cannot trade their social status on web3 networks.
The unique highlight about the SoulBound NFTs is that they are permanently bound to a specific wallet for the rest of their entirety. The accounts or wallets hosting the SoulBound NFTs would be known as “Souls.” Users would have a blockchain account that would store immutable records such as employment history, work experience, and academic credentials. Just like a CV in the real world, SBTs can work as critical tools for developing the reputation of a user in web3 ecosystems.
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What Is So Special about SoulBound Tokens?
The actual potential of SoulBound tokens is not limited to a single non-transferable digital identity token. Founders of SoulBound have explained that the true potential of the tokens is evident in the capabilities of a Soul for issuing an SBT, with the attestation of other Souls, to other Souls. Therefore, it can help in creating communities that could serve as a Soul issuing SBTs to natives of a company.
Similarly, a company could also become a Soul serving tokens to stakeholders as a mark of membership. As a result, the SoulBound project would aim to ensure trust, credibility, integrity, and affiliations on web3 networks. The non-transferable NFTs can offer the foundation for developing web3 networks which do not rely completely on money-centric frameworks. Projects like SoulBound can empower web3 networks driven on the shoulders of reputation and provenance.
Working of SoulBound Tokens
The immediate question following “What is a SoulBound NFT?” would be about its working. SoulBound is not different from other NFT projects, albeit in terms of non-transferability. Souls or blockchain accounts and wallets can issue SBTs and store them. In addition, Souls can assign self-certified tokens to themselves.
However, the major highlight in the working of SoulBound NFTs would refer to the SBT creators issuing a token to the address of another Soul. Such transactions feature open verification of the SBT, issuers, and the address of the Soul. As a result, it is easier to verify or track the integrity of the trust circles associated with a specific Soul.
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How Does It Contribute Any Value?
The overview of the working of a SoulBound non fungible token draws attention to the simplicity of the application scope. Where will such tokens serve any useful applications? As of now, web3 applications and the emerging ecosystem featuring decentralized solutions have registered promising levels of growth within a limited time. Web3 has successfully introduced many challenging innovations in norms across different industries.
On the other hand, the rapid growth of web3 also brings the focus towards certain limitations which have been hampering its growth. Prior to SoulBound NFT, other improvements in the web3 landscape resolved notable issues such as transition to Proof of Stake consensus from energy-intensive Proof of Work mechanisms. In addition, public/private key cryptography and smart contracts have helped in addressing a major share of issues in the web3 ecosystem.
The most critical issue affecting the web3 landscape right now refers to the trust factor. All the interactions between users or financial and business interactions rely on trust among stakeholders. On the other hand, web3 has to deal with critical issues in this domain due to considerably higher privacy and anonymity in web3 applications. Therefore, web3 infrastructures have to rely more on centralized structures prevalent in web2 systems.
For example, the importance of SBTs becomes clearly evident when you notice how NFT owners have to use OpenSea or Twitter to prove ownership of their collections. In addition, DAOs depend on web2 platforms such as Discord to remove the possibilities of a Sybil attack. At the same time, DeFi lending platforms could not offer uncollateralized loans
At this juncture, SoulBound tokens can serve as the bridge or connecting link for the trust gaps in web3. The non-transferable nature ensures that they can work as instruments for developing social identities. As a result, it can enable people and protocols to serve on the foundation of trust alongside maintaining privacy simultaneously.
Role of SoulBound Tokens in Everyday Life
The SoulBound non fungible token or SBT could serve as a promising tool for accessing many benefits in transformation of social identities on digital platforms. It is important to note how non-fungible tokens or NFTs can work as an instrument for proving ownership of certain assets. On the other hand, non-transferable NFTs are not all about the advantage of money. SBTs could help in improving the advantages of non-fungible tokens for helping people confirm their reputation.
The new tokens could help in observing the history of people before conducting any business transaction with them. For example, organizations could use SoulBound NFT to verify the work experience of candidates before offering them a position. Therefore, the applications of the new non-transferable NFTs in the web3 landscape could help in driving plausible advantages for achieving a decentralized society.
Use Cases of SoulBound Tokens
The important highlights regarding use cases for SoulBound tokens also make a major portion of the project’s whitepaper. Clarity regarding the value of these new non-transferable tokens is an important highlight which can encourage their adoption. Here is an overview of the important use cases pertaining to SoulBound NFTs.
The foremost value advantage of SoulBound non transferable NFT would refer to the facility of provenance for NFTs. NFT owners have to depend on centralized systems such as OpenSea to prove ownership of their unique digital assets. A mere downtime in the NFT marketplace recently resulted in disappearance of the NFT profile pictures of people.
On the other hand, SoulBound NFT can resolve the problem as creators can mint the NFTs from their blockchain account or wallet, i.e., Soul. The more tokens it accumulates, the easier it will be to verify the legitimacy of the NFT, thereby helping creators and artists.
The questions such as “What is a SoulBound NFT?” and how it will be useful also showcase possibilities for improvements in DeFi lending. Popular DeFi lending platforms such as Aave do not offer new services such as uncollateralized loans due to hostility of highly private decentralized environments. On the other hand, SoulBound token can enable DeFi protocols to offer uncollateralized loans by leveraging the real-time interactions of a Soul throughout different communities.
Sybil Resistance Attacks
One of the biggest issues in coin voting for different DAOs is the possibility of system risks. 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. On top of it, majority of DAO token holders do not have expertise in ensuring critical decisions.
SBTs could help in solving the challenge through representation of voting rights in DAOs. The non-transferable nature of SBT ensures that no particular individual can buy the tokens required for a Sybil attack. In addition, SBT can also ensure transfer of voting rights to Souls with tokens on licenses, academic credentials, and endorsement from other Souls.
The development of new crypto projects generally involves a community effort with creation of new communities. Crypto projects can launch airdrops alongside conducting different token sales. However, the process is generally associated with Sybil attacks, with whales consuming majority of the drops. On top of it, airdrops cannot reach the target community.
SoulBound tokens can solve the 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 airdrop of governance tokens to Souls with tokens verifying their association with various sustainable activities.
The applications of SoulBound NFT in the field of academic credentials would also garner promising attention in the future. Universities, colleges, and schools can use SBT as digital proof of attendance or academic credentials for students. As an important set of non-transferable NFTs, they can help in verifying the credentials and proof of attendance of candidates.
Speaking of academic credentials, the SoulBound token can also offer the opportunity to create a unique digital CV. The speed of the hiring process becomes better when candidates are scanned for their abilities to work for the intended role. On the other hand, it is not easy to check the validity of the claims of a candidate regarding their professional experience or academic credentials.
In such cases, SBTs can help in proving that an individual has the necessary skills for the job. The non-transferable NFTs would ensure that professionals in different fields would have a publicly-verifiable digital CV. As a result, it would be easier for employers to make hiring decisions on the basis of SBT a candidate has from their previous employers or academic institutions.
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Are SoulBound Tokens Available for Use?
The most striking highlight in discussions on “What are SoulBound tokens?” points to their availability. SoulBound NFTs or tokens are just a new concept that made an entry into the world of web3 with a blog post by Vitalik Buterin. The co-founder of Ethereum blockchain has reported that experiments related to the concept of SoulBound token would start on the Ethereum blockchain. As of now, there is no specific date for when the SBTs would be available for use.
Critical Overview of SoulBound Tokens
The outline of the definition, working, and use cases of SoulBound tokens definitely serve a promising impression about the tokens. However, it is also important to notice the critical challenges associated with SBT NFTs. For example, they can reveal personal information about an individual. At the same time, you can employ zk-SNARKs as a reliable solution to this setback. Most important of all, you must note that the concept of the SoulBound project is completely new, and the implementation process might be complicated.
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The distinct highlights pertaining to SoulBound NFT show that non-transferable non fungible tokens would play a crucial role in the future of web3. You must look forward to the practical prototypes of SBT as it might take some time for general use. However, the concept underlying the design of SoulBound token project is promising.
It provides a benchmark for creating a decentralized society in the web3 ecosystem with attested proof of skills and credentials. Non-transferable NFTs have a significant role in transforming the essential precedents of NFTs themselves. SoulBound is only the beginning, and early experiments will begin soon on the Ethereum blockchain. Stay updated with latest sources of information on SoulBound and its new use cases.
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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!