Soulbound Token Explained: Here’s Everything You Need To Know
Cryptocurrency exchange Binance has launched BAB, a Soulbound token on the BNB chain, as a decentralized solution for exchange KYC requirements. The Soulbound token is a non-fungible token (NFT) that is not transferable between wallets. NFT’s inability to transact allows it to be used to identify wallet owners on the blockchain. NFT-linked data can be used to identify actions recorded by the wallet, such as interactions with a decentralized application (dApp) or smart contract.
What is Soulbound Token or SBT?
In May, Ethereum co-founder Vitalik Buterin release an official report with an extensive description of the Decentralized Society (DeSoc) and the Soulbound token (SBT). The term “Soulbound” originates from the game World of Warcraft, which was discussed on his blog in January.
The Soulbound token is a specific type of NFT, but they differ in one key point – they are designed to never be delivered. A soulbound token is associated with a specific Soul, a special type of blockchain address.
The non-transferability of Soulbound tokens allows them to track information that is specific to a person or organization and cannot be effectively tracked through NFT. For example, user credentials encoded in soulbound tokens must be associated with a specific user, which is not transferable to any account on the blockchain.
What are Soulbound Tokens for?
Soulbound tokens are intended to serve as a major building block of the Digital Society. One of the fundamental features of many blockchain platforms is that they provide a degree of pseudonymization. Anyone can create an account on blockchainand this blockchain account is very difficult to link back to the real world identity of the user.
While this is good for anonymity and privacy, it creates problems for use cases where strong identity verification would be useful. The Soulbound token is designed to fill this void by providing attestation that a particular entity has certain attributes.
With multiple types of data that can be encoded in soulbound tokens, it means that users can have multiple Souls for different purposes. For example, one Soul may contain professional information (credentials, certificates, etc.), while another Soul may be used for medical records and a third to store receiving documents form.
In addition, ownership of Souls is not limited to individuals. Organizations, software, computers, and other entities may have their own Souls and the ability to use soul dump tokens to track and authenticate certain information.