Non-Fungible Tokens (NFTs) are unique digital assets that represent ownership of real-world items like art, music, or virtual real estate, and are stored on the blockchain. 

Soulbound Tokens (SBTs) are in a way similar – they are unique, reside on the blockchain, and represent ownership. But, unlike NFTs, SBTs are non-transferable and irreversible, making them suitable for representing personal attributes, achievements, and affiliations.

Today, we unpack what SBTs are, how they work, and how they are used. 

Understanding Soulbound Tokens 

SBTs are a novel concept in digital identity and credentials. They are digital tokens that are irreversibly linked to a specific individual or entity. This unique feature sets them apart from traditional NFTs, which can be exchanged between users. 

Given this definition, we can define the three core characteristics of SBTs as:

• Non-transferability: Once assigned to an individual, SBTs remain permanently linked to their digital identity.
• Immutability: SBTs can’t be altered or deleted once created. This ensures the integrity and authenticity of the information they represent.
• Verifiability: SBTs can be verified by anyone with access to the blockchain network. This transparency and verifiability make them a powerful tool for establishing trust and credibility.

There's no single, standardized token standard specifically designed for SBTs yet. They often leverage existing NFT standards like ERC-721, with modifications to enforce their non-transferable nature.

Use Cases of Soulbound Tokens

You can’t trade SBTs to generate a profit, but SBTs have many other applications across various industries. Here are some of the most promising use cases.

Digital Identity

SBTs can be used to create a unique, verifiable digital identity for each person. This identity can be linked to various attributes, such as name, date of birth, and address.

Education and Professional Certifications 

• Verification: Professional organizations and educational institutions can issue SBTs to certify individuals who have completed specific training programs or passed relevant exams. 
• Career or learning progression tracking: Individuals can track career progression and academic accomplishments, such as promotions, awards, and publications to help build a strong profile and showcase their expertise to potential employers.

Healthcare

• Medical record storage: Healthcare providers can use SBTs to securely store and share medical records. Blockchain technology can protect patient information from unauthorized access and data breaches.
• Vaccination: SBTs can be used to verify vaccination status and other health information. This can help facilitate travel, employment, and other activities that require proof of vaccination.

Governance

• Voting rights verification: Governments can use SBTs to verify voting rights and prevent voter fraud. By linking SBTs to citizen identities, they can ensure that only eligible individuals cast votes.
• Civic engagement tracking: SBTs can be used to track civic engagement and contributions, such as volunteering, community service, and political activism. 

The Potential Impact of Soulbound Tokens

SBTs have the potential to revolutionize our digital lives. However, their widespread adoption also faces certain challenges.

Benefits

• Trust and transparency: By providing a verifiable and immutable record of credentials and affiliations, SBTs can increase transparency in digital systems and reduce fraud.
• Security: SBTs can enhance security and privacy by limiting the sharing of sensitive personal information. By controlling the specific attributes associated with an SBT, individuals can minimize the risk of identity theft and data breaches.
• Efficiency and accessibility: SBTs can streamline processes and improve efficiency by automating the verification of credentials and affiliations. This can reduce administrative burdens and make it easier for individuals to access opportunities and services.

Challenges 

• Privacy concerns: The widespread use of SBTs raises concerns about privacy and data protection. It is important to establish proper privacy measures to protect sensitive information associated with SBTs.
• Interoperability and standardization: To realize the full potential of SBTs, we must develop interoperable standards that allow SBTs to be recognized and verified across different platforms and systems.
• Misuse and discrimination: There’s a risk that SBTs could be used to discriminate against individuals based on their personal attributes or affiliations. 

Conclusion 

SBTs are a promising new technology with the potential to revolutionize how we store and share personal data. 

In the future, we can expect SBTs to become an integral part of our digital lives. They could power a new era of decentralized identity, where individuals have greater control over their personal data and can easily verify their credentials.