What are Soulbound Tokens?

5 min readNov 15, 2022


“NFTs can represent much more of who you are and not just what you can afford” — Vitalik Buterin

What are Soulbound Tokens (SBTs)?

Scams, rug-pulls, and market shakedowns… NFTs, as we know them, are far away from being the core stones of a trustworthy, decentralized society. For now they are mainly used for tokenizing digital art. NFTs are non-fungible tokens meaning that you cannot sell an NFT partially. More characteristically, NFTs are unique. Their blockchain codes are one of a kind and are not changeable. All of these features make NFTs the new star of the crypto world: they can be used for digital certificates such as mortgages, rental contracts, and for other kinds of properties. All these monetary contracts seemingly determine the scope of NFT applications. Yet, Vitalik Buterin, the founder of the Ethereum ecosystem, came up with a revolutionary idea. What if NFTs could represent something more about you and not only your bank account? With this question in mind, Buterin along with some others published a white-paper in May 2022, arguing that NFTs can play a non-financial role in the future. According to this paper, a special type of NFTs called Soulbound tokens (SBTs) can help us transfer the legitimacy of our centralized societies to the blockchain network.

How do Soulbound Tokens work?

Before we dive into the definition of a SBT, let’s talk about trust. The idea of civilized trust comes from identity and verification. We sign a contract if our counterpart is credible, and we agree on a check if we think that the deposit will follow along. In the crypto world, where everyone is just an IP address, trust means something else: it means transparency and traceability. Soulbound tokens aim to combine these distinct worlds. Essentially SBTs are identity and reputation tokens. The name comes from the video game, Warcraft. In this game, players cannot sell or give away their soulbound items; literally, these items are bound to the souls of the gamers. With a similar idea, soulbound tokens cannot be transferred or sold to other parties, they can only exist in the wallets of their owners.

Soulbound Tokens use cases

At the core, SBTs are non-transferable NFTs. Their applications are beyond imagination. Since every bit of information about you can be broken down to pieces, like in profiling, these pieces can be represented by soulbound NFTs. For example, your passport, residency, birth data, education background, work records, cultural beliefs, orientation, hobbies, experiences can have a unique, non-fungible, non-transferable blockchain code associated with itself. You keep these SBTs in your own wallet, and every time a third party needs to process information about you, it can verify and proceed in seconds, very fast and efficiently. Imagine checking-in to a flight, you need to pre-check in your phone before the flight, then they check your ticket at the entrance and your passport at the door. These procedures take hours. If SBTs were used for verifying your ticket and identity, it would take about five minutes, without any human error. This is a huge step forward. Any identification and verification can become transparent and public, and can be done anywhere, anytime. There can be a world without time-killing bureaucracy. That is innovation.

How would the SBT system work?

It is quite hard to answer this question now. However, we can imagine a scenario where SBTs will be used most possibly. Imagine that you graduate from college. Then, an SBT representing your degree is sent to your wallet by the university. Now, your alma mater and gpa can be verified by your future employers without leaving a space for fraud. Another use-case is for reputation. Via SBTs, being part of an exclusive community can be shown in the digital world. Besides these, attending events, visiting museums, and health records are on the endless possibilities list of SBTs sent to you by institutions.

What are the downsides to SBTs?

Yet, solutions come with problems. Not only the cynics but also Buterin himself raised some concerns:

  • Issue number one is that you own your SBTs forever. Even if that is not part of your identity anymore, or if it has changed in any way, you cannot alter the NFT corresponding to it.
  • Secondly, it is in the blockchain ecosystem, meaning that SBTs are fully transparent. You may want to hide some information or exercise your right to be forgotten but with blockchain, your information is permanently public.
  • Last but not least, harm-intended SBTs can be sent to your wallet, without your consent. Due to the nature of blockchain, your crypto wallet address is open to transactions without requiring your acknowledgement. If someone knows your wallet address, they can send you NFTs, coins, and tokens. For instance, an NFT considered inappropriate or shameful can be sent to your wallet. These NFTs could include life threats, hate speech, malsoftware, or viruses. And they stay in your wallet forever.

How to address SBTs problems?

The authors of the white paper offer some technological solutions to address these issues. They suggest that individuals should be able to hide and delete their SBTs and update the info on some personal tokens. This way the consent and privacy of the individuals will be taken into account. Buterin and his colleagues also come up with an idea for identity recovery as well. If you lose your password to your wallet or pass away, your pre-chosen guardians can vote for the recovery of your wallet for you. Of course, this social recovery system has a great potential for betrayal and drama. However, for now, it feels good to know that your SBTs would not disappear if you forget your credentials.

What is the price of an SBT?

While crypto coin prices vary from a tenth of a cent to thousands of dollars and the cost of an NFT from a famous artist can skyrocket, there will be less and less volatility for SBTs. Remember, the main purpose of soulbound tokens is to create a trusted digital identification for individuals. In a way, it is like creating a database built on blockchain. So, essential SBTs for your health records, alma mater, and birth data can be free of charge or at insignificant prices. Here, you are the owner of your data. While putting it on blockchain, you offer a service as well. So, the cost should not be a concern in this case. However, SBTs could also be used as reputation tokens. Then, not the SBT itself but what it represents can be costly to attain. For example, if you are part of an exclusive community and would like to show off with that, its SBT might come with a significant price. However, SBTs are expected to be accessible for everyone with very low costs if any.

When will SBTs be available?

It is important to note that SBTs do not fully exist yet. All these questions and suggestions are rhetorical. However, they are among the most important non-financial blockchain potential applications. SBTs being implemented as a database structure, can clear the path towards a decentralized society. With the crypto market, we met with decentralized money, with NFTs we met with decentralized possessions, and now with SBTs, the souls of Web3, we might be meeting decentralized data. And who knows, maybe it was the last missing piece of the puzzle for a better future?

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