What Is Worldcoin?

Basics

Worldcoin was co-founded by OpenAI CEO Sam Altman and aims to develop a decentralized proof-of-personhood solution. The idea behind proof-of-personhood is that the need to prove that someone is a unique real person becomes increasingly important because AI will create a lot of content and spam. Worldcoin's native cryptocurrency, WLD, was officially launched on July 24th, 2023. To be eligible to receive the WLD token, users must visit a special hardware called the Orb and have their iris scanned to be verified as a unique real human by Worldcoin. While many people find Worldcoin's vision exciting, others are concerned about the potential risks of its operations.

Worldcoin's Founders and Launch

Worldcoin was conceived by Sam Altman and Alex Blania. Altman, also the CEO of OpenAI, has a notable background, including leadership roles at Y Combinator and a brief tenure as CEO of Reddit. Blania, a co-founder, has a background in artificial intelligence research.

Worldcoin secured more than $100 million in venture capital from major investors like Andreessen Horowitz and Khosla Ventures, with funding rounds beginning in 2021. The project's native cryptocurrency, Worldcoin (WLD), officially launched on July 24, 2023.

Worldcoin's Mission

Worldcoin is a cryptocurrency project with roots in artificial intelligence, conceived by co-founders with significant AI experience. The platform describes itself as a digital identity protocol designed to address challenges that arise as AI technology advances, aiming to establish a decentralized proof-of-personhood system.

Proof-of-personhood tackles the need to distinguish real people from bots or duplicate identities, a crucial task in an AI-driven world prone to spam and automation. To achieve this, Worldcoin intends to deploy a unique device called the Orb across the globe. This hardware allows users to scan their iris and create a unique ID through an app. Worldcoin emphasizes its commitment to privacy and has plans to progressively decentralize the protocol's governance as it evolves.

The Significance of Worldcoin

Worldcoin, along with other proof-of-personhood protocols, addresses key issues in modern identity verification. The following challenges highlight its importance:

Centralized Identification Systems

Many existing identification methods depend on centralized authorities, often government-run, which can lead to concerns about data privacy and limited access for certain groups. The control by centralized entities introduces risks and barriers.

AI-Driven Content and Spam

As AI technology becomes more sophisticated, it can generate content that's hard to distinguish from human-created work. This poses a risk of increased spam and misleading information. Proof-of-personhood systems, like Worldcoin, offer a solution to verify whether a person or content is authentically human, reducing the risk of AI-generated spam and enhancing digital trust.

How Worldcoin Works

Worldcoin comprises three main elements: the World ID, WLD tokens, and the World App. The World ID acts as a unique identifier for an individual, confirming their personhood. WLD tokens are the project's cryptocurrency, distributed to participants in the network. The World App serves as the platform through which users access their World ID and WLD tokens.

To create a World ID, users must download the World App, which allows them to generate a private and public key pair. They then visit a designated Orb location to undergo iris scanning, which confirms they are a unique, living human. This process ensures that the World ID is tied to an individual and that there are no duplicates among verified users.

Once the iris scan is complete, the user receives an Orb-verified World ID. As of May 2024, approximately three million such IDs had been issued. Users in certain regions can now claim WLD tokens as part of the Worldcoin ecosystem.

An Overview of Worldcoin (WLD) Tokenomics

Worldcoin's token, WLD, operates on the Ethereum Mainnet as an ERC-20 token, with eligible users receiving their tokens via the Optimism network.

The initial total supply is set at 10 billion tokens, a limit that will be in place for the first 15 years. After that, the network's governance could permit an annual inflation rate of up to 1.5%, with guidelines for how additional tokens will be distributed.

Here's the breakdown of the initial allocation from the 10 billion tokens:

• 75% is earmarked for users, ecosystem funding, and network operations. The majority of these tokens will go to individual users.
• 10% is for the founding team.
• 13.5% is set aside for investors.
• 1.7% is held in reserve.

Though the full 7.5 billion tokens intended for users are already minted, the release will occur incrementally over 15 years. According to the token unlock schedule, the maximum circulating supply at launch is 143 million tokens, with 43 million allocated to verified users and 100 million loaned to non-US market makers. Worldcoin emphasizes that this tokenomics design is intended to create a proof-of-personhood network where most tokens are distributed to users, promoting widespread participation over many years. As the user base grows, so will the circulating supply of WLD tokens.

Worldcoin's Governance Structure

Worldcoin aspires to create a decentralized proof-of-personhood system, but its early stages have been guided by centralized leadership. The initial protocol development was managed by a San Francisco-based Delaware corporation, Tools for Humanity (TFH). This team developed the Orb and the World App, while its German subsidiary carried out extensive beta testing over several years.

In 2022, the Worldcoin Foundation was established to oversee the network's expansion and to gradually transition toward decentralized governance. The foundation operates as a non-profit and is currently led by a board of three directors, supported by a group of advisors. To manage Worldcoin's smart contracts, the foundation employs a 4-of-6 multi-signature wallet, requiring consensus among key stakeholders for any critical actions.

Though the foundation plays a pivotal role in the network's growth, the ultimate goal is for the Worldcoin community to take over governance, with the foundation's role diminishing as the protocol becomes more decentralized.

Worldcoin and WLD Token: Limitations and Risks

Worldcoin has set ambitious goals, but there are limitations and risks that potential participants or investors should consider. Key challenges include:

• Orb Security: The Orb, a key component in Worldcoin's proof-of-personhood system, is vulnerable to security risks. No hardware system is entirely secure, and the Orb could be susceptible to various vulnerabilities, including fraud, accuracy issues, and data theft. Given that it involves sensitive biometric information, any security breach could have severe consequences.
• Token Price Volatility: WLD, the token used within the Worldcoin ecosystem, may experience significant price fluctuations, a common trait among cryptocurrencies. This volatility poses a risk to investors, who should approach with caution and conduct comprehensive research.
• Manipulation Risks: Despite Worldcoin's security measures, there's a risk of bad actors manipulating or misusing World IDs. There are potential loopholes that could allow individuals to acquire multiple World IDs, undermining the protocol's integrity.
• Privacy Concerns: The use of biometric data raises privacy concerns among users. Although Worldcoin states it doesn't retain complete iris scan data and only keeps hashed versions, scanning and storing biometric information carry inherent risks. If Worldcoin integrates facial recognition, this could further heighten privacy issues.
• Centralization and Open Source Limitations: While much of the Worldcoin protocol is open source, certain aspects remain closed, such as the Orb's firmware. Worldcoin's operations are currently centralized, with data centers holding iris scan hashes and Orb production controlled by centralized entities. The path to full decentralization depends on effective implementation.
• Regulatory Uncertainty: Worldcoin's aim to operate globally introduces the risk of regulatory uncertainty and compliance challenges across different jurisdictions. Changes in local regulations could have a significant impact on the project's ability to function and expand.

These factors suggest that while Worldcoin holds potential, it also carries significant risks that warrant careful consideration.

Conclusion

Worldcoin aims to accomplish bold objectives with its World ID system, envisioning a future where universal basic income (UBI) can be fairly distributed worldwide in an AI-driven age of abundance. While these ambitions inspire optimism, they also raise concerns, particularly around the use of iris scans and the collection of biometric data.

As with any crypto-related project, it's crucial to conduct thorough research before investing in WLD tokens. The token's value is likely to be influenced by the broader adoption of Worldcoin's concept and whether it can establish practical applications and a vibrant ecosystem. Proceed with caution, keeping in mind the potential risks and challenges associated with this innovative but controversial project.