How would you feel if you knew that your valuable crypto collectibles were never to be sold or transferred?
So, what are soulbound tokens, and how do they work?
What Are Soulbound Tokens?
NFTs are tied to a blockchain with their unique identification code.
They can’t be replicated or falsified but can be transferred or sold.
Soulbound tokens, however, take NFTs to the next level.
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When an NFT is said to be soulbound, it cannot be transferred from your soul.
In this case, a soul is your private wallet.
These tokens are non-transferable and represent your identity.
How Do Soulbound Tokens Work?
The idea of soulbound tokens came from the popular game World of Warcraft, where several items aresoulbound.
These items cannot be traded or exchanged between players as they are permanently assigned to a particular player.
So, while regular NFTs represent an individual’s wealth, SBTs show identity and information.
SBTs can only be linked to one private wallet for the duration of their entirety.
With SBTs, it would be easier to recognize each artist through their unique tokens and souls.
In addition, the SBTs given out by the organization contain an unalterable proof of history.
Loans and Lending
SBTs can also be measures of a reputation for loans and overdrafts.
Buterin suggested using SBTs as a form of attachment to the private wallets of loan seekers.
This could prevent the individual from receiving other loans until the previous one has been taken care of.
Recovering a wallet with such important information is a priority, and Buterin proposed aSocial Security Model.
The Loopring and Argent wallets are the two most popular ones that have included social recovery thus far.
In addition, Loopring can alsomake Ethereum gas fees cheaper.
For the key to be changed successfully, it has to be approved by a majority of the guardians.
This model has its drawbacks.
There might be cases where most of the guardians are dead or inaccessible.
When Can You Use Soulbound Tokens?
There is no doubt that SBTs have their drawbacks.
There might be SBTs you want to avoid but have been added to your wallet for public view.
Buterin gave the end of 2022 as an estimate for when SBTs would be in full swing.
