WorldCoin, a verification and identity-based protocol that raised $115 million in a Series C funding round in May 2023, is one such initiative. Co-founded by OpenAI CEO Sam Altman, WorldCoin's "proof of humanity" system uses retinal scans to authenticate human users, combating the increasing presence of bots online. The company is developing World ID, a digital identification system generated using a person's iris, with a focus on preserving privacy. WorldCoin's primary emphasis is on ensuring that each user is a genuine person and controls only a single identity. The project's objectives have been fluid, reflecting shifts in focus from wealth redistribution to introducing new crypto users, to a narrative centered around AI.
WorldCoin has also launched its WLD token on the Optimism Mainnet. The project aims to create a globally inclusive identity and financial network that could potentially increase economic opportunity, scale a reliable solution for distinguishing humans from AI online while preserving privacy, and show a potential path to AI-funded Universal Basic Income (UBI).
Concerns and Vulnerabilities
Despite its ambitious goals, WorldCoin has faced criticism from the crypto community, with concerns over potential data mismanagement and privacy leaks for sensitive iris biometrics. Critics also highlight implementation flaws such as unfavorable WLD tokenomics, lack of accessibility, and mistrust in Sam Altman due to his background in AI.
Tokenomics
WorldCoin's co-founder Sam Altman envisions the project as a path to cryptocurrency-based Universal Basic Income (UBI), a social benefits program where every individual is entitled to payments. By reducing fraud in deploying UBI, WorldCoin could become a key player in addressing income inequality exacerbated by AI's displacement of jobs.
To that end, WorldCoin and its token officially launched in July 2023 but to considerable controversy, mostly in regard to their VC-heavy fundraising strategy, (arguably) predatory tokenomics model, ethics surrounding their marketing, ability to protect users’ privacy, and more.
WorldCoin's tokenomics is characterized by a low float and high Fully Diluted Valuation (FDV) structure. With a maximum circulating supply of 143 million (1.4% of its 10 billion supply cap), the current circulating supply stands at approximately 1.1% of the total supply. “Low float” token launches are (unfortunately) a common occurrence in the crypto space. Projects release a very small portion of the supply, get early users or market makers to pump the low liquidity supply, creating large price appreciation and eye-popping market cap figures in the process. However, the reality is that the current price is nowhere near reflective of the actual value and once the other 90%+ of supply comes onto the market, the price will certainly tank. WorldCoin’s launch is egregious, even for crypto standards, as the majority of the ~1% supply available today is with market makers and not actual users.
Furthermore, the allocation of WorldCoin's tokens is distributed as follows:
- 13.5% of the supply, with a 24-month linear vesting period after a 12-month cliff. This means that all tokens are assumed to be fully unlocked by August 2026.
- Developers: 9.8% of the supply, with 1.7% held in reserve.
- Operating Costs: 10% is allocated for manufacturing and incentives for independent Orb operators who enroll users.
- Ecosystem Fund: 5% is designated for Research & Development (R&D) expenses, audits, liquidity provision, and Foundation operations.
- Community Tokens: The remaining 60% are reserved for users who acquire a WorldID and promoters, with the distribution schedule to be determined by governance.
For a project that has hopes of becoming the decentralized digital ID and UBI standard for the future of the world, it seems hypocritical/antithetical to earmark 20%+ for early insiders and investors.
Decentralization Dilemma
Beyond just the token, WorldCoin's claim of decentralization in other aspects is also met with skepticism. The custom Orb hardware, used for iris scanning, is a central point of control, and the process of decentralizing it presents significant challenges. Ensuring that the Orbs are constructed according to specifications and are not modified maliciously is a complex task. The scale of audits required to achieve billions of signups would be enormous, and the risk of malicious Orbs generating fake IDs could lead to irreversible consequences, such as siphoning off WLD tokens.
Privacy Concerns
WorldCoin's approach to privacy is criticized for being superficial. While the project argues that only the IrisCode is stored and that zero-knowledge proofs will preserve privacy, these assurances are hollow. Concerns around the potential leakage of data from the iris hashing algorithm, the risks associated with malicious access to a participant's data, and the scalability of the algorithm to larger populations have all been raised.
The use of zero-knowledge proofs is also questioned, with some critics describing it as "zero-knowledge washing," a way to make a dubious concept appear socially acceptable. The implementation of zero-knowledge proofs would be critical, and the responsibility would largely fall on third parties, such as corporations and governments. The permanent record of sensitive transaction histories linked to a biometric identifier is described as a "nightmare scenario."
Ethical Considerations
WorldCoin's targeting of the Global South for biometric data collection has raised ethical questions and been dubbed "Data Colonialism." Countries lacking modern privacy protection laws are particularly vulnerable.
The history of data breaches and misuse by large corporations and governments serves as a cautionary tale. From the FBI's illegal spying in COINTELPRO to the theft of biometric records from the U.S. Government's Office of Personnel Management, the risks are real and significant.
Biometric data is irreplaceable. Unlike passwords or crypto wallets, one cannot change fingerprints or eyeballs. The decision to share these data points must be made with discernment.
Supply Chain Security
The security of the supply chain is a significant risk for WorldCoin. Attackers within the supply chain could insert malicious components to leak biometric data or create synthetic WorldIDs. WorldCoin's approach to keeping tamper-resistant features confidential has been criticized as "security by obscurity," which offers no real security guarantees.
Two security assessments on WorldCoin were conducted by Nethermind and Least Authority in 2023, with future publication planned. Additionally, TechCrunch reported that hackers have installed malware on multiple WorldCoin Orb operators' devices, exposing a lack of basic security measures like Two-Factor Authentication.
WorldCoin represents a bold step towards redefining digital identity and the potential implementation of Universal Basic Income. By leveraging biometric technology, it offers a unique solution to the challenges of online democracy, bot impersonation, and AI-generated content.
However, the project's ambitious scope raises critical questions about privacy, censorship, and the ethical implications of involuntary iris scanning. As WorldCoin continues to develop, it will be essential to carefully consider these issues and the broader impact of this revolutionary approach on the digital landscape.
The success or failure of WorldCoin could have far-reaching implications for the future of digital identity, online democracy, and the pursuit of a more equitable society. It is a project that demands attention, critical analysis, and thoughtful engagement from all stakeholders in the digital world.
