Soulbound Tokens (SBTs) and why you should care about it

Soulbound Tokens (SBTs) and why you should care about it

What exactly are SBTs, how is it different from NFTs and how can we capitalize on it? Read on to find out more.

If you have been in the cryptocurrency industry long enough, you might have probably heard of Soulbound Tokens (SBTs) — but you might not understand it yet. Today, we dive into what exactly SBTs are, why it differs from NFTs, and how you can capitalize on this.

What are SBTs?

Soulbound tokens (SBTs) are digital assets tied to a user's identity. They can represent many things, from virtual items in a video game to ownership rights on a decentralized platform. While you might think that “isn’t this an NFT?” — you are right and wrong.

The difference between NFTs and SBTs

This differs from NFTs in some ways, with the significant difference being that SBTs are tied to a user’s identity while NFTs are not. Thus, when dealing with SBTs, a user must prove that they are the rightful owners of the token and are typically non-transferable.

Because of this, SBTs are more commonly used for assets that require identity, such as your Know Your Identity (KYC) details or on-chain identification for credentials. At the same time, NFTs are mostly tied to unique digital items, such as art or collectibles.

What can we use SBTs for

We can use soulbound tokens in various ways, which we explore below. Because this is such a new technology, there are few use cases for it yet, and you should know all the latest developments happening around this area, which we will also write about as they come out.

Streamlining experiences with on-chain credentials

SBTs can allow the experience of many things to be streamlined quickly and securely, with one example being a bank.

For example, banks could use SBTs to require potential borrowers to sign a message with their private key to access their credit information or apply for a loan and use this information to determine whether they are eligible for a loan and at what interest rate.

By doing this, the bank can verify that the user is the rightful owner of the SBTs and access their credit information, allowing them to make better-informed lending decisions and reduce the risk of default with a faster and more secure method than the traditional methods of such as using passwords or other forms for authentication or paper and pens for loans.

SBTs can also streamline verifying a person's qualifications to be more secure and trustless.

For example, instead of relying on centralized institutions to certify qualifications, schools and universities can use the on-chain credentials of SBT holders to verify the authenticity of their qualifications. This can reduce the risk of fraud and make it easier for students to prove their qualifications to potential employers or other institutions. By using SBTs, the education sector can reach a trustless state when authenticating certifications and qualifications.

Anti-sybilling of airdrops via “souldrops”

Web3 communities have traditionally relied on token sales or airdrops to attract new members, but these methods have had mixed results and can be susceptible to sybilling. As an alternative, soulbound tokens (SBTs) can issue "souldrops" to community members.

For example, developers who have attended at least 5 out of the last ten conferences could be eligible to receive souldrops, with their SBTs serving as proof of attendance. This approach, known as a proof of attendance protocol (POAP), allows community members to use special NFTs (non-fungible tokens) to show that they have attended live or recorded events.

This can provide a more effective and secure way of engaging with web3 communities and rewarding participation, reducing the risk of sybilling of airdrops.


In conclusion, soulbound tokens (SBTs) are digital assets tied to a user's identity — and these are just some of how we can use SBTs in the future.

Thus, while SBTs are a relatively new technology, they have the potential to improve the security and efficiency of a wide range of applications. And you can capitalize on this technology by trying protocols or applications that use this when it comes out.

Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.



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