You, as a customer, will certainly do your homework before getting in bed with any exchange or opening your wallet. Unfortunately, KYC protocols are often one-sided, wherein the company wants to know their customer. Still, it’s usually a rigorous procedure that said customers typically prefer to skip – they want to get to the best part of the date!
Binance’s latest innovation might be the right incentive to prompt customers to complete the KYC process. The concept of the Soulbound token, Binance Account Bound (BAB), is more than knowing your customers. There’s so much more to explore in this article, so let’s get right into it!
Seeing Into Soul
It won’t be surprising if you’re seeing Soulbound Tokens (SBT) for the first time. The project recently came into the limelight in June and was pioneered by Vitalik Buterin, Glen Weyl, and Puja Ohlhaver. They defined them as digital tokens that are non-transferable and can be verified by the public.
These tokens can serve as a profile for web3 users by displaying an individual’s credentials, memberships, and affiliations in various organizations. The project was designed to reduce crime risks within the crypto industry and promote a community-oriented space where Souls can endorse one another. Due to its brilliance, Binance quickly adopted the project and is in the pilot phase, so what’s the plan, exactly? Find out.
What is Soulbound Token, and what problem does it solve?
The need for customer due diligence (CDD) and anti-money laundering compliance is new. It’s a process that financial institutions have been using for years to prevent anyone from using their platforms to launder money or commit other criminal activities.
In our current digital world of ever-increasing data breaches and identity theft, keeping your personal information safe is more important than ever. Unfortunately, the traditional methods of KYC verification – such as government-issued IDs and utility bills – are often susceptible to hacks. That’s where Soulbound Token becomes the hero.
Binance released BAB, a Soulbound Token, as a decentralized solution to its KYC requirements. Soulbound Tokens are NFTs that CAN NOT be transferred between wallets. Essentially, the Soulbound KYC Token is a blockchain-based solution that doubles as a digital asset to allow Binance to verify the identity of its customers using a secure program.
How Does the Binance Soulbound Token (BAB) Work?
Although it is a pilot project, the Soulbound innovation is proof of how Web 3 promotes a progressive world. As a first of its kind, the BAB token is to be issued on the BNB Smart Chain. However, Binance users will not be required to own BAB, as the alternatives for completing their KYC verification include conventional methods or Soulbound Token.
Blockchain’s greatest power is decentralization; therefore, the primary focus of the BAB token is on resolving identity-related challenges – imagine a profile containing verifiable information such as driver’s license, ID card, certifications, and more.
Furthermore, it is a token that cannot be transferred and has no monetary value, as “transferability” might not be in the collective interest of decentralization, as stated in the exchange’s announcement. There will initially be no further user data contained within the BAB token, so owning a BAB token automatically means you have successfully completed the Binance KYC process.
Nevertheless, Binance may issue different sorts of BAB tokens in the future, which are poised to have more functionality and use cases such as digital CV, Sybil resistance attack, proof of NFT provenance, and more.
Benefits of using Soulbound Tokens
Drawbacks of utilizing Soulbound Tokens
The Binance team has expressed a lot of excitement about the new token. The reason for this is obvious; it solves a critical problem in the world of cryptocurrency exchanges. It also opens up a whole host of new possibilities for the future development of decentralized applications. We can expect to see more innovation from Binance in the coming months as they continue to explore the potential of Web 3 technologies.
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