Amid the cryptocurrency winter, how did Worldcoin manage to secure $100 million in funding?

During the cryptocurrency slump, how did Worldcoin raise $100 million in funding?

Valued at $3 billion and with its valuation tripling in a year, Worldcoin has secured two rounds of investment from a16z. Written by LeftOfCenter. According to insiders, OpenAI founder Sam Altman is seeking a new round of financing worth $100 million for his new cryptocurrency project, Worldcoin, and is currently in deep negotiations. “Financial Times” cited a person familiar with the matter as saying that the new round of financing has received support from existing and new investors. As early as 2022, Worldcoin received investments from institutions such as Andreessen Horowitz (a16z) and Khosla Ventures with a valuation as high as $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, Multicoin, as well as angel investors such as Sam Bankman-Fried, founder of FTX, and Reid Hoffman, co-founder of LinkedIn.

Raising funds during the crypto winter is not an easy task, and it is even more difficult to get such a large amount. What are the investment potentials that investors see in Worldcoin? What does Worldcoin mean for the wallet track and the cryptocurrency industry?

Worldcoin introduction

Worldcoin was proposed by Altman in 2019, inspired by the economist’s theory of “universal basic income (UBI).” It is hoped that by sending free cryptocurrency Worldcoin, wealth can be distributed fairly, which is simply understood as redistributing the wealth created in the AI era through the “money distribution” method of universal basic income (UBI).

Since it is about sending money for free, a method is needed to identify users to prevent the same person from receiving tokens multiple times under different identities. Therefore, World ID was developed as the underlying identity protocol of Worldcoin, which can ensure that each person can only register an account with the iris.

In addition, the team has developed a set of biometric devices that verify a person’s uniqueness by scanning the iris, while ensuring the privacy of the verified person through zero-knowledge proof. This scanner, called Orb, is currently undergoing beta testing. It uses open-source design and has two lenses, wide-angle and telephoto, which work together with neural networks to capture high-definition images of the iris. Due to compliance restrictions, the hardware device is currently limited to trial use in certain regions, including Argentina, Chile, India, Kenya, Portugal, and Spain.

Orb’s function is very simple: scan the human iris and convert the biological feature image into an unbreakable string of letters and numbers called an “IrisCode”. Worldcoin will add a new WorldID to the Worldcoin database and generate an encrypted wallet with a QR code for users to get free Worldcoin tokens by comparing the data in the database and verifying new registered users.

In summary, Worldcoin is a product ecosystem built around UBI, including three products: WLD Token, which will be distributed for free to one billion people worldwide, the World ID verification protocol used to determine real identities, and the World App wallet used to hold tokens.

From the narrative of a grand vision to the embryonic form of the product and user data

Worldcoin, which originates from the UBI theory, has had a very lofty ideal since its inception-to distribute digital currencies to 7.9 billion people worldwide for free, achieving fair distribution of wealth.

“By using UBI to help billions of people around the world out of poverty and achieve the goal of extending cryptocurrency and its financial system to hundreds of millions of people that Bitcoin cannot achieve because it is too expensive and slow in transactions,” this is a bold plan and a utopian vision. Although the vision is beautiful, it is also easy to become a pure narrative talk. With a small user base of crypto users, Worldcoin’s ambitions have been questioned and compared to the “moon landing plan.”

However, with two years of silent development, Worldcoin has taken shape in product form and user growth, and its business logic is becoming clear beyond the ideal narrative logic.

First of all, sending free coins to users around the world is both a narrative technique and a very clever 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 cryptocurrency industry, mastering the wallet is equivalent to seizing the flow entrance.

Data shows that the ecosystem wallet “World App” launched a few days ago has already started small-scale testing, with nearly 1.7 million registered users and a rapidly growing rate of one new user every 14 seconds, making it the fastest-growing wallet in the world. Users have completed website, mobile application, and encrypted DApp login authentication more than 6.3 million times through World ID, with a total of more than 690,000 transactions sent and a daily transaction volume of 60,000 transactions.

At first glance, 1.7 million is not an eye-catching figure, but for the cryptocurrency industry, it is still a considerable number. Worldcoin’s breakout is not groundless. We can see some traceable fundamentals from the product design of “World App” recently released by the ecology and the economic model of Worldcoin.

In terms of product design, the team “accurately positions the target users and optimizes the usability of the product”.

Due to the objective compliance difficulties faced by Worldcoin, most of the currently open countries are in the third world countries and regions, which means that Worldcoin has been taking the route of surrounding cities from the countryside from the beginning. This also coincides with Worldcoin’s main goal – inclusive finance. Inclusive finance, of course, should prioritize covering underdeveloped countries with weak financial infrastructure, which is the vast majority of the people in the vast Asia, Africa and Latin America covered by Worldcoin.

Since it is the route of inclusive finance, the first priority should be the residents of those regions and countries where financial infrastructure and hardware equipment are generally lacking.

Regarding the current situation that the financial infrastructure and hardware equipment in most third world countries are still not perfect, Worldcoin has made maximum inclusive and friendly improvements to the product design. On May 8th, Worldcoin announced the launch of the ecological wallet “World App”. This exclusive wallet supports feeless transactions and is compatible with OS and Android versions. It currently supports downloads in more than 80 countries/regions around the world, supports multiple localized languages, and the product size is only 18MB, and it can even support mobile phones with a 10-year service life.

At the product level, the team based the product design on the lowest software and hardware standards, reducing the usage threshold of current users to the lowest. Only in this way can the initial vision-including most of the humans in the world-be included, reaching people in various parts of the world, including those who cannot access the new digital economy.

Figure: “National Geographic”/John Stanmeyer photographed on the coast of Djibouti on the evening of February 26, 2013. African immigrants raised their mobile phones to receive cheap signals from Somalia to contact overseas relatives.

Worldcoin adopts a deflationary reward model and incentivizes activity through task completion. According to the plan, Worldcoin is expected to distribute WLD tokens by the end of June, with a total supply of 10 billion, and over 80 percent of the token supply will be distributed to the community and contributors through free distribution.

To incentivize early contributors, the reward mechanism uses a deflationary model, which means that as more people join, the amount received by later participants will decrease. This not only encourages early enthusiasm and motivation, increases user growth rate, but also generates FOMO effect, creating market buy pressure and generating momentum for price discovery, especially for crypto veterans who cannot participate in certain regions due to compliance requirements.

In addition, WLD token distribution is not a one-time event, but is acquired through task completion. In the early stages, one token is distributed per week, and as time goes on, the interval for token distribution may increase to one per month, which helps to maintain user activity. From the data, it has achieved good results, with a total of 1.7 million users and a daily transaction volume of 60,000.

World ID: The Antidote to False Content in the AI Era

With the widespread use of artificial intelligence, the proliferation of false and anonymous accounts on the Internet will intensify. Artificial intelligence is proficient at imitating human behavior by generating text, deep fakes, or bypassing commonly used verification methods, making it increasingly difficult to distinguish between human accounts and bots/false accounts. Identity verification becomes an urgent problem.

As an open and permissionless identity protocol, World ID can not only serve as a global digital passport, but also anonymously prove a person’s uniqueness, that is, “you are you” without revealing privacy.

World ID uses proof of personhood to solve two problems caused by AI: preventing witch attacks and minimizing the spread of false information generated by AI.

Since we acknowledge that AI will bring about changes on an industrial revolution level for human society, solutions to the problems it creates will also be a real demand.

If the so-called inclusive finance and UBI in the early days of entrepreneurship were still stuck in 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 stands at a higher level, with real needs at the level of social significance.

It can be said that in addition to its reasonable business logic, Worldcoin can also solve real social problems at a higher level, which is why Worldcoin, which was still unknown two years ago, has won the favor of top capital today and still has a high valuation in the cold winter with huge investments.

Interestingly, Sam Altman, the founder of Worldcoin, is also the founder of OpenAI. OpenAI has played a key role in leading a new wave of AI trends, and it can be said that the success of OpenAI and ChatGPT has given Worldcoin a new opportunity. This is not only because Sam Altman’s aura has enabled investors to “dig up” his other project, Worldcoin, but also because the artificial intelligence led by OpenAI has the potential threat of creating and disseminating inaccurate information on a large scale, which can be solved by the latter, providing real usage scenarios and use cases for the latter’s business logic. To some extent, these two projects have achieved a perfect self-consistent closed loop.

What does it mean for the cryptocurrency industry?

The “World App”, which is currently growing rapidly at a speed of one new user every 14 seconds, can be said to be the fastest growing wallet in the world. Considering the logic that “mastering the wallet is mastering the flow entrance of the cryptocurrency industry”, the importance of Worldcoin for the wallet track is beyond doubt. Considering the possible introduction of transaction fees in the future (according to Tiago Sada, the product, engineering and design supervisor of Tools For Humanity, World App charges a few basis points for each transaction), mastering the flow entrance of the wallet will bring huge commercial success to World App.

If Worldcoin can continue to expand steadily and achieve its expected goals, it will be possible to intensify the pace of massive adoption of cryptocurrencies, which will be good for the entire industry and is the most important value for the entire cryptocurrency industry.

Under the current restrictions on compliance issues, Worldcoin is forced to prioritize opening up to less developed third-world regions and countries. For people in these regions who lack financial infrastructure, when they scan their eyes and complete a series of follow-up operations, they are most likely to have their first wallet, and WLD will be their first cryptocurrency in life.

So, every new user who receives WLD tokens is equivalent to another successful conversion to the “World App” wallet user. This not only allows WorldCoin to successfully occupy a key entry point in the encryption industry – the wallet, but also brings incremental users to the encryption industry, because every newly added World ID may flow from the WorldCoin ecosystem to other corners of the encryption industry, which will benefit the entire encryption industry.

The Worldcoin ecological wallet World App, which carries new users, will use its broad encryption channel to transport these encryption novices to other encryption ecosystems.

In fact, from the very beginning, Worldcoin, which is based on openness and equality, has been closely linked to the encryption industry. This is not only reflected in the founding team and VC background, the native encryption project genes, but also in the ecological development, integration, and extension, the Worldcoin team is also actively connecting and cooperating with various encryption ecosystems.

Let’s take a look at where Worldcoin has extended its tentacles:

The native token WLD of Worldcoin will be issued on Ethereum, and the underlying protocol of World ID has run on Polygon, and it is planned to migrate to the Optimism OP mainnet with World App. In addition, Worldcoin is also actively developing and building around cross-chain.

World App, a native wallet created specifically for Worldcoin, not only supports payment, purchase, and transfer of Beta WLD, but also supports corresponding functions of various other tokens, including WETH, WBTC, DAI, and USDC (more tokens will be supported later);

World App also supports CEX and decentralized applications, and currently supports applications such as Uniswap, ENS, Circle, Safe, MoonBlockingy, and RampNetwork.

The Worldcoin team once worked with Optimism, Coinbase, and Prysm development teams to test, implement, and release the EIP-4844 proposal, which aims to reduce L2 fees by 10 times, making it more affordable for more users to use DApps.

It can be said that Worldcoin is not only a wallet entry point, but also an entry point from the real world to the encryption industry. Entering the world of Worldcoin is equivalent to entering the encryption ecosystem of Ethereum, Bitcoin, and others.

Imagine such a scenario: World App continuously delivers fresh blood to the encryption world through Worldcoin. These new users who have their own wallets and digital identities for the first time will have their first experience of using cryptocurrencies for purchasing and trading. They will also start to try more different encryption operations. In addition to passively receiving airdropped WLD tokens, they will also use Ethereum, stablecoins to perform more on-chain operations, such as trading, financial management, and even publishing and collecting NFTs.

The series of cross-chain, bridging, and application technology constructions around World App are like highways laid out around this wallet, connecting places that lead to Ethereum, Layer 2 chains, decentralized applications, and platforms, expanding richer scenes for new users.

As a crypto gateway connecting the real world, World App will connect 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 for universal adoption.

Moving forward amidst doubts

Of course, during the development of WorldCoin, doubts about WorldCoin have never stopped, and the main points of the doubters are mainly concentrated on privacy and security, unrealistic goals, and exploitation of vulnerable groups.

One of the doubts: Can iris scanning really guarantee the user’s real identity?

Although the team claims that the personality proof solution combining identity protocol World ID and biometric device Orb can perfectly solve the problem of false accounts, can iris scanning really guarantee the user’s real identity?

According to a tweet by BlockBeats, due to compliance issues, WorldCoin has not yet opened up in mainland China, which means that users cannot register at present. Therefore, a business of proxying iris scanning has quietly emerged on the market, and an iris verification can be bought for up to $30, and then a $20 reward can be claimed. According to these intermediaries, most of the human iris proxies come from rural areas of Africa and Cambodia. The low cost of proxying makes us wonder how many of the so-called 1.7 million users are fake?

In response to this, Worldcoin admitted the existence of the black market, but emphasized that there were only a few hundred such cases. At the same time, to combat the iris black market, Worldcoin launched new measures, including adjusting the first face-to-face registration process and implementing dynamic and static QR codes.

Doubt two: Privacy and Security

A common doubt about Worldcoin is that Worldcoin’s human iris scanning may cause privacy and security issues.

Regarding this, the team’s explanation is that Worldcoin’s “underlying identity protocol” World ID uses zero-knowledge proof technology to verify users’ identities without sacrificing their privacy, which can protect the privacy of users’ iris data. Unlike typical digital identity systems that use biometric authentication, iris scanning is only used for identity verification, and the iris image itself is not retained (unless the user selects this option). The database receives only the iris hash value (IrisHash) generated by Orb processing, which is generated locally and is one-way irreversible.

However, today we have higher requirements for the transparency of 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 being shared.

Question 3: Former Ethereum Foundation member criticizes WorldCoin’s economic model and regional issues

Former Ethereum Foundation member Hudson Jameson questioned WorldCoin’s claim to create a fair global currency and criticized WorldCoin’s economic model, stating that “WorldCoin’s token economic model is flawed. The goal of WorldCoin is to make people around the world grasp 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 WorldCoin’s distribution could cause huge socio-economic problems in the local area, and these problems are different in each region, but there is no publicly available information showing how the team is dealing with these issues, nor has it formed a working group involving relevant experts.

Therefore, Hudson believes that WorldCoin is impractical and even questions whether it can bring tens of millions of new users by 2025.

Question 4: Snowden once questioned WorldCoin, and MIT Technology Review described it as crypto-colonialism

As early as October 2021, Snowden questioned Worldcoin’s ID plan, fearing that Worldcoin was building a global iris database.

Snowden said this seems to be a global body iris scan (hash) database generated with “fairness” as the reason, and “We deleted these scans!” to eliminate the impact. Snowden also warned, “Don’t use biometric technology for fraud prevention. In fact, don’t use biometric technology for anything.”

Recently, the MIT Technology Review, an American technology magazine, also pointed out that Worldcoin first tested in low-income communities, is a form of crypto-colonialism, given that the residents of these areas lack legal protection and data collection is cheaper and more convenient. According to technologyreview, as of March this year, Worldcoin’s iris scanning has been opened to 24 countries/regions around the world, of which 14 are developing countries and 8 are located in Africa.

Worldcoin may not be the perfect product, and it still faces many problems, challenges, and even crises in the short term. However, undoubtedly, it is the most potentially disruptive cryptocurrency application to date. If Worldcoin can succeed, its tokens will also appreciate, which may be why, in addition to founder Altman, Worldcoin has attracted top Silicon Valley venture capital.

Note: Blocking all articles only represents the author’s point of view and does not constitute investment advice
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