What is a soulbound token?

A soulbound token is a non-transferable NFT that is permanently linked to one wallet. A normal NFT can be sold or sent to anyone, but a soulbound token cannot be passed on, so it says something about the holder instead of something they bought. The name comes from the video game World of Warcraft, where soulbound items cannot be traded once a player picks them up.

What makes soulbound tokens unique?

The key difference is that transfers are blocked. Buterin argued in a January 2022 blog post that most NFTs signal wealth, since anyone with money can buy one. A token that cannot be sold can instead signal what a person has done, such as attending an event or earning a qualification. A degree or a driving licence would mean little if someone could simply buy one from a person who had passed the test.

In May 2022, Buterin, economist E. Glen Weyl and researcher Puja Ohlhaver published a paper calling this vision a "decentralized society". It describes holders' wallets as "Souls" whose tokens record commitments, credentials and affiliations. Suggested uses include voting systems that resist fake accounts (see sybil attacks), lending based on reputation instead of collateral, and recovering a lost wallet with help from trusted contacts.

How does a soulbound NFT work?

On Ethereum, a common approach is ERC-5192, a final standard titled Minimal Soulbound NFTs. It extends the ERC-721 NFT standard with one extra function that reports whether a token is locked. If it is locked, any attempt to transfer it must fail. Because it builds on ERC-721, wallets and explorers can still display the token.

Who can revoke or burn the token depends on the issuer's contract. Some designs let the issuer cancel a credential, while others leave that choice to the holder.

What is a soulbound token example?

• Identity checks. Binance announced its Binance Account Bound (BAB) token on BNB Smart Chain in August 2022. It can be minted only after a user completes Binance's KYC identity check, cannot be moved between addresses, and can be revoked only by its holder. Other apps can check it to confirm a user is verified.
• Attendance badges. Buterin pointed to event tokens that lost their meaning when people bought them on the secondary market.
• Certificates. Course completions, memberships and work history are frequently suggested uses.

What are the risks of soulbound tokens?

Blockchains are public, so a wallet full of soulbound credentials can reveal a lot about its owner. Buterin suggested privacy tools such as zero-knowledge proofs to prove a fact without exposing the full record. He also noted that non-transferability is not airtight, since a person could sell control of the whole wallet. And if you lose the keys to the wallet, the tokens cannot be moved to a new one.