What Is Soulbound Token?
A Soulbound Token (SBT) is a non-transferable, publicly visible token permanently bound to a specific wallet address (a "soul"). Unlike NFTs which can be bought, sold, and traded, SBTs cannot be moved once received. They represent commitments, credentials, and affiliations: educational degrees, work history, event attendance, community membership, or credit scores.
How Soulbound Token Works
SBTs are proposed as the building blocks for a decentralized reputation system. A wallet that holds SBTs from reputable institutions, governance participation records, and verified skill credentials creates a verifiable on-chain identity without relying on centralized identity providers. Multiple SBTs together create a rich identity profile that protocols can use for access control, under-collateralized lending, and community governance.
Why It Matters for Traders
For traders and DeFi users, soulbound tokens could transform lending and reputation. Currently, all DeFi lending requires over-collateralization because there is no on-chain credit score. SBTs could enable under-collateralized or even uncollateralized DeFi loans for wallets with strong reputation profiles: consistent repayment history, participation in governance, and verification from trusted issuers. This would unlock a new category of capital efficiency in DeFi.
