Worldcoin, a cryptocurrency project founded by OpenAI CEO Sam Altman, launched on Monday and my Twitter feed is full of posts about it. What’s the fuss? Is it worth it? Is it a wise investment and should you rush to buy this token?

Let’s explore.

With AI technology developing extremely rapidly since the start of the year, many believe that soon it’s going to take over lots of human jobs leaving thousands unemployed. It might even get to the point where it becomes very difficult to tell the difference between humans and AI bots online. The threats that AI poses are being debated on a daily basis along with its advantages and benefits - especially in the field of mundane tasks automation. It surely saves time, helps us be way more productive than even before. But should we be worried about the negatives?

Many already are. But of course, with new threats and dangers that AI presents to us as it advances, we come up with solutions. And the Worldcoin project is just one of these solutions.

As Vitalik Buterin (co-founder of Ethereum) very eloquently described it, The philosophy behind the project is simple: AI is going to create a lot of abundance and wealth for humanity, but it also may kill very many people's jobs and make it almost impossible to tell who even is a human and not a bot, and so we need to plug that hole by creating a really good proof-of-personhood system so that humans can prove that they actually are humans, and giving everyone a UBI. Worldcoin is unique in that it relies on highly sophisticated biometrics, scanning each user's iris using a piece of specialized hardware called "the Orb". Why am I freaking out just by the thought of this?

Can I trust any such device to keep my scan from leaks, hacks or other malicious intent? It’s certainly a concern.

Nevertheless, the key focus here is on reinventing digital identity without compromising a person's real-world identity. Make it decentralised via the use of a blockchain network and make it the world’s largest identity and financial network as a public utility, giving ownership to everyone. In other words, this project aims to create a digital identity that proves you are a real and unique person while fully protecting your privacy. I’m yet to be convinced that privacy can be fully protected, but that’s a topic of another discussion I guess…

So, Worldcoin aims to create universal access to the global economy regardless of country or background, accelerating the transition to an economic future that welcomes and benefits every person on the planet. The CEO of OpenAI Sam Altman together with Alex Blania founded Worldcoin over three years ago. The main idea behind the project is to present a solution which can effectively verify human identity online without violating users’ privacy. It was initially launched in 2022 and recently launched its proof-of-personhood blockchain platform, which has drawn mixed reactions from the cryptocurrency community.

Among the most fierce critics of the project is fellow crypto analyst Andrew Bailey, who took to Twitter and posted this thread outlining some of the things he finds problematic: namely, the fact that the team was not prepared for people who sell their credentials on the black market, something that seems to be a thing in China, where people are so far unable to sign up for Worldcoin. They simply buy the necessary credentials from Cambodia, Africa and other countries to bypass the restrictions, but ultimately, they prove how easy it is, so far, to cheat the system and defeat its purpose.

The orb itself is a controversial device, with its own limitations and risks of abuse. Andrew calls it dystopian and dangerous - somewhat Orwellian, even though, we’re talking about a decentralised, tamper-proof method of storing that data. Before I can trust it, I will need more convincing. Track record would be one way to go about it, but the project just launched, so I’ll have to wait some more before there is any track record.

Another concern outlined by Andrew, is the fact that the project is run by a non-profit foundation - in other words, a centralised entity that will work towards the goal of making the project decentralised, but clearly it is not a DAO from the get go. A Red Flag in my opinion too.

And last but not least, Andrew points out the claim that their goal is to distribute the coins equally to all, while in reality, insiders will get 20% of all tokens. This is how many other projects started, giving founders or angel investors similar percentage of their tokens and this is something that is always criticized, it’s largely frowned upon in the crypto community and definitely not a winning strategy. Some projects like Zcash became a target of multiple forks by their community, precisely to eliminate such unfair advantages and privileges.

Other criticism comes from an article titled: “Deception, exploited workers, and cash handouts: How Worldcoin recruited its first half a million test users”. Published by the Massachusetts Institute of Technology’s media outlet, it examines some of the issues of the project’s beta testing. The company has been accused of using deceptive marketing practices, collecting more personal data than it acknowledged, and failing to obtain meaningful informed consent. The company has also been criticized for violating the European Union's General Data Protection Regulations (GDPR) and local laws. At the time of publishing this article, Worldcoin had scanned 450,000 eyes, faces, and bodies in 24 countries, and its aim was to garner a billion sign-ups by 2023. My research shows that they have about 2 million by now , but this number must be greatly increased in the last few days with the hype surrounding its launch. Worldcoin is scaling up "orbing" operations to 35 cities in 20 countries. As an enticement, those who sign up in certain countries will receive some of Worldcoin's cryptocurrency token WLD for free.

Anyway, I don’t mean to be overtly critical and negative about the project, so let’s talk more about their unique value proposition. Indeed, the project does have a vision as to how they tackle a real world problem, the criticism so far is mainly directed to the methods they have proposed in their pursuit of that vision.

So, back to their vision. The increasing availability of powerful AI models to individuals, combined with open-source tools for generating deep fakes, raises concerns about the ability to control their usage. The Turing Test, previously used to differentiate humans from AI, is no longer sufficient as modern AI is close to passing or has already passed this test. Video-based verification is also becoming unreliable due to deep fake impersonations. As a result, there is no reliable method to verify humanness online.

Despite these challenges, proving humanness in the digital domain is essential for empowering individuals in the new era of AI. To address this, the Worldcoin project has introduced the World ID protocol, which focuses on verifying humanness through real-world attestations using biometrics. The protocol aims to be decentralized, privacy-focused, and inclusive, allowing individuals to prove their humanness without relying on third parties.

The need for proof of personhood arises due to advanced AI's potential for sybil attacks (creating multiple accounts) and spreading AI-generated content for deception and disinformation. Proof of personhood helps address both challenges by providing natural rate limiting for account creation and allowing users to filter and interact exclusively with authenticated accounts or verified content.

Ultimately, proof of personhood serves as a fundamental building block for digital identity, along with digital authentication and verification layers. It establishes an individual's humanness and uniqueness, ensuring that only the rightful owner can use their identity online. Worldcoin is proposing Biometrics - in particular, eye-scanning of the iris and it has been criticized for privacy and security concerns around the Orb, design issues in its "coin", and for ethical issues around some choices that the company has made.

Human identity and subsequently, privacy, is one of the most sensitive subjects and a valid concern for us in the age of AI.

Vitalik Buterin addressed this in his latest blog post just 2 days ago, where he rightfully raised the questions about the risks involved. They include unavoidable privacy leaks, further erosion of people's ability to navigate the internet anonymously, coercion by authoritarian governments, and the potential impossibility of being secure at the same time as being decentralized.

And now, with the launch of their mainnet 2 days ago, this project has become a hot topic in the cryptoverse. As I mentioned, my Twitter feed is full of posts and comments about it, so is this a project that you should be invested in?

Let’s examine it further, so you can have some basis points to take into account in your decision-making.

How does Worldcoin work?

Each Worldcoin user installs an app on their phone, which generates a private and public key, much like an Ethereum wallet. They then go in-person to visit an "Orb". The user stares into the Orb's camera, and at the same time shows the Orb a QR code generated by their Worldcoin app, which contains their public key. The Orb scans the user's eyes, and uses complicated hardware scanning and machine-learned classifiers to verify that:

  1. The user is a real human

  2. The user's iris does not match the iris of any other user that has previously used the system

The first token (WLD) is to be globally and freely distributed to people, for both utility and future governance, just for being a unique individual. It enables payment, purchases, and transfers globally using the Worldcoin token, digital assets, and traditional currencies. Worldcoin is an open-source protocol, supported by a global community of developers, individuals, economists, and technologists. I have to mention also, that certain geolocations are not permitted, like China and US.

Tokenomics

The tokenomics of the Worldcoin project were released on Monday after the launch of the mainnet.

Total supply is capped at 10 billion tokens, which will remain fixed for at least the network's first 15 years. After that, an inflation rate of 1.5% could be implemented by voters. The tokens were minted ahead of launch and had a fully diluted valuation of $20.6 billion. The circulating supply of WLD at launch was 143 million tokens, with 43 million set aside for early users and 100 million loaned to market makers. The loans have a duration of three months and give market makers the option to purchase WLD tokens instead of returning the loan. The agreement with market makers is seen as an effective way to manage the market for WLD, but there are concerns about the potential for quick sell-offs and price stability in the long term. 75% of WLD will be allocated to members of the Worldcoin community over time, with the remaining 25% split among the protocol's initial development team, investors, and a reserve of 170 million WLD. The reserve will be managed by Tools For Humanity, a US-based technology firm. The tokens belonging to the network's team and investors are locked up at launch.

The price so far is hovering around $2.40 which makes the market capitalisation of Worldcoin roughly around $250 million (US). The token reached a peak on launch day, when the price hit $3.33 and it’s currently -27% down from that ATH. As it corrected, it hit a low of $1.91 and then recovered to its current value of $2.41. It’s available on some of the bigger exchanges, like Binance, Kucoin, Huobi and OKX.

This is a utility token that grants users the power to participate in the Worldcoin network. According to this article in Decrypt, the launch supply of WLD was mostly made up of market maker loans. According to a formula in the whitepaper, market makers would have the option to purchase WLD tokens at $2.80 per token if they don’t want to return any WLD loaned, assuming the 100 million tokens were distributed evenly. The loans are for 3 month-period and I feel that we could see a lot of selling pressure at the point of expiry of those. Especially if the price is above the 2.80 mark by that point. Take this into account. 3 months from now means late October.

In conclusion, Worldcoin's ambitious venture into the realm of digital identity with the World ID protocol represents a pioneering step towards addressing the challenges posed by advanced AI and deep fake technology. By prioritizing privacy, self-sovereignty, inclusivity, and decentralization, Worldcoin aims to empower individuals to authenticate their humanness in an ever-evolving digital landscape. As the world ushers in this new chapter of human history, Worldcoin's vision of a global network of verified individuals, accessible to all as a public good, holds the promise of fostering online fairness, social interaction, and trust. Worldcoin would also solve key technical problems for Web3, the blockchain-powered third iteration of the internet, where data and content could be decentralized and controlled by individuals and groups rather than a handful of tech companies.

While the road ahead may be filled with challenges, Worldcoin's dedication to building a more secure and authentic digital ecosystem leaves us optimistic about the possibilities it can unlock for the future of human interaction in the digital domain. Should they succeed, that is. The project is in its infancy right now, with some fierce criticism in regards to privacy and identity protection. It’s a good idea to place it on your crypto radar for now, but definitely do more research and monitor it for some time before you make a decision whether to add it to your portfolio or pass on this one. This is what I’m doing, so naturally, I can’t advise otherwise. But of course, I am not providing investment advise, let me be clear. I provide analysis and share with you my research, my opinion and my own peace of mind.

Take this as a starting point for your research and build up on it.

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