Understanding Ethereum's Soulbound Tokens (SBTs) | The Future of NFTs

in LeoFinance8 months ago

A new token standard has arrived on Ethereum.

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Soulbound Tokens (SBTs)

If you've ever read any of my articles, you're probably aware that I am a hardcore NFT enthusiast. Hell, I wrote a whole series for LBI called "What is an NFT?" where I dove into specific use cases for NFTs. You can find that in the link at the end of this article if you wish to check it out. Something that I've always thought would be an incredible use-case is account-bound NFTs for digital identity.

We live in a digital world that every day is becoming more and more digitized. Some states have Driver's Licenses in mobile apps on the resident's phones, voting is digital, and much more. What we've yet to establish is a real digital identity that can be verified. Sure, you have a digital identity on some centralized systems such as banks, social media, etc...

Soulbound tokens are a new token standard on Ethereum that are bound to an account forever. These SBTs will live inside special wallets called Souls that can establish a digital identity for that wallet.

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Since these are specialized wallets specifically for holding SBTs, you can have a digital identity separate from your actual crypto wallet. I know a lot of people want to remain anonymous or try to keep their real identity separate from the degenerate shit they do with crypto.... But It's out there. The blockchain doesn't lie and the blockchain is only pseudo-anonymous anyway unless you're using something like Monero.

SBTs can be used for a number of different things that would like to your digital identity, or Soul. Say you graduate from college and you're given a physical degree. Something crazy happens and that college closes down, then records get lost. You now have no record of your degree (I know the odds of this happening are slim to none) or whatever other records they have have been keeping. Your Soul wallet is the solution if those records were issued as SBTs.

The same thing could be done with medical records and other legal documents. Driver's licenses are a big one, no more losing it or having it stolen. These are bound to your Soul wallet and cannot be transferred.

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Souls could even be linked to communities or be issued by communities. You could think of your Hive account as a Soul as well since it's kind of an NFT. This could enable things such as community recovery of Soul wallets. For example, if a well-known community member loses access to their Soul wallet, the community could come together to verify the identity of that user so they could recover the wallet.

Obviously there are issues with this concept, but that's why it's up for discussion. SBTs could be used an a number of ways, but the primary objective is to establish some kind of digital identity that's non-transferrable. Hive does this already by using the account as your digital identity that even has an on-chain reputation system. It could potentially be used for uncollateralized loans and things like this in DeFi.

This could change the way digital memberships are verified, or even the way access to events is verified. Of course this is already possible with NFT technology, but SBTs add another layer of security because they are bound to one account.

What do you think about Soulbound Tokens? Do you think this new token standard is going to be widely adopted?

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Thanks for reading! Much love.

Wanna learn about all kinds of things you can do with the crypto you earn blogging on Hive? Check out my index - Learn Crypto Stuff for some fun educational crypto stuff.

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This is an extremely intriguing concept I wasn't aware of until just now. This sounds like the inroads to digital identities that aren't necessarily tied to real-world information that—as you mentioned—allows for anonymity without depriving wallet holders from enjoying more socialized engagement in crypto communities. Further, the protective nature of community wallet recovery seems like a great way to reward those willing to step out of the shadows with a layer of security against the very thing many choose to remain anonymous over: wallet loss.

Seems like Ethereum is bursting with fun new ideas lately ;P

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This is what @splinterlands did with their Gladiators in the game. They literally called these assets Soul Bound. I don't know where they got the name from. What I do know is that now I have even more respect for the foresight of @splinterlands team.
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