Soulbound Tokens - Building a Decentralized Society

Written by
Rahul Kaushik
Published on
July 29, 2022
Read time
3 min read

With Web 3 moving at a lightning pace, Soulbound Tokens, proposed by Ethereum creator Vitalik Buterin, would form a critical bedrock for building DeSoc, or decentralized society.

What are Soulbound Tokens?

SBTs are just like NFTs but are 'non-transferable' in nature.

That means, that once you receive an SBT, it is for life. It is 'soulbound' to your wallet. You can neither trade nor transfer it.

SBT has already been thoroughly discussed on our blog. Check it out for a more in-depth explanation of SBT.

In this article, we'll look at some of the applications of SBTs and how they might change the world we live in.

1) College Degree

Traditional college degrees are not tamper-proof; they can be faked and anybody can swear to have done the work and claim a degree by paying money.

This has allowed con artists and criminals around the world to purchase instant degrees and transcripts fast and on the cheap. Citing these fake degrees and papers, people have gone on to commit crimes and felonies.

Did you know that a Dog earned itself a university degree in Rochville University Scam?

Yes, a dog!

Chester Ludlow, a pug dog from Vermont, was awarded an online MBA degree (master’s in business administration) by Rochville University—an online college that offers life and work experience degrees.

In another report, an 8-year-old diabetic child died after a North Carolina "doctor" advised her mother to stop giving her insulin. Laurence Perry, the "doctor," claimed to be a specialist with credentials from several online schools.

These were later found to have been purchased from diploma mills(an organization that claims to be a higher education institution but provides illegitimate academic degrees and diplomas for a fee).

Imagine if we had universities offering degrees as Soulbound Tokens.

Students would receive a degree in the form of SBT only if they exhibit academic prowess and clear the exams.

SBTs would not only provide tamper-proof degrees to students but also provide them an incorruptible record of educational achievement where the students can prove they earned the degree fair and square.

2) Proof-of-Skill

How often have we seen employers complain that the person they hired based on the interview didn't meet their expectations while working on a project?

A majority of people lie on their resume to secure a job and once they're assigned work, they're clueless.

According to HireRight 2017 Employment Screening Benchmark Report:

  • 85% of survey respondents uncovered a lie or misrepresentation on a candidate’s resume or job application during the screening process – up from 66% five years ago.

Recruiters have to invest time and energy and work around the clock interviewing candidates and performing background checks, just to ensure the potential candidate isn't lying.

So, how do you make sure the candidates aren't lying and are the right fit for your organization?

By attaching SBTs to skills.

Here's how SBTs build a better resume:

  • Worked on an open-source AI project significantly?
  • Receive an SBT in return for your contribution.
  • Designed a full-fledged e-commerce website for a client?
  • Unlock an SBT in return.

Now that your SBTs were unlocked only because you put in time and effort into the projects, the employers would have no problem hiring you because as soon as they see that you have SBTs, they can instantly see that you're skilled and aren't necessarily lying.

In a way, SBTs can become your 'Digital CV' that can't be faked or tampered with. In other words, SBTs can become your 'proof-of-skill' that can have a say in whether you're qualified for a job or not within minutes and saves time and energy for everyone that is part of recruitment.

Also, employers can offer SBTs as work experience which eliminates the need to cross-check with a candidate’s current employer when hiring.

3) Voting and Governance on DAO

Another area where SBTs could help is Voting and governance on DAOs.

With SBT, Sybil attacks on DAOs can be prevented.

During a Sybil attack, attackers acquire voting power by paying off the original token holders to approve/reject a proposal. The problem with this type of voting is that they could aim to hack the DAO to suit their greedy needs.

In the words of Vitalik, “Decentralized governance is necessary, but doing it through coin voting carries many risks that are or have not been discovered. The solution’s core is to change or replace voting with coins.”

Vitalik proposes the ****use of soulbound tokens for voting.

Since soulbound tokens are not tradable. This can prevent malicious users with wrong intentions from being able to influence voting and governance on DAOs and voting rights will remain in the hands of local community members who are vested in DAO’s progress and growth.

4) Credit & Lending

With the rise of DeFi, the lending market has grown leaps and bounds in the cryptocurrency ecosystem. We've seen projects such as Aave and Compound offer lending and borrowing services for users that wanted to avoid using centralized platforms to have access to financial services.

The largest financial value built directly on reputation is credit and uncollateralized lending. The traditional financial systems rely on centralized scoring systems such as CIBIL and FICO to provide uncollateralized loans to users.

Because of the anonymity factor, uncollateralized lending in the DeFi space is currently not possible. There's no mechanism available to determine the background or estimate credit scores of borrowers as traditional financials do.

SBTs could potentially plug the hole here.

The creditworthiness of a potential borrower could be proved with SBTs that represent educational background, work history, closure of previous loans if any, clean bank statements, etc.

SBTs could serve as a continued record of credit-relevant history, allowing DeFi protocols to open up a credit line to borrowers who could leverage SBTs and stake their reputation as collateral to secure a loan.

These are the top 3 areas where SBTs can change the game.

Other use cases include -

  • Health Records: SBTs are issued by a diagnostic center, thus creating an incorruptible record of an individual’s health. This could provide incorruptible information for decentralized insurance protocols to offer such coverage to those that require it.
  • Records of Identity: SBTs could be used to create unique records of identity. An example is invitations to online events, where holders of SBTs could be admitted to such events on presentation & verification.
  • Wills and Gifts: SBTs could be designed to identify the holder as the inheritor of a digital estate or receive the same as a gift subject to the passing or fulfillment of certain pre-defined conditions.


As the Web 3.0 ecosystem expands, it has the potential to revolutionize our lives. It does however struggles when it comes to 'Decentralized Identity'.

Integrating Soulbound tokens could play a massive role in people opting out of the traditional systems and the embrace complete decentralization in every aspect of our lives.

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Rahul Kaushik

Rahul is a former software engineer who is now a writer. After working as a full-stack developer early in his career, he realized that coding was not his forte and began writing blogs, poetry, and articles for sports magazines. He is always torn between Football and Bitcoin as his first love. In his spare time, he enjoys reading books on economics, startups, and business, as well as educating people on personal finance, cryptocurrency, and Web 3.0 on Instagram.

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