The Reputation Called Soulbound Token
By Ruchi Sharma
Soulbound Tokens or SBTs are digital identity tokens that represent a person’s or entity’s characteristics, features, traits, and achievements. Soulbound tokens are thus non-transferable NFTs linked to a blockchain network, containing a person’s or entity’s unique identifying information, including personal data and history, such as age, qualification, education, health records, and work achievements.
SBTs seek to expand the NFT concept beyond money and bragging rights by creating a token that is both unique and non-transferable. An SBT represents a person’s or entity’s reputation, whereas NFTs represent assets and property. In addition, unlike NFTs, SBTs have no monetary value and cannot be traded once issued to a wallet.
Apart from developing a reputation-based voting system, SBTs have the potential to improve the integrity of DAO voting by defending against Sybil attacks, which are one of the most serious threats to the current DAO governance model.
SBTs have become a hot topic in Web3. In theory, SBTs could allow people to establish their own digital reputation and assess someone else’s on the blockchain. It remains to be seen if an SBT can function as Web3’s version of the “identity card.”
For example, Binance introduced its own SBT, Binance Account Bound (BAB). The BAB token has no monetary value and is the first SBT to be issued on the BNB Chain. BAB’s goal in Web3 is to address identity verification issues by acting as a digital verification tool for Binance users who have completed KYC.
Third-party protocols, in addition to the Binance ecosystem, will be able to use BAB tokens to airdrop NFTs, prevent bot activity, and facilitate DAO governance voting, among other things.
How do SBTs work in Web3
One of the major issues confronting the Web3 industry is trust. As an example, consider lending money. SBTs, like traditional bank credit scores, could track a user’s DeFi borrowing history as well as other risk-related metrics.
SBTs are also proposed as a voting method for decentralized autonomous organizations (DAOs). DAOs could issue SBTs that assign voting power based on users’ interactions with the community, rather than the current governance model, which is based on how many tokens a member holds. This model would prioritize voting power for the most dedicated and well-known users.
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