NFTs 2.0 – When Can We Expect Soulbound Tokens?
May 2022. Spring has arrived, the NFT100 is less than a month away, and Ethereum Co-Founder Vitalik Buterin has just made a significant announcement: Soulbound Tokens (SBTs). The concept, which came from a white paper titled “Decentralized Society: Finding Web3’s Soul,” elicits “oohs” and “ahhs” from people all over the metaverse. The paper’s co-author, E. Glen Weyl, stated the same month that early applications of SBTs could be available by the end of 2022.
However, where are all of these early use-case SBTs to be found in January 2023? Did the NFT space once again gloss over this potentially paradigm-shifting technology in favor of more Bored Ape derivatives? Is it simply a lack of infrastructure that allows SBTs to be created in the first place? Maybe both, maybe neither — because SBTs are here, but they are far from finished.
What are Soulbound Tokens?
In layman’s terms, Soulbound Tokens are non-transferable NFTs that are ideal for managing permanent records (versus storing documents in your safe deposit box). However, taking over paper records is only one of these NFTs’ functions. Because, according to Buterin’s paper, SBTs will serve as a comprehensive set of tools for online users to maintain and protect their identity.
Over the last year, it has become widely accepted that, if SBTs are implemented as planned, they will have a significant impact on our daily lives. Medical records, academic accomplishments, alumni status, employment histories, criminal records, and everything in between can be minted as an NFT with immutable and non-transferable ownership via SBTs. This could be particularly beneficial for healthcare administrators and hiring managers. SBTs, however, have yet to reach the outside world.
Where the Soulbound Tokens are now
While SBTs (or NFTs, for that matter) have yet to be adopted by mainstream society, there are still current Soulbound efforts on the blockchain. Not in droves, as some might have expected after the initial white paper release, but a select few have stepped forward to help usher in a new era of Web3 identity.
MoonPay is one such venture aiming to innovate in this burgeoning sector. In 2023, the company, led by CEO Ivan Soto-Wright, will launch the Web3 Passport, which will help define the potential of SBTs in our current blockchain climate. The passport, billed as a “next-generation loyalty and rewards program,” will provide holders with guaranteed access to exclusive experiences and products from MoonPay partners as well as other leading brands and creators. This Soulbound NFT offering may be especially useful for Web3 brand building.
However, MoonPay is only one player in the rapidly expanding SBT market. While it may be the most NFT-native SBT offering on the horizon (along with an adjacent Pudgy Penguins project), other entities have begun work on Soulbound projects that aren’t necessarily reliant on NFT tech or culture. Organizations from a variety of sectors have expressed interest in Soulbound Tokens, with the Tenora blockchain planning to go Soulbound in the future, Crypto VC LongHash considering an SBT reward system, and even a collaborative project between MetaMask, Cobo, and Gnosis Safe in the works.
Nonetheless, given how new the concept of SBT is, the practicality of the new type of token remains unknown. While real-world SBT applications, such as tokenized diplomas from the National University of Mongolia and potential SBT trials launched by Japanese banking giant SMBC, have demonstrated that Soulbound Tokens have every incentive to move away from Web3 nativity, they still feel like a novelty that falls short of communicating SBTs’ full potential.
When will SBT become more widely used?
So, when will the increasingly elusive use cases of SBTs become a significant part of the NFT ecosystem? The answer is far from straightforward. Because, while the benefits of SBTs appear to outweigh the drawbacks, it’s anyone’s guess when a decentralized society will become a reality.
For the time being, movers will most likely continue to seek out new and novel ways to employ SBTs, gradually laying the groundwork for them to become relevant in the next market cycle or the one after that. Of course, Masa and MoonPay’s SBTs will benefit the NFT space and Web3 in general. However, the true utility of these tokens cannot be realized until major financial, medical, and educational organizations (and others) are ready to replace antiquated credentialing models with a more immutable and effective system made possible by SBTs.