Soulbound NFTs and Their Implications

• Soulbound NFT gained the attention of blockchain companies because of its potential of resolving many security concerns of users.
• Wider implications of the concept in multiple firms and growing use cases of SBTs for different businesses.

The concept of Soulbound NFTs caught the eye of the markets in May 2022 after the idea was proposed by the co-founder of a leading blockchain-developing firm. 

Non-Fungible tokens, as the name suggests, are uniquely identified assets that cannot be replicated and Soulbound NFTs facilitate better management of records of users and more secure holding of data. Let’s dive into this further in this article. 

What a Soulbound NFT means

We know that NFTs are unique assets which are generally tradable while the supply remains limited. However, a soulbound NFT is the one which is non-transferrable. This means that it cannot be traded and its ownership cannot be transferred. 

The concept of a soulbound NFTs was proposed in May 2022 by Ethereum co-founder Vitalik Buterin, economist Eric Glen Weyl, and lawyer Puja Ohlhaver.

Before the firm announced its adoption, the concept was discussed on a blog-post by Buterin in January 2022: 

“NFTs in their current form have many of the same properties as rare and epic items in a massively multiplayer online game,” he wrote while discussing “soulbound items” in the widely popular game, World of Warcraft.

The basic idea behind this discussion was how the potential of a non-transferable NFT can be unlocked.  This idea was proliferated by Buterin and his colleagues in a May 2022 paper titled, “Decentralized Society: Finding Web3’s Soul.”

According to the viewpoint presented by Buterin in the paper, the Soulbound NFTs will function as a “comprehensive set of tools” which will safeguard the identity of online users. The non-transferable nature of Soulbound NFTs makes them more reliable in terms of safety. It also makes them suitable for the management of permanent records with greater efficiency.  

Implications of Soulbound NFTs

The uses of SBT have a wide scope in many businesses. The uses are being discussed among those who are interested in exploring the potential of this concept. The  concept has already been implemented in Web3 for identification purposes.

An earlier implementation of this concept was the Binance-Account Bound(BAB) Tokens which were used as a form of verification in the Binance chain for its users.

SBTs could help in regulating token sales and participation in governance by voting, airdrops, and more. 

Sybil attacks can be regulated by the use of SBTs as it verifies the users. This eliminates the risk of frauds or imposters. 

“It’s tough going to market with an identity protocol where the first use case is credit. The biggest problem identity protocols have is cold starting. If you don’t have something someone can use their identity for, you’re not going to track those first users,” Playford stated in an interview with NFT now.

What the Future Holds

SoulBound NFTs have numerous possibilities for its application in many blockchain-developing companies. It can be a useful asset with greater security, and it can be ideal in the management of permanent records.

The concept is being accepted and developed by many companies, while users also seek new ways to invest into the idea. SBTs have the potential of solving the challenges of trust and safety with the users.