Author: Maverick

Editor: Colin Wu

On September 8, Binance announced the launch of the first Soulbound Token on BNB Chain: Binance Account Bound (BAB) Token, which serves as proof of identity for Binance users who have completed KYC authentication. On the same day, 14 Web3 projects in BNB Chain (ApeSwap, ApolloX, Galxe, Cyber Connect, etc.) will offer incentives to users who are holders of Binance’s newly released BAB Token, with rewards such as exclusive airdrops, NFT claims, VIP privileges, daily bonus points, etc. BNB Chain also said it encourages more projects to use BAB Token and will provide more benefits to users in the future.

Soulbound Token (SBT), similar to the Soulbound item in World of Warcraft, was proposed by Vitalik Buterin, the founder of Ethereum, back in January this year. Simply understood, SBT is a non-transferable ERC-20 or ERC-721, which is non-financial and often represents an identity or subordination.

Similarly, BAB is also non-transferable, revocable and unique. Non-transferable, the user cannot transfer the BAB Token to another user; revocable, the user can unbind the BAB Token he owns; and unique, the authenticated Binance User ID can only mint one BAB Token at a certain address on a certain chain.

The Benefits

(1) For the common user, the non-transferable nature of the SBT will more easily trigger a sense of responsibility, as the SBT does not have financial or wealthy attributes, but represents more of a Web3 on-chain behavioral credential and is available for verification. The BAB Token holder user, represents and proves that the user has successfully gone through the Binance KYC process, which helps to identify and eliminate robo accounts. In the future, it will also be possible to determine whether a user is a loyal user of the exchange by obtaining an on-chain time query of the BAB.

On the other hand, BAB binds the Binance account to the user’s address, and in the future the behavior of this on-chain address may become a criterion for Binance to judge large customers, privileged owners, and thus to enlist more core users/large accounts. Also to some extent it is good for the prevention of hackers/attackers, if the BAB is bound, it is equivalent to cut off the possibility of pooling funds from the on-chain address to the exchange.

(2) For protocol project parties, BAB holder user identities can be used and verified for a variety of purposes not limited to airdrops, rewards, etc. Dapps can also differentiate their interactions with users by using BAB Token to classify data on the chain to identify different types of users, which may provide the possibility to diversify the tasks assigned to users and try to build a more distinctive community. Different SBTs may also represent members of different communities.

In addition, some Web3 identity protocols, perhaps sensing Binance’s interest in bridging the relationship between its internal account system and the BNB Chain addresses, are integrating their own ecosystem with BAB to capture its users, such as Link3’s Mystery Box sweepstakes for BAB Token users. (Note: Mystery Box is designed to reward early Link3 adopters who’re actively helping us build the layer of trust.)

(3) Realize the soulbound of governance rights. If the governance mechanism is disrupted, then the governance power is easily transferable. Current implementations of governance are mainly applied to FT and NFT, both of which can be easily transferred. In “Soulbound”, Vitalik Buterin argues that the goal, whether to distribute governance broadly or to give it to those who can, is likely to lead to a transfer of governance power, since the former concentrated interest may cause one group of people to buy it from another, while the latter often results in governance being acquired by the determined but incompetent.

Transferability will likely shift governance power from those who may provide overall value to those who desire power and have strong capital. Governance power wars are no stranger to DeFi history, such as the best known Curve War, where major protocols offered higher CRV rewards as bribes to attract investors to participate in order to secure their position in the preferred pool. In the future, the decentralized protocol on the BNB Chain may combine the project holder with the BAB Token holder, granting higher governance rights based on conditions such as holding time.

Disputes

A single address is not representative of the user and is subject to risks such as address changes and loss of private keys. Unlike addresses that can be created indefinitely, most individuals tend to have only 1 exchange account due to KYC. The BAB Token and many of the current SBTs are encapsulated in a single on-chain address, and the data behavior of a single on-chain address is often not fully representative of the user itself.

BAB requires that a Binance KYC account be tied to a certain address. If a user connects an address that is not commonly used or a hedge address, the data that the on-chain protocols want to obtain about the BAB user may not be accurate, and the actual on-chain behavior of the user may differ significantly from the behavior of the BAB bonded address. In addition, hacking events are frequent at present, and there are also some problems such as private key leakage or loss in SBT binding address.

There are also some EIP standards that are currently trying more solutions. For example, EIP-5114 argues that SBTs should be bound to some NFT rather than an address. Vitalik Buterin has also mentioned this in some of his articles, such as “Soulbound”, which argues that SBTs can be bound to ENS domains if users care enough about them. In “Decentralized Society: Finding Web3 Soul”, unlocking SBTs and gaining governance power by holding a transferable ERC-20 Token for a period of time.

Overall, as the first soulbound token BAB backed by the largest exchange: Binance and the most used public chain: BNB Chain, it is groundbreaking, and it is believed that more third-party protocols or data analytics organizations outside of BNB Chain will also be connected to BAB in the future. Other exchanges, such as FTX, OKX and Huobi, which also have their own public chains, may choose to imitate or make more attempts on SBT after Binance, bringing more privileges and benefits to users.

Referenced articles:

1. https://www.bnbchain.org/en/blog/soulbound-tokens-to-pave-the-way-for-decentralized-society-on-bnb-chain/

2. https://vitalik.eth.limo/general/2022/01/26/soulbound.html

3. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4105763

4. https://github.com/ethereum/EIPs/pull/5114

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