People worldwide were surprised at how quickly and creatively Web3 came up with a new way to make money. An open-source system has been made to handle and approve financial transactions. It uses smart contracts and consensus methods from economics and cryptography. The bitcoins-era.nl facilitates the purchase and trade of cryptocurrency for thousands of users.
What are soulbound tokens, also known as SBTs?
Suppose blockchains will be at the center of fascinating, collaborative ecosystems. In that case, they need projects and use cases focusing on social identities, communities, and financial transactions. Vitalik Buterin, who helped start Ethereum, worked with Puja Ohlhaver, the strategic counsel for FlashBots, and E. L. James to figure out what needed to be done. In a paper called “Decentralized Society: Finding Web3’s Soul,” he came up with the idea of soulbound tokens.
What is a token that can’t be traded for something else?
“Non-transferable tokens” can’t be sold (NFTs). These tokens are added to addresses and may help keep track of reputation, but they can’t be moved from one address to another. But what does the word “Souls” mean regarding soulbound NFTs? Souls are the names of the digital wallets or accounts that permanently link SBTs or other tokens that can’t be traded. A person’s work history, for example, could be a Soul. You can check that this information is similar to what you find on a curriculum vitae.
But the real power of the mechanism is shown when SBTs owned by one Soul can be issued or certified by other Souls who are counterparties (like people or organizations) to these connections. The system shows what it can do at this point. For example, the Ethereum Foundation could be a Soul that gives people SBTs based on how often they go to Ethereum conferences.
How do you use soulbound tokens?
On the other hand, because SBTs show how qualified someone is, their reputation can be used as collateral when they need more. If you think about NFTs, you’ll remember that they mean property or assets worth something. But how can you discover someone’s reputation in a system that doesn’t depend on trust, like blockchain?
As an example of this idea, let’s look at how a decentralized autonomous organization (DAO) votes and how SBTs work in the Web3 area. Most models of how a DAO is run let members vote based on how many tokens they own.
Still, DAOs that give out SBTs may care more about a member’s reputation than how many tokens they have. Users interacting with the community is an independent way to check their reputation. For instance, a member’s reputation could be shown by the trophies they get for voting on-chain through Kusama’s Governance Rewards program. You can show how each member voted with these awards.
Because of this, trophies are a way for members of the Kusama and Polkadot DAOs to show what they have done on-chain. This picture may be enough to get a loan when there needs to be more collateral. If people can vote based on how trustworthy they are, Sybil’s agents might not be able to attack DAOs.
Here are some things you can do in the Web3 environment with soulbound tokens. In the next part, you’ll find these examples. But. When can soulbound tokens be gotten? Binance will put Binance Account Bound (BAB) on the BNB chain as its first stablecoin token (SBT). The BAB token will not be worth any money and can’t be given to anyone else.
Customers of Binance who have met the requirements of the Know Your Customer (KYC) program will be able to use it as a digital verification solution. Third-party protocols could also use BAB SBTs to vote on how the DAO is run and send out airdrops.
