Soulbound Tokens, proposed by Ethereum creator Vitalik Buterin, would form an essential building block for this Decentralized Society, or DeSoc. These non-transferable tokens represent credentials and affiliations within DeSoc, and are linked to Souls, a type of address that establishes provenance.
Nevertheless, Soulbound Tokens, and that which they inspire, stand to shape Web3’s path forward in a meaningful way. They are the proposed building blocks that could reshape how we relate to one another, build and manage communities, communicate reputation, and more.
Soulbound Tokens (SBTs) were proposed in May 2022 by economist & social technologist E. Glen Weyl, lawyer Puja Ohlhaver, and Ethereum creator Vitalik Buterin. SBTs are a primitive, or foundational building block, in an emerging Web3 trend known as the Decentralized Society.
DeSoc sits at the intersection of politics and markets and, much like the wider Web3 context into which it fits, is based around principles of composability, bottom-up community, cooperation, and emergent networks that are owned and governed by network users. It aims to augment Web3’s trajectory toward hyper-financialization to something more inclusive, democratic, and decentralized.
SBTs are an essential feature of DeSoc. Similar to a resume or medical records in the non-Web3 world, SBTs are non-transferable tokens that represent “commitments, credentials, and affiliations” that make up the social relations on Web3 networks. In other words, they are tokenized representations of the myriad traits, features and achievements that make up a person or entity.
Crucially, Souls can issue and attest SBTs to other Souls; so for example a college (represented by one Soul) could issue a SBT certifying that a course has been completed to a student’s Soul.
At time of publication, no formal Soulbound Token specification exists at the time of writing; they’re still just an idea. That said, some mechanics have already been outlined.
SBTs’ most distinguishing feature is non-transferability. Unlike today’s most popular token standards—namely, fungible ERC-20 tokens like ETH and ERC-721 NFTs like Bored Ape Yacht Club—SBTs are not designed to have a market value and cannot be transferred to another wallet.
Within a DeSoc context, SBTs are issued by and held within accounts known as “Souls”. Souls are essentially wallets that hold SBTs and are used to establish provenance (the origin of something) and reputation. Souls can be associated with individuals, organizations, or other entities. Importantly, Souls are not intended to have a 1:1 representation to humans. That is, a human can have multiple Souls in DeSoc.
For example, your high school could have a Soul that issues diplomas as SBTs to its graduates, all of whom have Souls that hold their respective diploma SBT. You receive this SBT in your Credentials Soul, where you also hold SBTs for your Girls Scouts badges and National Honors Society SBTs. This Credentials Soul, however, is separate from your Identification Soul, which holds your drivers license and passport.
SBTs in and of themselves are simply descriptive and representative. Their power and utility, in part, comes from how SBTs held in Souls interrelate to form emergent communities based on verified affiliations, commitments, and credentials.
Use Cases of SBT
🏥 Medical record management - Switching doctors or insurance providers can be a frustrating experience. It requires spending hours on the phone requesting medical history, verifying your identity, and trying to remember if you used your mother’s maiden name or the street you grew up on as a security question. SBTs would render this cumbersome process obsolete with something like a medical Soul that holds all of your medical records.
💵 Undercollateralized on-chain lending - Traditional financial markets are built atop credit. To date, crypto projects have struggled to solve this problem at scale due to technical limitations around proving an individual’s or institution’s ability to pay back a loan. SBTs could solve this through provable reputation.
🛡️ DAO sybil attack protection - One of the biggest threats faced by decentralized autonomous organizations (DAOs) is a sybil attack, wherein an individual or coordinated group of individuals accumulate a critical mass of governance tokens and manipulate proposal voting in their favor. Leveraging SBTs, DAOs can have built-in mechanisms that mitigate such risks in a number of ways such as checking for correlation between SBTs held by Souls who support a particular vote and discounting accordingly.