Soulbound tokens are special non-fungible tokens (NFTs) that are tied to a person’s identity. Soulbound tokens represent the unique traits, features, and characteristics that form the identity of a person. So, these tokens are not transferable.
The idea of Soulbound tokens was put forward by the Ethereum cofounder Vitalik Buterin, lawyer Puja Ohlhaver, and E. Glen Weyl, an economist and social technologist in the whitepaper “Decentralized Society: Finding Web3’s Soul.” All the details that constitute a person’s identity such as medical records, work history, and any other relevant information can be recorded in a Soulbound token. The wallets on which the Soulbound tokens are stored are called “souls”. A person can have multiple souls, which together constitute their digital identity.
Soulbound tokens personalize NFTs. They are unique and non-transferrable as they do not have any monetary value. They cannot be traded.
How Do Soulbound Tokens Work?
Soulbound tokens work by compiling and using a person’s personal records that can be used to identify and create trust among cryptocurrency users at the time of financial transactions. They are similar to the credit scores used by ordinary banks to verify the trustworthiness of a borrower as well as their risk profile.
Another method of working with a Soulbound token is that it can be used as an alternative for voting in decentralized autonomous organizations (DAOs). The Soulbound tokens issued by DAOs may assign voting rights to each person based on their engagement with the platform. This process will also help users to protect their money from sybil attacks. This is because Soulbound tokens remain public and can be easily verified to prevent fraudsters or bad actors from interfering with its normal workflow.
Potential Use Cases Of Soulbound Tokens
Soulbound tokens have many potential use cases. They can be used to store data about different periods or aspects of one’s life.
- Educational History: Soulbound tokens can replace the certificates that you receive upon the completion of each educational milestone. The university or the certificate issuing authority can issue Soulbound tokens on which all the details about your learning credentials are stored.
- Job Applications: Previous job experiences and professional records can be stored in the form of Soulbound tokens. At the time of job application, you can provide proof of your experience using the Soulbound tokens issued by the previous organizations where you have worked.
- Health Records: All the details about your health can be stored in the form of Soulbound tokens. You can save the time required for filling in your medical records and can use Soulbound tokens instead, to show their medical history.
- Gaming: Soulbound tokens can provide real-world utility to in-game currencies. They also help enhance player engagement.
- Supply Chain Management: Soulbound tokens can improve the traceability and transparency of the supply chain. Soulbound tokens can tokenize physical goods and assets and can be used to track a product from its production to sale. It ensures authenticity and reduces counterfeiting issues.
Advantages Of Soulbound Tokens
Soulbound tokens offer different advantages to their users, some of which are mentioned here.:
- Soulbound tokens provide safety and security to cryptocurrency users through immutable blockchain technology.
- They provide true ownership of digital assets without the help of any intermediaries.
- They are interoperable across various platforms and provide dice-setting device settings when needed and the deal will be.
- Soulbound tokens provide engagement and community-building facilities.
- There are golden features that facilitate global acceptance and inclusivity.
- They provide liquidity and asset management rights to their users.
- Soulbound tokens provide incentives and rewards to those who participate in the governance mechanisms of the respective platforms.
- Soulbound tokens have the power to empower individuals and communities.
The Bottom Line
Soulound tokens have various applications in the fields of finance, personal record management, identity verification, supply-chain management, gaming, and NFTs. They are a new method of making use of the concept of tokens in fields other than decentralized finance.
The immutability and non-transferability of Soulbound tokens make them important in establishing and preserving the identity of a user. They also help improve trust and collaboration among users and promote equal access to all the players of the concerned ecosystem.