Author: LeftOfCenter
According to people familiar with the matter, OpenAI founder Sam Altman is seeking a new round of financing of $100 million for Worldcoin, another encryption project he founded, and is currently in advanced negotiations. The Financial Times quoted a person familiar with the matter as saying that the new round of financing was supported by existing and new investors. As early as 2022, Worldcoin received investment from institutions such as Andreessen Horowitz (a16z) and Khosla Ventures at a valuation of up to US$3 billion, which means that the valuation of the project has tripled in just one year. According to reports, in October 2021, Worldcoin completed a $25 million Series A financing led by a16z, with a valuation of $1 billion. Other investors include Digital Currency Group, Coinbase Ventures and Multicoin, as well as FTX founders Sam Bankman-Fried and LinkedIn co-founder Reid Hoffman and other angel investors.
It is not easy to raise funds in the crypto winter, and it is even more difficult to get such a huge amount. Why did the previously unknown Worldcoin gain the favor of capital two years later and still get a huge investment with a valuation of 3 billion in the crypto winter? What investment potential did investors see in Worldcoin? What does Worldcoin mean for the wallet track and the crypto industry?
Introduction to Worldcoin
Worldcoin was proposed by Altman in 2019. It was inspired by the theory of "Universal Basic Income (UBI)" proposed by economists. It hopes to achieve fair distribution of wealth by sending free cryptocurrency Worldcoin. Simply put, it is to redistribute the wealth created in the AI era by "distributing money" through universal basic income (UBI).
Since money is given out for free, a method is needed to determine the identity of the user to prevent the same person from receiving tokens multiple times with different identities. Therefore, World ID was created as the underlying identity protocol of Worldcoin. It can ensure that each person can only register one account with their ID.
In addition, the team has developed a biometric device that verifies a person's uniqueness by scanning the iris, while ensuring the privacy of the person being verified through zero-knowledge proof. This scanner, called Orb, is currently undergoing beta testing. It uses an open source design and has two lenses, wide-angle and telephoto, which work in conjunction with a neural network to capture high-definition images of the pupil. Due to compliance restrictions, the hardware device is currently only available in some regions, including Argentina, Chile, India, Kenya, Portugal and Spain.
The function of Orb is very simple: scan the human iris and convert the biometric image into an unbreakable hash code consisting of letters and numbers, which Worldcoin calls the "IrisCode". By comparing the data in the database, if it is verified to be a new registered user, a new WorldID will be saved in the Worldcoin database, and an encrypted wallet with a QR code will be generated. Through this wallet, users can obtain free Worldcoin tokens.
In summary, Worldcoin is a product ecosystem built around UBI. It includes a total of 3 products: a WLD Token that will be distributed free of charge to 1 billion people worldwide, a verification protocol World ID for determining real identity, and a wallet World App for storing tokens.
From the narrative of grand vision to the initial product form and user data
Worldcoin, which originated from the UBI theory, has had a very ambitious ideal since its launch - to distribute digital currency to 7.9 billion people around the world for free and achieve fair distribution of wealth.
"To lift billions of people out of poverty through UBI, to achieve what Bitcoin cannot achieve because it is too expensive and the transaction speed is too slow - to expand cryptocurrency and its financial system to hundreds of millions of people", this is a bold plan and a utopian vision. Although the vision is beautiful, it can easily become a pure narrative. Given the small scale of crypto users, Worldcoin's ambition was once questioned as comparable to the "moon landing plan".
However, with two years of silent development, Worldcoin has begun to take shape in terms of product form and user growth. In addition to the ideal narrative logic, its business logic has also begun to become clear.
First of all, sending free coins to users all over the world is both a narrative technique and a very smart customer acquisition strategy. Every time a new account receives cryptocurrency, it brings a new wallet user to Worldcoin, which will help Worldcoin seize the wallet entrance. In the encryption industry, controlling the wallet is equivalent to seizing the traffic entrance.
Data shows that the ecological wallet "World App" launched a few days ago has already been tested on a small scale. Currently, there are nearly 1.7 million registered users, and it is still growing rapidly at a rate of one new user every 14 seconds, which can be called the fastest growing wallet in the world. Users have completed more than 6.3 million login authentications for websites, mobile applications and encrypted DApps through World ID, and the total number of transfer transactions has exceeded 690,000, with a daily transaction volume of 60,000.
At first glance, 1.7 million is not an eye-catching number. However, for the crypto industry, 1.7 million is still a considerable number.
Worldcoin’s breakthrough is not groundless. At least from the product design of the “World App” recently released by the ecosystem and the economic model of Worldcoin, we can see some traceable fundamentals.
In product design, the team "precisely identifies target users and optimizes product usability."
Due to the objective compliance difficulties faced by Worldcoin, most of the countries currently open to it are in third world countries and regions. This means that from the very beginning, Worldcoin has taken the route of surrounding the cities from the countryside. This also coincides with Worldcoin’s main goal - inclusive finance. The so-called inclusive finance, of course, gives priority to covering those underdeveloped countries with weak financial infrastructure, that is, the vast number of people in Asia, Africa and Latin America currently covered by Worldcoin.
Since we are taking the inclusive finance route, the first people to be considered should be residents in regions and countries where financial infrastructure is generally lacking.
In view of the current situation where most of the third world’s financial infrastructure and hardware equipment are still imperfect, Worldcoin has made maximum inclusiveness and friendliness improvements in product design. On May 8, Worldcoin announced the launch of its ecological wallet "World App". This exclusive wallet supports transactions without gas fees and is compatible with OS and Android versions. It currently supports downloads in more than 80 countries and regions around the world and supports multiple localized languages. The product size is only 18MB and can even support mobile phones that are 10 years old.
At the product level, the team designs products based on the minimum software and hardware standards to minimize the threshold for current users. Only in this way can the original vision of including most of the world's human beings be realized, reaching people in all regions of the world, including those who cannot access the new digital economy.
Photo: National Geographic/John Stanmeyer African migrants hold up their cell phones to receive cheap signals from Somalia to contact relatives overseas on the coast of Djibouti on the evening of February 26, 2013.
In terms of token mechanism, Worldcoin adopts a deflationary reward model and incentivizes activity by completing tasks.
According to the plan, Worldcoin expects to issue WLD tokens by the end of June with a total supply of 10 billion, and will distribute more than 80% of the token supply to the community and contributors through free sending.
To incentivize early contributors, the rewards adopt a deflationary mechanism, which means that as more people join, the amount received by latecomers will decrease. This will not only motivate early participation and increase the user growth rate, but also, especially for those old crypto players who cannot participate in the region due to compliance requirements, it will produce a FOMO effect, thereby creating market buying pressure and generating price discovery momentum.
In addition, WLD tokens are not issued all at once, but are obtained by completing tasks. In the early stage, one token is issued every week, and the interval between tokens will increase over time, possibly to one token per month, which is conducive to maintaining user activity. From the data, it has also achieved good results. With a total of 1.7 million users, the daily transaction volume reached 60,000.
World ID: The antidote to the proliferation of fake content in the AI era
As artificial intelligence becomes more widespread and widely used, the proliferation of fake and anonymous accounts on the Internet will intensify. Artificial intelligence is good at imitating human behavior by generating text, deep fakes, or bypassing common verification methods, making it increasingly difficult to distinguish between human accounts and robot/fake accounts, and identity verification has become an urgent problem that needs to be solved.
As an open and permissionless identity protocol, World ID can not only be used as a global digital passport, but also anonymously prove the uniqueness of a person, that is, "you are you" without revealing your privacy.
World ID uses Proof of personhood to solve two problems caused by AI: preventing Sybil attacks and minimizing the spread of AI-generated misinformation.
Since we acknowledge that AI will bring about industrial revolution-level changes to human society, solutions to the problems it generates will also be a real need.
If the so-called inclusive finance and UBI in the early days of entrepreneurship still remained at a certain idealistic narrative logic, then today, two years later, Worldcoin not only has real products and real user growth, but also allows us to see its reasonable business logic, and at a higher level, there is real demand at the level of social significance.
It can be said that in addition to its own reasonable business logic, Worldcoin can also solve real social problems at a higher level. This is why Worldcoin, which was still unknown two years ago, has won the favor of top capital today and still won huge investments at a high valuation in the cold winter.
Interestingly, Sam Altman, the founder of Worldcoin, is also the founder of OpenAI. OpenAI has played an indispensable role in leading the new round of AI trend. It can be said that the success of OpenAI and ChatGPT has given Worldcoin new opportunities. This is not only because of Sam Altman’s own aura that investors are “digging up the grave” of his other project Worldcoin. On another level, the potential threat of artificial intelligence led by OpenAI to create and spread inaccurate information on a large scale can be solved by the latter, which outputs real usage scenarios and use cases for the latter’s business logic. To some extent, the two projects have achieved a perfect self-consistent closed loop.
What does this mean for the crypto industry?
The "World App", which is currently growing rapidly at a rate of one new user every 14 seconds, can be said to be the fastest growing wallet in the world. Based on the logic that "controlling the wallet means controlling the traffic entrance of the crypto industry", the importance of Worldcoin to the wallet track is unquestionable. Considering that transaction fees may be introduced in the future (according to Tiago Sada, head of product, engineering and design at Tools For Humanity, World App charges a few basis points for each transaction), controlling the traffic at the wallet entrance will bring great commercial success to World App.
If Worldcoin can continue to expand steadily, achieve its target expectations, and bring in tens of millions of incremental users, it will likely accelerate the pace of large-scale adoption of cryptocurrencies, which will benefit the entire industry and is also the most important value for the entire crypto industry.
Due to the current compliance issues, Worldcoin is forced to give priority to opening up to underdeveloped third world regions and countries. For people in these areas that lack financial infrastructure, after they scan their eyes and complete a series of subsequent operations, they are likely to have their first wallet in their lives, and WLD will be the first cryptocurrency in their lives.
Then, every new user who receives the WLD token is equivalent to successfully converting a user of the "World App" wallet. This will not only allow WorldCoin to successfully occupy the key entrance to the crypto industry - the wallet, but also bring incremental users to the crypto industry, because every new World ID has the potential to flow from the WorldCoin ecosystem to other corners of the crypto industry, which will benefit the entire crypto industry.
The Worldcoin ecosystem wallet World App, which carries new users, will transport these crypto novices to other crypto ecosystems through its vast crypto pipeline.
In fact, right from the beginning, Worldcoin, which focuses on openness and equality, has had close ties with the crypto industry. This is not only reflected in the founding team and VC background, and the crypto-native project genes, but also in the development, integration and expansion of the ecosystem. The Worldcoin team is also very active in connecting and cooperating with various crypto ecosystems.
Let’s take a look at where Worldcoin has extended its tentacles:
Worldcoin's native token WLD will be issued on Ethereum. The underlying protocol of World ID was previously run on Polygon and is planned to be migrated to the Optimism OP mainnet together with the World App. In addition, Worldcoin is also actively developing and building around cross-chain.
The native wallet World App built specifically for Worldcoin not only supports payments, purchases, and transfers of Beta WLD, but also supports corresponding functions for a variety of other tokens, including WETH, WBTC, DAI, USDC (more tokens will be supported later);
World App also supports CEX and decentralized applications. Currently supported applications include Uniswap, ENS, Circle, Safe, Moonpay, and RampNetwork.
The Worldcoin team has teamed up with the Optimism, Coinbase and Prysm development teams to test, implement and release the EIP-4844 proposal. The goal of the proposal is to reduce L2 fees by 10 times so that more users can afford the use of DApps. .
It can be said that Worldcoin is not only the entrance to the wallet, but also the entrance from the real world to the crypto industry. Entering the world of Worldcoin is equivalent to entering the crypto ecosystem such as Ethereum and Bitcoin.
Imagine a scenario where World App continuously injects fresh blood into the crypto world through Worldcoin. These new users who have their own wallets and digital identities for the first time will have their first life experience of using cryptocurrency to purchase and trade. They will also begin to try more different crypto operations. In addition to passively receiving airdropped WLD tokens, they will also use Ethereum and stablecoins to perform more on-chain operations, such as trading, financial management, and even publishing and collecting NFTs.
What followed was a series of cross-chain, bridging and application technology constructions created around World App. They are like highways paved around this wallet, connecting to Ethereum, second-layer chains, decentralized applications and platforms, expanding new users to richer scenarios.
As an encryption portal to the real world, World App will connect with other blockchains and ecosystems such as Ethereum, bringing new users to the industry. From this perspective, it is not impossible for Worldcoin to leverage this to achieve widespread adoption of encryption. .
Advancing amid doubts
Of course, during the development of WorldCoin, there has been no end to the doubts about WorldCoin. The main arguments of the doubters focus on privacy and security, unrealistic goals and exploitation of vulnerable groups.
Question 1: Can iris scanning really guarantee the user’s true identity?
Although the team claims that the personality verification solution that combines the identity protocol World ID and the biometric device Orb can perfectly solve the current problem of fake accounts, can iris scanning really guarantee the user's true identity?
According to a tweet released by BlockRhythm, due to compliance issues, WorldCoin has not yet been opened in mainland China, resulting in users being unable to register. As a result, a business of iris scanning has quietly emerged on the market. You can buy an iris verification for a maximum of $30, and then you can receive a $20 reward. According to these intermediaries, most of the human irises used for scanning come from rural areas in Africa and Cambodia. Such a low-cost scanning makes us wonder how much water there is in the so-called 1.7 million users?
In response to this, Worldcoin officially acknowledged the existence of the black market, but emphasized that there were only a few hundred such cases. At the same time, Worldcoin introduced new measures to combat the iris black market, including adjustments to the initial face-to-face registration process and the implementation of dynamic and static QR codes.
Question 2: Privacy and security
A common criticism of Worldcoin is that its iris scanning may raise privacy and security issues.
In this regard, the team explained that Worldcoin's "underlying identity protocol" World ID uses zero-knowledge proof technology to ensure that the user's identity is verified without sacrificing user privacy, which can protect the privacy of the user's iris data. Unlike the biometrics of typical digital identity systems, iris scanning is only used for personality verification, and the iris image itself will not be retained and stored (unless the user checks this option himself). What is passed into the database is the iris hash value (IrisHash) generated by Orb after processing. This value is only generated locally and is one-way irreversible.
However, today we have higher requirements for transparency in data privacy, such as where the data is stored, whether there is a possibility of sharing data with third parties, and if so, with whom the data is shared.
Question 3: Former Ethereum Foundation member criticizes WorldCoin’s economic model and regional issues
Former Ethereum Foundation member Hudson Jameson posted a tweet questioning the possibility of WorldCoin’s claim to create a fair global currency, and questioned WorldCoin’s economic model, saying “Worldcoin’s token economic model is problematic, and Worldcoin’s goal is Let people around the world control and use the same currency, but only 80% of the tokens are distributed to users, 10% are retained by the team, and the remaining 10% are given to investors.”
In addition, Hudson believes that the distribution of WorldCoin may bring huge socioeconomic problems to the local area, and these problems vary from region to region, but so far there is no public information showing that the team has a solution to these problems, nor has it formed a working group with the participation of relevant experts.
Therefore, Hudson believes that WorldCoin is unrealistic and doubts whether it can bring tens of millions of new users by 2025.
Question 4: Snowden once questioned WorldCoin, and MIT Technology Review wrote an article calling it crypto colonialism
As early as October 2021, Snowden questioned Worldcoin's ID plan, worrying that Worldcoin would build a global pupil database.
Snowden said that this seemed to be a global database of human iris scans (hashes) generated under the pretext of "fairness", and eliminated the impact by saying "We deleted these scans!" Snowden also warned, "Don't use biometrics for anti-fraud. In fact, don't use biometrics for anything."
Recently, the American technology magazine MIT Technology Review also wrote that Worldcoin was first tested in low-income communities, simply because residents in these areas lack legal protection, data collection costs are lower and more convenient, which can be called a form of crypto-colonialism. According to technologyreview, as of March this year, Worldcoin's iris scanning has been opened to 24 countries/regions around the world, 14 of which are developing countries and 8 are in Africa.
Worldcoin may not be the most perfect product, and it still faces many problems, challenges and even crises in the short term, but it is undoubtedly the most popular crypto application so far. If Worldcoin succeeds, its token will also appreciate in value. This may be why, in addition to its founder Altman, Worldcoin has attracted top venture capitalists in Silicon Valley.
