Soul-Bound NFTs: Everything You Need to Know

Soul-Bound NFTs (SBT) are digital assets like regular NFTs, they are built on the blockchain, non-replicable and unique. What differentiates them from standard NFTs is that they are non-transferable. In this article, we look at this unique digital asset class and its potential. Let’s dive in!

What are Soul-Bound NFTs (SBTs)?

The idea of ​​an SBT came from World of Warcraft, where users could obtain rare soul-bound items. Not only were these items difficult to obtain, but they were also non-transferable between users. Viitalik Buterin and some others built on this idea to release a whitepaper on non-fungible soul-bound tokens.

According to the White Paper, SBTs are non-transferable forms of NFTs. That means they are built on the blockchain and are used to represent something. Essentially, SBTs are digital tokens used to represent a person’s or entity’s characteristics, identity, characteristics and several other features unique to them.

Take for example the academic qualifications of a person. This information is unique to that person. Thus, it cannot be transferred or sold to another person. So when this information is entered into an SBT, it remains permanently in the person’s private wallet.

For this reason, SBTs are not built for trading or monetary purposes. It is a unique identifier used to permanently represent information about a person or an entity. This information can be a person’s name, age, driver’s license or location. Similarly, it may contain information about a company’s address, operating license or anything else unique to them.

What are the benefits of using Soulbound Tokens?

In a hugely decentralized and anonymous world, it is not easy to verify the identity of the parties in the ecosystem. It is for this reason that fraud and fraudulent activities are common. According to Vitalik, SBTs represent a path to a decentralized society (DeSoc). Like how people are unique from each other, SBTs can help achieve that in the Web3 ecosystem. It would make it difficult for people to impersonate others or give false information about themselves.

In the following, we consider some of the benefits of using SBTs:

Digital verification and documentation

Digital verification is one of the best benefits of SBTs. Since information is permanently recorded on the blockchain, it makes it easier for people and companies to verify the identity of the people they are dealing with. Likewise, authentication of information about such a person makes it easy to verify.

In addition, SBTs improve the digital documentation process. Users can easily create information about them on the blockchain and make it public for anyone to see or verify.

Increased transparency

SBTs make it easier to interact and do business in the Web3 ecosystem, with verified identities people will be more willing to deal with each other. An added benefit is that it makes it easier for people in very large communities to know if they are dealing with a legitimate person. It is not uncommon for people to pretend to be celebrities to trick others. So, with the SBT permanently attached to the wallet of such a celebrity, it reduces the chances of fraud or fraud.

Reduced fraudulent activity

Identity theft is not uncommon in the Web3 space. One of the reasons is because of the new nature of the Web3 ecosystem and the number of newbies entering daily. As a result, scammers often prey on the naivety of beginners to con them out of their money or digital assets. However, with SBTs in play, the identity of the users they are dealing with can be confirmed and verified. The ability to do so will reduce fraudulent activities within the Web3 area.

Popular SBT use cases

Despite the enormous possibilities associated with SBTs, it is a new concept that has not gained much adoption. Binance is one of the few entities that have used SBTs on their platform. So far, the whitepaper by Vitalik shows the technology’s true potential. Nevertheless, let’s consider some of the areas where SBT will see massive adoption.

Educational history

SBTs are an easy way for people to create their educational history and other relevant information on the blockchain. Common practice is for diplomas to be issued to students after completion of their degree. Often people who did not attend that school could forge a certificate and deliver it to unsuspecting users.

With SBTs, educational institutions can stamp these certificates on the blockchain and issue them to graduating students. Not only does it improve transparency, but it also makes it easier for third parties to verify such certificates or qualifications.

Personal records

Users can create SBTs to store their records on the blockchain. Imprinting them on the blockchain means that the information can be easily accessed by the user and any third party that wants to verify it. Records such as health records, CVs, driver’s licenses and even tax returns can be represented as tokens stored on the blockchain. Likewise, credit scores can also be made into soul-bound tokens, which will help lending institutions verify the user’s creditworthiness.

NFT trading

In no other area will SBTs be more beneficial than in NFT trading. Although NFT trading is transparent, unsuspecting users can sometimes be tricked into buying knockoff NFTs from fraudsters. It is common to see copies of popular NFT collections such as BAYC, CryptoPunks and MAYC. With SBTs, users can easily verify the creator’s identity and avoid fraud.

Gaming

The Web3 gaming ecosystem is filled with fascinating use cases and digital assets. Soul-Bound NFTs can enhance the gaming experience for users through increased opportunity for personalization. As seen in the World of Warcraft game, SBTs can introduce more exciting experiences into the gaming ecosystem.

The Future of Soul-Bound NFTs

SBTs will undoubtedly gain more ground in the coming years. The world is rapidly approaching a full virtual reality where digital characters and information form a user identity on the chain. Digital verification and documentation will be crucial and essential in such decentralized virtual worlds. As a result, the idea of ​​SBTs will evolve more as more attention is paid to virtual reality. However, it will only come into its own when users fail to sell or transfer wallets or login accounts to each other.

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*All investment/financial opinions expressed by NFT Plazas are from personal research and experience of our site moderators and are intended as educational material only. Individuals are required to research all products before making any type of investment.