What are SoulBound Tokens?
















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What are SoulBo...


What are SoulBound Tokens?

10 mins read / updated on Tue Nov 21 2023


Soulbound tokens, often called SBTs, are unique digital tokens that utilize blockchain technology to symbolize an individual's identity. This identity can encompass various facets of a person's life, such as their medical history, professional background, and other defining attributes. These tokens are stored in digital wallets, aptly named "Souls."

It's possible for an individual to possess multiple Souls, each representing different aspects of their life. For instance, one might have a "Credentials Soul" that showcases their professional achievements, while another "Medical Soul" might store their health records. The primary objective of Souls and SBTs is to create a digital, verifiable reputation in the Web3 ecosystem, rooted in an individual's past actions and experiences.

Entities, such as corporations, can also act as Souls, issuing SBTs to individuals. Imagine a digital club issuing SBTs to confirm membership or a company providing SBTs to its employees. The inspiration for the term "soulbound" is derived from the renowned online game World of Warcraft, where certain items, once acquired, are permanently linked to a player's character.

SBTs are designed to evolve the concept of NFTs, focusing on individuality and non-transferability. While NFTs typically represent tangible assets, SBTs symbolize the reputation of an individual or entity. Crucially, SBTs carry no monetary value and are non-transferable once allocated to a wallet.

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History of Soulbound Tokens

The term "soulbound" in the context of blockchain assets was first introduced to the public in a blog post penned by Buterin in January 2022. He drew parallels between NFTs and the "soulbound items" from World of Warcraft, which players cannot trade or sell.

Buterin highlighted the potential of non-transferable NFTs, suggesting they could offer more than just their current monetary-focused applications. This concept was further elaborated upon in a paper released in May 2022 titled "Decentralized Society: Finding Web3’s Soul." Here, SBTs were portrayed as the digital representation of social identity in a decentralized world.

The vision presented in this paper imagines a decentralized society where accounts, termed "Souls," hold or issue SBTs. These tokens would act as a digital CV, endorsed by other wallets, attesting to the holder's social affiliations and credentials.

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How Do Soulbound Tokens Work?

Soulbound tokens (SBTs) are poised to introduce a paradigm shift in the Web3 ecosystem. Instead of relying solely on monetary metrics, SBTs can enable Web3 networks to use non-transferable tokens as reputation indicators. In traditional financial systems, lenders assess borrowers' creditworthiness based on bank account balances, credit scores, and repayment history. In a scenario where SBTs represent an individual's credentials, their reputation could be collateral for obtaining an undercollateralized loan.

Drawing a parallel with the foundational concept of NFTs, which represent tangible assets with inherent monetary value, the challenge arises in verifying an individual's reputation within a trustless, blockchain-based system. To elucidate this, consider the voting systems employed by decentralized autonomous organizations (DAOs). Typically, DAO governance models allocate voting power based on the number of tokens a member possesses.

However, DAOs that issue SBTs could prioritize reputation over token ownership. This reputation can be ascertained through users' interactions and contributions to the community. For instance, trophies earned from Kusama's Governance Rewards program, which are awarded for participation in on-chain referendums, could serve as a testament to a member's reputation.

Such trophies visually represent a member's on-chain activities within Kusama and Polkadot DAOs. This could potentially provide adequate security for granting an undercollateralized loan. Moreover, a reputation-centric voting system could bolster DAOs' defenses against Sybil attacks, where malicious actors aim to control the majority of governance tokens to steer the project's direction for their benefit.

Since SBTs are publicly verifiable, they can act as a protective measure, preventing DAOs from being manipulated by malevolent entities. For example, Souls with a commendable collection of SBTs could be entrusted with majority voting power, ensuring the preservation of the DAO's integrity.

While there are several theoretical applications of SBTs in the Web3 domain, their practical implementation is still in its infancy. Binance is set to launch the Binance Account Bound (BAB) as the inaugural SBT on the BNB chain.

This token, devoid of any monetary value and non-transferable by nature, is designed to serve as a digital verification solution for Binance users who have successfully completed the Know Your Customer (KYC) requirements. Furthermore, third-party protocols can harness the potential of BAB SBTs for various purposes, including DAO governance voting and airdrops.

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Can You Buy Soulbound Tokens?

Soulbound Tokens, commonly called SBTs, are not up for grabs in the market. Their essence lies in symbolizing accomplishments and significant milestones rather than serving as a monetary asset. The NFT innovation pioneer, Idexo, boasts of introducing the world to the first-ever SBT in April 2021, predating the official naming of the term.

This unique, non-transferable token originated on the Binance Smart Chain and was intricately linked to the holder's Telegram handle. Taking it a notch higher, Idexo has seamlessly integrated SBTs into its tech toolkit, facilitating the birth of SBTs in diverse blockchain ecosystems.

Also Read: Components Of Blockchain

Do any Soulbound tokens exist so far?

Fast forward to August 2022, the realm of SBTs is still largely on paper. However, Glen Weyl, a key contributor to the foundational SBT whitepaper, holds a hopeful vision of witnessing tangible SBT applications by the year's end. Binance, a global crypto giant, has pioneered this space, unveiling its very own SBT, christened Binance Account Bound (BAB), on September 8th, 2022.

This groundbreaking token, a first on the BNB Chain, is designed to refine identity validation in the burgeoning web3 universe. It is a digital seal of approval for Binance aficionados navigating the KYC maze. A crucial point to note is its non-transferable nature and absence of financial worth.

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What Can Soulbound Tokens Be Used for?

The foundational document suggests that SBTs could be the catalyst propelling Web3 by reducing the reliance on the centralized pillars of Web2. It highlights the prevalent trend of users entrusting their crypto assets to custodial wallets overseen by centralized giants like Coinbase or Binance. Similarly, NFT creators lean on centralized hubs like OpenSea or Twitter to monetize their creations.

Moreover, SBTs aim to shift the narrative from crypto's rampant "hyper-financialization" and challenge the trend of flaunting NFTs as status badges.

SBTs could also be the answer to establishing verifiable reputations in the anonymous corridors of Web3. Imagine the power of an SBT from a prestigious institution like Harvard, authenticating one's academic prowess in the Web3 space. Reputation, after all, can make or break trust within a community.

Also Read: Blockchain and Web3

Examples of how SBTs can be used

While the SBT blueprint has been laid out, its real-world applications are still budding. Let's delve into its potential impact on our daily lives:

- Education history: Envision a world where SBTs validate one's academic journey. Like traditional graduation certificates, SBTs could authenticate qualifications and institutional affiliations, ensuring transparency and authenticity.

- Job applications: SBTs could encapsulate one's professional trajectory beyond academia. Companies could encapsulate an employee's achievements, experiences, and contributions in an SBT, serving as a digital testament during future job pursuits.

- Health records: SBTs could revolutionize patient data management in healthcare, streamlining transitions between healthcare providers and eliminating tedious paperwork.

Other notable applications include:

- Digital driver's licenses on the blockchain.

- SBTs as proof of creditworthiness.

- SBTs as digital resumes enhancing credibility in the DeFi world.

Also Read: What Is Defi

Diving deeper into the web3 ecosystem:

- NFT trading: SBTs could be the beacon of authenticity, distinguishing genuine NFT artists from imposters, ensuring a transparent and trustworthy NFT marketplace.

- Governance: In the DeFi space, SBTs could ensure that governance remains in the hands of genuine supporters, preventing undue influence by external entities.

In essence, Soulbound Tokens promise to revolutionize various sectors, from education and employment to healthcare and governance, ensuring transparency, authenticity, and trust in the decentralized world.

Also Read: Defi Protocols

What Are the Benefits of Soulbound Tokens?

Soulbound tokens (SBTs) have emerged as a revolutionary tool in the crypto space, offering many benefits. One of the primary advantages of SBTs is their role in credential verification. Given that data is indelibly stored on the blockchain, it becomes impossible for anyone to tamper with it. This ensures that any accolades or certifications an individual has garnered can be openly validated through SBTs. The inherent nature of SBTs, which emphasizes authenticity and cannot be merely bought, instills trust among token holders and the wider audience.

Additionally, soulbound NFTs pave the way for protocols to assess borrowers' credit histories, enabling them to gauge their creditworthiness. Furthermore, SBTs are pivotal in preventing Web3 projects from merely becoming monetary ventures by ensuring that digital assets remain non-exchangeable. This underscores the idea that NFTs aren't items to be purchased but rather to be earned through genuine efforts.

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What Are the Limitations Associated With Soulbound Tokens?

While SBTs offer many benefits, they are not without their challenges. One of the pressing concerns is the current wallet infrastructure, which may not be fully equipped for SBTs due to the absence of community-based recovery mechanisms. This necessitates a diverse array of soulbound tokens spread across multiple communities to retrieve lost Souls.

A potential remedy for this is the community recovery approach, where a Soul's private keys can be accessed if endorsed by a significant majority of a community the Soul is affiliated with. However, this system is not without its pitfalls. There's a potential risk of individuals or entities exploiting this information, leading to potential threats or privacy breaches. Moreover, there's a hypothetical risk of SBT-driven credit systems mirroring restrictive systems like China's social credit model, which could inadvertently ostracize certain societal segments based on their SBTs.

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How to Recover Your Soul if Lost?

Losing one's Soul is a potential drawback associated with Soulbound tokens. This could result from misplacing the keys to your Soul, leading to a loss of stored data or the SBT itself. However, a solution has been proposed by Buterin. SBTs incorporate a "community recovery" mechanism akin to social recovery. This robust system links Soul's recovery to its affiliations across diverse communities, leveraging a wide spectrum of real-world relationships for enhanced security. These affiliations could range from off-chain associations like club memberships to on-chain involvement like DAOs.

In essence, if one were to lose their Soul's private keys, a collective consensus from the majority of the Soul's communities would be required for recovery. This means that fellow community members can assist in retrieving your keys.

Also Read: Private Vs Public Keys

How can SBTs improve the present web3 ecosystem?

Trust remains a pivotal concern in the web3 domain. How does one vouch for an individual's reputation in a system designed to be trustless? SBTs could potentially serve as a metric akin to traditional credit scores, reflecting users' DeFi transaction histories and other parameters that shape their risk profile. Furthermore, SBTs are being explored as an alternative for voting within decentralized autonomous organizations (DAOs). Instead of the current model where voting power is determined by token possession, DAOs could leverage SBTs to allocate voting rights based on members' community engagement. This would empower the most dedicated members with an enhanced reputation and voting influence.

Additionally, SBTs can fortify DAO voting systems against Sybil attacks, a prevalent threat to current DAO governance structures. By ensuring transparency and verifiability, SBTs can thwart malicious actors from manipulating voting processes, ensuring that decisions are driven by genuine stakeholders rather than mere token holders.

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SBTs vs. NFTs:

Nonfungible tokens can be bought and sold via NFT marketplaces, whereas soulbound tokens are non-transferable NFTs because they’re bound to the Soul. A summary of the differences between SBTs and NFTs is listed in the table below:


- SBTs: They represent non-transferable tokens as reputation indicators.

- NFTs: They demonstrate ownership of specific items, for example, real estate.


- SBTs: If private keys are lost, SBTs can be recovered via a community recovery approach.

- NFTs: NFTs cannot be retrieved if private keys are lost or stolen.


- SBTs: Non-transferable.

- NFTs: Transferable

The Future of Soulbound Tokens in the Crypto World

In the rapidly evolving world of cryptocurrencies and blockchain technology, the concept of Non-Fungible Tokens (NFTs) has taken center stage. These unique digital assets, while immutable and non-duplicable, possess a transferable nature. Though advantageous in many scenarios, this characteristic can pose challenges, especially when unauthorized access and transfers occur. Enter the realm of Soulbound Tokens (SBTs) - a solution designed to address these very challenges.

The foundational document, or the white paper for Soulbound Tokens, paints a vivid picture of their potential. It envisions Souls and SBTs as the bedrock of a decentralized society. This isn't just any society; it heralds a "transformative, pluralist future." In this envisioned world, the essence of human relationships and social interactions becomes the cornerstone of one's Web3 identity.

SBTs are poised to address the trust issues plaguing the Web3 ecosystem. These tokens ensure authenticity and credibility by establishing a clear provenance and reputation. Their non-transferable nature inherently reduces the chances of ecosystem manipulation through false claims of achievements or outright purchase of status. The intricacies involved in identity theft and impersonation within the Web3 space could also see a decline, thanks to the robustness of SBTs.

Eric Glen Weyl, a notable contributor to the white paper, anticipates the early adoption of SBTs by the close of 2022. Highlighting the growing acceptance of this concept, Binance, a leading cryptocurrency exchange, revealed its plans in September 2020. The exchange intends to roll out soulbound tokens on its BNB blockchain for users who successfully undergo the know-your-customer (KYC) procedures.

However, like all innovations, SBTs face challenges. Ensuring privacy while fostering a genuinely decentralized society remains a significant hurdle. Yet, the potential of soulbound tokens to revolutionize the digital landscape is undeniable.

Also Read: Total Value Locked


Q: What is an example of a soulbound token?
A: An example of a soulbound token is the one proposed by Binance, where users who complete the KYC requirements would be issued soulbound tokens on the BNB blockchain.

Q:What is a soulbound token?
A: A soulbound token (SBT) is a type of digital asset tied to a specific Soul address. It is non-transferable and can be authenticated using on-chain credentials, ensuring that unauthorized modifications are prevented.

Q:What is the difference between Soulbound and NFT?
A: While both Soulbound tokens and NFTs are unique digital assets, the primary difference lies in their transferability. NFTs can be transferred between parties, whereas Soulbound tokens are non-transferable and are tied to a specific Soul address.

Q: What are the disadvantages of Soulbound tokens?
A: One of the main challenges of Soulbound tokens is ensuring privacy while maintaining the essence of a decentralized society. Additionally, being a relatively new concept, its widespread adoption and integration into existing systems remain to be seen.

Q: Do any Soulbound tokens exist so far?
A: Yes, as of the information provided, Binance has announced its intention to issue soulbound tokens to users who complete their KYC requirements.

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Zainab Saberi

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