Unlike regular NFTs, soulbound tokens (SBTs) are non-transferable NFTs.
If we told you just this, would you consider SBTs to have any market value? The most expensive NFT, after all, got sold for $91.8M!
Soulbound token NFTs, on the other hand, have no financial or speculative value, yet they are NFTs that hold the key to establishing trust in the trustless Web3 landscape. Today, SBTs are realigning marketing and brand loyalty campaigns, managing gated access to exclusive content and services, and helping build a dedicated and engaged community.
But what are soulbound tokens, what do they do, and why are brands finding SBTs a powerful marketing tool–all this and more–let’s discuss.
What Are Soulbound NFTs?
Soulbound tokens are non-transferable NFTs that can be used to digitally stamp a wallet forever. Once stamped, this NFT is irrevocable and can provide benefits such as enhanced identity protection, greater data control, and security.
A traditional NFT can be bought, sold, and traded on marketplaces, but an SBT cannot. An SBT serves use cases not yet explored by transferable NFTs. NFTs have a show-off/wealth-centric value, whereas SBTs act more like tools to put trust into the decentralised system.
- Thus, a soulbound token:
- Has no intrinsic value
- Cannot be traded, bought, or sold
- Isn’t a source of wealth
- Cannot be modified
It can represent a person’s traits, features, commitments, credentials, and rights and be permanently attached to their digital wallet.
Some of the most prominent use cases of SBTs include:
- Proof of Personhood: Immutably storing personal details such as name, birthday, nationality, or political affiliations.
- Proof of Work: Professional records such as employment history or academic achievements.
- Proof of Knowledge: Momentos of attendance in major programs, seminars, and training. Every bit of factual information gets recorded as an SBT stored securely within your wallet. The SBT acts as a digital resume.
- Customer engagement: Serve as access cards to exclusive services and loyalty programs.
- Decentralised Community Governance: Vitalik puts the case for SBTs for a decentralised society (DeSoc) where actual humans and not bots control the voting power.
Origin of The Term ‘Soulbound Token’
Vitalik Buterin, Ethereum’s co-founder, was the first to discuss the term in 2022. Vitalik was a huge fan of the World of Warcraft (WoW) game in his teens until an important component from his favourite character was removed by the makers. His bio states this bit:
Inspired by the name, Vitalik presented a whitepaper in collaboration with Glen Weyl and Puja Ohlhaver in 2022. The whitepaper talks about how soulbound tokens can be the building blocks of a decentralised society (DeSoc). The whitepaper also points out the types of models and functionality SBTs could possess.
Fundamentals of A SoulBound Token
Just like an NFT, soulbound tokens carry the traits of a collectible, a certificate, and even a ticket granting access to an exclusive service or program. But Soulbound tokens carry no speculative value for their own good. They don’t carry a price tag. They serve the purpose for which they are minted, just like good technology should.
A soulbound token is attached to a soul, here a digital account or wallet on a blockchain. An SBT can be issued by an individual, institution, company, or project. A soul can issue and attest SBTs to other souls. For instance, a brand can issue early access tickets to a new product launch as an SBT and attest to wallets or souls meeting the eligibility criteria or completing certain tasks.
SBTs can also be used to establish the origin and reputation of something/someone. However, SBTs aren’t 1:1 representations, meaning users can have multiple SBTs from different entities. An academic degree from a university, a credit rating from an agency, a badge of honour from a public society, a loyalty card from a brand–all of them as SBTs in one or more wallets.
To learn more about the kinds of soulbound NFT token standards, check out this article by Cyfrin.io.
The Role of Soulbound NFTs in Marketing
While soulbound tokens have mostly been restricted to proof-of-personhood use cases in Web3, Web2 brands and Web3 projects are experimenting with SBTs for many use cases.
Customer Loyalty Programs
Behavioural economist Dan Ariely showed that free items have a disproportionate impact on the receiver. We all love free gifts over discounts. When a brand offers a free SBT, it can trigger a far more positive response than a rebate on a good product. The receiver feels appreciated and valued.
Entire customer loyalty programs can revolve around SBTs to facilitate social and economic interactions between customers and brands. Smart contracts coded with the terms and conditions automate these interactions. Unlike NFTs, SBTs serve as verified tickets for accessing the loyalty program benefits.
One of the main reasons the Starbucks Odyssey program failed was that it was based on NFTs and not SBTs. Starbucks had issued NFTs that were transferable, poorly integrated, and served little purpose if owned. The Web3 users bought them to earn profit and not because of any loyalty to the brand. If Starbucks had considered using Soulbound NFTs, the case might have been different, of course, with better integration and rewarding systems in place.
Personalised Marketing Campaigns
Consumers love products that are unique, reflect their personality, or are personalised according to their preferences. SBTs are unique tokens attached to user wallets. They can be coded with every interaction a consumer had with a brand, the tasks they completed, the events they attended, etc. SBTs here would act as social image enhancers. Customers would opt for a brand that makes them feel good about themselves and give social validation.
A good example would be Degen score - a Web3 identity tool based on SBTs. Degen Score allows users to mint a Beacon profile, where their interactions with DeFi protocols are scored based on their on-chain actions. The Beacon Profile here is an SBT representing the users’ digital identity on the blockchain. The higher a user’s score, the greater their access to exclusive opportunities like airdrops, early access to projects, etc.
Event Access and Exclusive Offers
An SBT can also be used as a non-transferable ticket granting access to exclusive events, perks, personalised experiences, or early access to a new product launch or gated resource library. The brands can ask the users to complete a quest, promote them on social media, or attend an event to become eligible for an SBT. These SBTs can be made more exclusive by minting different categories of NFTs in tiers, each with a specific benefit attached.
SBTs are great ticketing tools as they can help brands distinguish between legitimate users and bots. Out of the legitimate users, brands can use SBTs to differentiate those who are actually invested. NFTs, on the other hand, would fail to serve the purpose. By recognising the active contributors, the brands can stop wasting their marketing budgets on serving bots or undeserving participants during airdrops.
Benefits of Implementing Soulbound NFTs in Marketing
Soulbound NFTs in crypto can prove to be powerful Web3 marketing tools for numerous reasons:
Brand Authenticity & Consumer Trust
Since SBTs are non-transferable, they can represent a right, an achievement, an affiliation, or even a part of someone’s life. They can act as proof of personhood, knowledge, skill, loyalty, etc. That way, brands can verify their users’ identity and reputation on-chain before allotting any benefits or recognising them as members.
For example, Anima uses a Reputation NFT, an SBT, to ensure only real humans claim rewards within Web3 communities. Only when a person completes a Proof of Personhood (PoP) challenge can they mint a Soulbound Reputation NFT certifying uniqueness and humanity on-chain. Over 200K users own a reputation NFT today minted across chains like Polygon, Lines, BNB, Base, and Scroll. The SBTs are available on-chain for a Web3 protocol to leverage for their personalised marketing campaigns.
In short, SBTs are ideal for digital assets that cannot be acquired through purchasing. These assets may include reputation, medical records, access rights, certificates, credit history, etc.
Strengthened Brand-Consumer Relationships
SBTs bring social identity into context, giving a face to the nameless consumer. SBTs possess descriptive and representative properties. These traits can help develop communities based on verified credentials and affiliations. Simply put, a brand can issue SBTs to its most valued users. These users now share a common link and can grow together as a community, taking the brand forward.
The Soulbound NFT whitepaper envisions a decentralised society owned and governed by the community. SBTs can make these communities more democratic, inclusive, and decentralised. By delivering unique, personalised experiences, brands can strengthen their relationships with consumers and differentiate themselves from competitors.
Data Security and Privacy
SBTs are based on blockchain technology, which makes them transparent, immutable, and secure. Since each token is publicly verifiable and visible, it authenticates a user’s social profile. SBTs also lend full data ownership to the users. They can control how the data stored in the SBTs gets shared or used.
SBTs can help with decentralised identity management and customer data protection-related compliance. They permanently store digital credentials, ensuring data privacy. SBTs can also help prevent Sybil attacks on DAOs.
Main Challenges
While Soulbound NFTs have great potential, they also come with certain risks and limitations that marketers need to consider.
Privacy Concerns
Some experts equate SBTs to China’s social credit system, which blacklists or gives a social credit rating to citizens based on their life history. SBTs could become surveillance tools in the wrong hands and could be used to supersede consumer rights or breach data privacy in ways not thought of before. SBTs are the guardians of sensitive information. If not dealt with carefully, they can raise serious considerations about soulbound token security and marketing ethics.
Integration with Existing Systems
If SBT integration with a marketing strategy is complicated and involves too many steps, the customers won’t be encouraged to participate. Digital marketing campaigns need to have seamless SBT integrations for a great user experience.
Legal and Ethical Implications
Careless SBT integrations might lead to spam. Soulbound tokens should come with an option where users can revoke attestation if they want to. Otherwise, unusually clogged wallets with not-so-useful or even dangerous SBTs could give rise to another set of problems.
Blockchain is a costly infrastructure to put up. SBTs need to justify their worth before they seek adoption in sector-wide use cases in blockchain marketing. Otherwise, legal and ethical repercussions may arise for the brands undertaking token-based marketing.
Marketing Case Studies Involving Soulbound NFTs
Binance’s BAB Tokens
The largest crypto exchange in terms of trade volume, Binance, was one of the first Web3 brands to tickle the idea of an SBT token for providing exclusive user incentives in August 2022. Binance users could mint Binance Account Bound tokens (BAB tokens) to their wallet address and access incentives from 14 other projects, including ApeSwap, Apollox PearDAO, Project Galaxy, X World Games, Summoner's Arena, Ultiverse, Cyberconnect, P12, Mathwallet, Liveart, OpenOcean, TinyWorld, and The Harvest. The benefits included exclusive airdrops and VIP benefits in the BAB community.
Future Outlook of Soulbound NFTs in Marketing
Soulbound tokens are still a nascent tech with huge future potential, steadily finding use cases beyond the Web3 space. There are still some challenges to be overcome, especially what happens to an SBT when a person loses the private key to their wallet, or the issuing party shuts down.
Another pressing issue is whether SBTs are a better tech than the existing NFTs. We have seen a lot of successful NFT applications in the past. But NFTs remain close to near-obsolescence. Since SBTs are also a kind of NFT, their adoption would directly depend on how well NFTs do or how much the Web3 populace embraces the online sector.
Soulbound tokens will find greater relevance as the metaverse takes centre stage, and we need our digital avatars to reflect our physical selves. SBTs will be the building blocks of DeSoc. They will define individual sovereignty over centralised structures in the coming years. SBTs are evolving with time. The best is yet to come.
If you are excited about the Web3 future, you will love scrolling through more informative pieces on NFT.EU.
FAQs
What makes Soulbound NFTs different from regular NFTs?
Soulbound tokens are non-transferable NFTs that can be attested to wallets permanently. A soulbound token’s price is nil. The NFTs, on the other hand, carry a price tag and can be traded and exchanged. Anyone can issue an NFT but SBTs are usually issued by an entity like a university, brand, or protocol.
Soulbound tokens can represent confirmations, affiliations, rights, and any other digital right that cannot be purchased. NFTs have broader use cases and can be used to represent any kind of digital or physical asset.
How can marketers start implementing Soulbound Non-Fungible Tokens?
Soulbound NFT tokens have varied use cases in marketing. Marketers can use SBTs to grant exclusive benefits, early access, and recognition to genuine users. Soulbound NFTs can be used to filter out bots and unworthy members, track user behaviour, and reward members who contribute to the ecosystem.
What industries can benefit the most from Soulbound NFTs?
Soulbound tokens can be most impactful in healthcare, education, recruitment, event management, ticketing, financial services, and marketing sectors.
Are Soulbound NFTs secure for storing customer data?
Owners of the soulbound tokens have full sovereignty over how anyone uses their data. They are highly secure as the data remains stored on a blockchain, where data is easily verifiable. However, SBTs can make tracking vulnerable targets easier as SBTs mostly hold a user’s personal, professional, or health-related information.
Will Soulbound tokens replace traditional loyalty cards?
Soulbound tokens are still a developing concept. Web2 and Web3 brands are increasingly experimenting with the idea of an SBT token to represent non-transferable assets such as loyalty cards. Blockchain adoption is also on the rise. However, there’s still time before SBTs replace their traditional counterparts.
