Worldcoin Rises, But So Do Privacy Concerns

The entire cryptocurrency market remains red on Tuesday, with Bitcoin trading at $29,185 and Ether exchanging hands at $1,855, with the total market cap down at $1.22 trillion. But one coin defied market momentum with everyone's eyes on the freshly launched Worldcoin (WLD).

At the time of writing, the $218 million market cap token has been trading at $2.09, down 22.7% in the past 24 hours while managing $477 mln in trading volume.

On Monday, the starting price of the coin was $0.15. But with all the market attention on WLD, it went to hit $3.30 but is down 38.88% since then, as per CoinGecko.

These gains came after the world's largest crypto exchange Binance listed the token, where the token price went as high as $0.5290. The trading pair WLD/USDT on Binance still accounts for 42.77% of all Worldcoin trading volume.

Besides Binance, several other major exchanges listed the token on the same day of its launch. Centralized crypto exchanges (CEXs) HTX, OKX, KuCoin, Bybit, WOO X, MEXC, Bitget, and Gate.io have already started allowing trading for the coin along with the decentralized exchanges (DEXs) Uniswap.

However, it's important to note that only 1% of the token supply, about 107 million out of the 10 billion, is circulating in the market. This puts the current FDC (Fully Diluted Valuation) at $20.2 bln.

While a new shiny thing for crypto to focus on, WLD comes with centralization and privacy implications, which has the market criticizing the project.

Worldcoin: Scan Your Iris in Exchange for Tokens

The company started ramping up expectations on Twitter over the weekend before its launch, with users prompted to update the mobile app. The functionality was also blocked in the app with the message, “It's time. Join us in the World App.”

Then on Monday, Worldcoin announced on Twitter that it had launched its mainnet and WLD token.

“More than three years ago, we founded Worldcoin with the ambition of creating a new identity and financial network owned by everyone,” wrote co-founders Sam Altman and Alex Blania in the company letter.

The project involves a privacy-preserving digital identity, World ID, which is proof of being a real and unique person online. The ID is given upon visiting the biometric verification device called Orb.

Orb is a tailor-made silver ball approximately the size of a bowling ball that weighs 2.8 kg or just under 6.2 lbs. Using the scan, the orb creates a unique identifier for each human but doesn't process or store any related data locally, as per the company. And in exchange for the full verification, which requires users to scan their irises using Orb, users are airdropped 25 WLD tokens.

“Worldcoin is an attempt at global scale alignment, the journey will be challenging, and the outcome is uncertain. But finding new ways to broadly share the coming technological prosperity is a critical challenge of our time,” wrote Altman and Blania.

Tokenomics, Demographics, & Future Plans

With Worldcoin mainnet and token launched, developers will now also have access to the project's software development kit (SDK), which up until now has been available in beta mode. Verified users participated in token airdrops, which will now be converted, and users will be able to move them out of World App or use them within the application.

World App is a crypto wallet that was launched in May. It is designed by the research lab and tech product development company Tools for Humanity (TFH), which Altman and Blania co-founded. On Monday, the World App put up a notice of being “at capacity” and “experiencing high loads.”

Right from the launch, features like peer-to-peer concepts will be available on the World App. Beyond that, the public availability of SDK means developers can create tools and apps using its identity protocol World ID.

The project is also ramping up the Orb availability worldwide, with about 200 Orbs currently available. Late last month, Worldcoin integrated with an identity and access management software provider Okta that has “hundreds of millions of users” and is aiming for billions.

According to the company, the plan is to make 1,500 Orbs available by the end of the year. Made in Germany, the Orbs feature a wide-angle camera as well as a telephoto camera to capture an image of the human iris. Already more than 2 million people have been scanned — 32% of them being from Asia and Africa each, 19% from Latin America, and 17% in Europe, the firm said in its whitepaper.

In the coming months, Worldcoin will make the verification available in 35 cities. The app is currently available in 120 countries. Moreover, the company will be adding the option to book appointments as opposed to pop-ups.

With the launch of its ERC-20 token, the project further finalized its migration from Polygon to the Optimism network, a layer 2 scaling option for Ethereum. The move was first announced in February as part of its commitment to “realizing a scalable, inclusive future that unlocks the full potential of crypto and furthers the evolution of identity on the blockchain.”

The project also released WLD tokenomics on Monday, which shows that the WLD supply will be capped at 10 billion tokens for 15 years. After this, the network governance can decide to implement an inflation rate of up to 1.5%, along with how to allocate the minted tokens.

The maximum circulating supply at launch is 143 million WLD, of which 43 million will be allocated to already verified on the World App during pre-launch. One hundred million, meanwhile, is given to market makers outside the US, which will expire in three months, to facilitate trading.

As per tokenomics, the majority (75%) of the token supply will be made available to the Worldcoin community. These 7.5 billion WLD tokens were minted before the launch. The foundation aims to allocate 6 billion of those to users. However, not all 2.5 billion WLD, meant for insiders, has been allocated.

Out of the remaining supply, Tools for Humanity's investors will receive 13.5%, while the initial development team is set to get a 9.8% slice. The portion meant for the team is presently under lockup, with a plan to release it gradually over the coming three years. Rounding off the allocation, a 1.7% reserve has been set aside to handle potential contingencies.

A Tool to Enable Global Democratic Processes

Back in May, the San Francisco and Berlin-based startup Tools for Humanity raised $115 million in a Series C round led by Blockchain Capital with participation from a16z, Bain Capital Crypto, and Distributed Global to build Worldcoin.

The project uses AI to create unique codes to represent the scans and complies with “very, very local and very specific rules and regulations in each of the markets where there's an Orb,” said Rebecca Hahn, chief communications officer at Tools for Humanity, in an interview.

While US citizens and those based in the country cannot access the token, Tools for Humanity's head of product, engineering & design, Tiago Sada, said that the “lack of regulatory” still allows them to get a verified World ID. As such, the company is confident in using the network in the US, based on people's excitement to sign up for World ID.

“It is really sad,” said Altman of not issuing tokens in the US amidst an SEC-led crackdown on digital assets. “Of course, we're going to follow the law. I hope that there's more clarity in the US over time and a more friendly environment.”

World ID, the project's main offering, is described as a “digital passport” to prove that its holder isn't an AI bot but a real human. Moreover, its wallet application World App can leverage the network of authenticated users to root out bots.

“In the age of AI, the need for proof of personhood is no longer a topic of serious debate; instead, the critical question is whether or not the proof of personhood solutions we have can be privacy-first, decentralized, and maximally inclusive,” said Blania.

According to the company, the distinction between human and AI bots is necessary in the age of generative AI chatbots like ChatGPT.

Altman is the co-founder of Open AI, the startup behind ChatGPT, which sent OpenAI's valuation to almost $30 billion. A couple of months ago, Altman called upon Congress to regulate AI and recently committed to a White House-brokered safety pledge.

According to Altman, Worldcoin can help address how generative AI will reshape the economy. “People will be supercharged by AI, which will have massive economic implications,” he told Reuters.

The idea is to have AI-funded UBI or universal basic income, a government-run program where every individual is entitled to payments, with Worldcoin to help eliminate fraud by adopting it in distributing UBI.

As AI “will do more and more of the work that people now do,” UBI can help to combat income inequality because only real people can have World IDs, noted Altman. While UBI could be “very far in the future,” Altman said, Worldcoin lays the groundwork for it to become a reality. “We think that we need to start experimenting with things so we can figure out what to do,” he said.

Besides Worldcoin and ChatGPT, Altman has also invested in Elon Musk's Neuralink and startup Retro Biosciences which aims to lengthen human life. He is also behind a nuclear fission startup Oklo, which will go public in a deal valuing the company at $850 mln. Speaking on his investments, Alman said in an interview with the Financial Times that “these are independent parts of a specific vision of the future which I believe in.”

Major Privacy, Centralization, & Security Concerns

With Worldcoin, Altman and Blania want to increase economic opportunity and scale a reliable solution for distinguishing humans from AI online while preserving privacy, limiting centralized control, and enabling global democratic processes.

However, the project is already facing scrutiny regarding how it has been collecting and processing the data and whether it can be safe from hackers in the future. Also, can it really be fraud-proof with a black market for iris scans reportedly already flourishing?

Late last month, Tools for Humanity's Sada said that users can opt to have their data retained, in which case, “their data is encrypted,” which then can be used for improving the accuracy and inclusivity of the models.” The user also has the ability to always revoke permission, Sada added.

The market, however, isn't convinced, with Dogecoin co-creator Billy Markus referring to Worldcoin as “creepy and weird.”

Meanwhile, Ethereum co-founder Vitalik Buterin released a blog post on Monday where he detailed his major concerns with Worldcoin's user authentication system, called “Proof-of-Personhood” (PoP).

Buterin argued that Worldcoin's system has potential issues with accessibility, centralization, privacy, and security.

According to him, World IDs won't be readily accessible to everyone, and scanning one's iris could potentially release more information than intended. Moreover, the “Orb” is a hardware device, and Buterin alleges that “we have no way to verify that (Orb) was constructed correctly and does not have backdoors,” alleged Buterin, adding the company can still insert a backdoor into its system and create “arbitrarily many fake human identities.”

Not to mention, users' phones could be hacked and then coerced into giving out their iris scans, he said. And while specialized hardware systems are better at protecting user privacy than traditional identification schemes, it also introduces “much greater centralization concerns.” “There is no ideal form of proof of personhood,” Buterin said.

All said, the token has captured traders' interest, while the project is gaining censure for now. And it remains to be seen if the project has any long-term viability beyond the short-term pump.