Over the past few weeks, I’ve been taking you on a journey through the metaverse and non-fungible tokens (NFT). The basics are there, I’m sure! The Web3 world is innovative and growing rapidly; a new concept is developed almost daily. Over the past few weeks, a new concept has been called Soulbound Tokens (SBT) arose. All the big names in the NFT world are talking about it, especially because the possibilities of this token are revolutionary. But this understanding is even more complicated than the NFT we talked about earlier. Let’s see!
World of Warcraft
On January 26, 2022, Ethereum (ETH) founder Vitalik Buterin published an article titled “Soulbound”. In the article, Buterin describes an NFT with special properties that he describes as “Soulbound”.
With the term soulbound, Buterin refers to the popular computer game World of Warcraft. In this game, players can find special items marked as “soulbound”. These are rare items that, unlike other items, cannot be traded in the game. They are, as the name gives away, attached to the player’s soul. Buterin calls this a flawed system that is too easy to cheat, but he also states that such a system offers many opportunities.
— vitalik.eth (@VitalikButerin) 26 January 2022
Benefits of Soulbound Tokens
Okay, enough with the history lesson. What exactly are these soul-bound tokens and what function will they fulfill? The idea remains that these types of tokens cannot be traded. These types of NFTs are then linked to your wallet, in other words your wallet is your soul.
But what is the benefit of this? What’s the point of a collectible if you can’t trade it? The answer may be simpler than you might expect. SBTs simply serve a completely different purpose. Since SBTs are non-tradable, they can act as a kind of label or badge. Because you cannot trade the token, authenticity is guaranteed. After all, tokens are still verified on the blockchain and the origin of the token can be traced by anyone. For example, someone can demonstrate that he or she has participated in a major event.
But what are the possible implementations of an SBT? The answer to this is pretty much the same as the answer to most questions about the metaverse: Anything is possible! The fact that SBTs are tied to a wallet, making them virtually impossible to counterfeit, makes it a highly suitable method for storing authentic documents on e.g. blockchain. Think of diplomas, identity cards and other important documents! A big problem in today’s society is that these kinds of documents are not yet digital enough, and this is an obstacle to digital traffic. If these documents are available in web3, it can really speed up the progress of this traffic!
Disadvantages of Soulbound Tokens
But what are the disadvantages of SBTs? In fact, these are very few. The biggest problem that is currently being solved is the amount of theft and fraud in the web3 world. Of course, SBTs cannot be traded, but the fact that hackers and fraudsters regularly gain access to wallets is a big problem. When a hacker has access to your private keysthere is still very little you can do about it. This may be an obstacle to the adoption of SBTs and therefore needs an urgent solution. Buterin suggests entering some kind of “trustees” who have the ability to change your private key.
But when can we start using these tokens? Unfortunately, Buterin has not yet provided any clarity on this. However, a number of other reliable sources expect it sometime towards the end of 2022. The question, of course, is whether the implementation of this explodes immediately. Personally, I think it might even go faster than regular NFTs. That’s because NFTs have already taken their place in the world, and these are the same people who are so excited about SBTs right now.
I expect soulbound tokens to be a term you’ll hear more often in the future. The only question is when. The possibilities are endless, there just needs to be enough pioneers to embrace it!