Impact SBT (Soulbound Token)

In digital worlds, SBTs represent permanent player accomplishments and history.

• Unforgeable Achievements: Tokens for completing quests, reaching levels, or winning tournaments that cannot be transferred or purchased.
• Character History: A soul's SBT collection becomes its portable, composable legacy across interoperable games.
• Guild Membership: Representing membership in a player guild or alliance with associated rights and reputation.

SBTs transform event tickets into permanent, verifiable mementos and access tools.

• Proof of Attendance: A permanent, on-chain record of participation in a conference, concert, or community call.
• Dynamic Utility: The SBT can later grant access to exclusive content, future discounts, or airdrops for attendees.
• Anti-Scalping: As non-transferable tokens, they prevent secondary market speculation on access rights.

SBTs enable decentralized credit scoring and underwriting by aggregating verifiable financial behavior.

• Credit History: A soul can accumulate SBTs representing successful loan repayments or rental history.
• Under-Collateralized Lending: Lenders can assess risk based on a wallet's reputation SBTs rather than only collateral.
• Privacy-Preserving Proofs: Zero-Knowledge proofs can verify creditworthiness SBTs without exposing underlying transaction details.

An Impact SBT (Soulbound Token) is a non-transferable, non-financialized token permanently bound to a wallet, representing verifiable on-chain contributions. Its primary purpose is to create a soulbound reputation system that quantifies a user's positive impact, such as governance participation, protocol usage, or community contributions, enabling new forms of identity and access control.

Impact SBTs are defined by specific technical constraints that enforce their utility as reputation tokens:

• Non-Transferable: Permanently locked to the minting address via smart contract logic, preventing sale or transfer.
• Soulbound: Represents attributes of a specific "soul" or identity, not a fungible asset.
• Verifiable On-Chain: Issuance and associated data (e.g., contribution metrics) are recorded on a public ledger.
• Non-Financialized: Designed for utility and access, not as a speculative financial instrument.

Impact SBTs enable novel governance and incentive models by proving specific user actions:

• Reputation-Based Governance: Granting voting power or proposal rights based on proven contribution history.
• Gated Access: Unlocking exclusive features, airdrops, or community channels for proven users.
• Contribution Tracking: Serving as a verifiable record of a user's activity, like providing liquidity, completing quests, or participating in governance.
• Sybil Resistance: Mitigating spam and manipulation in incentive programs by tying rewards to a persistent, non-transferable identity.

Impact SBTs are typically built on existing token standards with added restrictions:

• ERC-721 & ERC-1155: Common base standards, with transfer functions overridden or locked in the smart contract.
• EIP-4973 (Account-bound Tokens): A proposed standard explicitly for non-transferable tokens, providing a canonical interface.
• Verifiable Credentials (VCs): Often used as the underlying data model, with the SBT serving as a decentralized identifier (DID) pointer to off-chain or on-chain VC proofs.

While powerful, Impact SBTs introduce new design challenges:

• Permanence & Revocation: Balancing immutability with the need to revoke credentials in case of fraud or key loss.
• Privacy: Publicly associating all actions with a single persistent identity can reduce user privacy.
• Interoperability: Ensuring SBTs issued by one protocol are recognized and valued by others.
• Centralization Risks: Reliance on specific issuers or attestors for credential validity can reintroduce central points of failure.

Unlike fungible or NFT assets, Soulbound Tokens (SBTs) are designed to be non-transferable and bound to a single wallet address. This is a fundamental security property that prevents:

• Sybil attacks where a single entity creates multiple identities.
• Reputation laundering where trust or credentials can be bought or sold.
• Identity theft through simple token transfers, though wallet compromise remains a risk. The immutability of this binding is enforced at the smart contract level, making revocation or reassignment a deliberate, auditable action.

SBTs can create permanent, public records of personal attributes, raising significant privacy concerns. Key considerations include:

• On-chain permanence: Data written to a blockchain is typically immutable and public.
• Pseudonymity erosion: A collection of SBTs can deanonymize a wallet by revealing education, employment, and group memberships.
• Zero-Knowledge Proofs (ZKPs) are a critical mitigation, allowing users to prove they hold an SBT (or a property of it) without revealing the token identifier or associated wallet address, enabling selective disclosure.

The trustworthiness of an SBT is derived entirely from its issuer. This introduces centralization points and key-man risks:

• Issuer credibility: The SBT's value depends on the issuer's reputation and integrity (e.g., a university degree SBT).
• Key management: Compromise of the issuer's private key could allow fraudulent minting.
• Censorship & revocation: The issuer typically holds the power to revoke SBTs, which can be a feature (for misconduct) or a risk (for centralized control). Decentralized issuance protocols and multi-sig controls are used to mitigate these risks.

The SBT's logic is encoded in its smart contract, which must be meticulously audited for:

• Immutable binding: Ensuring the transfer function is permanently disabled or overridden.
• Revocation logic: Secure functions for authorized issuers to burn or revoke tokens.
• Upgradeability risks: If the contract is upgradeable, governance mechanisms must be secure to prevent malicious updates that alter core properties like non-transferability.
• Integration risks: Vulnerabilities in protocols that read or interact with SBTs (e.g., governance or access control systems).

Because SBTs represent immutable identity components, losing access to the private key of the bound wallet has severe, permanent consequences:

• Irrecoverable identity: Unlike funds, a non-transferable SBT cannot be moved to a new wallet.
• Social recovery systems are essential, where trusted guardians or a decentralized network can attest to identity and facilitate the re-binding of SBTs to a new wallet. This shifts security from key management to social graph security.
• Inheritance challenges: Protocols for posthumous or incapacitated transfer of SBT-based identity are an unsolved problem.

SBTs that represent official credentials (diplomas, licenses, KYC status) intersect with regulatory frameworks:

• Data protection laws: GDPR's "right to be forgotten" conflicts with blockchain immutability. Solutions involve storing hashes or using privacy-preserving tech.
• Issuer liability: Entities issuing credential SBTs may assume liability for their accuracy and the systems that rely on them.
• Travel Rule & AML: If SBTs gain financial utility (e.g., for loan collateral), they may trigger financial regulations, challenging their non-financial design intent.

A tamper-evident digital claim that follows a W3C standard format, enabling trust in digital interactions. Impact SBTs are a specific implementation of VCs on a blockchain.

• Structure: Contains claims (e.g., "completed carbon credit retirement"), metadata, and digital proofs (signatures).
• Selective Disclosure: Allows the holder to prove specific attributes from a credential without revealing the entire document, enhancing privacy.

A cryptographic method that allows one party (the prover) to prove to another (the verifier) that a statement is true without revealing any information beyond the validity of the statement itself.

• Privacy for SBTs: Enables users to prove they hold an SBT with certain properties (e.g., "is KYC'd") without exposing their wallet address or the token's full history.
• Scalability: ZKPs can aggregate and verify many claims in a single proof, reducing on-chain computation.

A cryptographically signed statement made by an issuer about a subject. On Ethereum, this is often implemented via standards like EIP-712 or EAS (Ethereum Attestation Service).

• On-Chain vs. Off-Chain: Attestations can be stored directly on-chain (as with many SBTs) or off-chain with a pointer on-chain for efficiency.
• Revocability: Some attestation frameworks allow issuers to revoke claims, a critical feature for maintaining the accuracy of real-world credentials.

The broader token class to which Soulbound Tokens belong. An NTT is any token with transfer restrictions enforced at the smart contract level.

• Key Distinction: While all SBTs are NTTs, not all NTTs are SBTs. SBTs specifically imply a persistent, soul-bound link to a single identity.
• Implementation: Enforced via functions like _beforeTokenTransfer reverting any transfer attempts, or by omitting transfer functions entirely.

The property of a system to resist fake or duplicate identities (Sybils). Impact SBTs are a primary tool for achieving Sybil resistance in decentralized governance and reward distribution.

• Mechanism: By binding a unique, non-transferable credential to a verified identity, systems can ensure "one-person, one-vote" or prevent airdrop farming.
• Applications: Critical for decentralized autonomous organization (DAO) voting, retroactive public goods funding, and fair launch mechanisms.