In the realm of web3, where conventional centralized checkpoints like passport scans are absent, this issue is of particular importance. Many projects are developing digital identity solutions, but probably the boldest one is Worldcoin, developed by Tools for Humanity, a company co-founded by Sam Altman. In development since 2021, the company launched its eponymous token this Monday, spiking tons of controversy. While some applaud its audacity, others fear it may pave the way for a Big Brother-style dystopia, reminiscent of concerns surrounding another company led by Sam Altman, OpenAI.
 
So, what exactly is the Worldcoin project, and why has it ignited such fervent debate?
 
How does Worldcoin work?
 
Worldcoin is an identity verification project, based on biometric data, cryptography, and blockchain. People can receive their unique World ID by scheduling a visit to a hardware device called the Orb and scanning their retina and several other biometric data points. This data is used to generate an “IrisHash”, used to check against the Worldcoin database to see if the person has already been signed in. According to the company’s website, biometric data is deleted as soon as IrisHash is created, and a zero-knowledge proof, a cryptography method, is used for privacy protection.
 
If the person’s IrisHash does not find a match, they can proceed by registering their Worldcoin wallet and receiving some amount of $WLD, an incentive cryptocurrency. Its utility is not yet clearly defined, but it is known that $WLD holders will be able to take part in Worldcoin governance and potentially be used as a currency for remittances, interacting with web3, or buying goods and services.
 
The controversies
As per its website, Worldcoin now counts over 2 million Orb-verified users, and this is where controversies start.
 
In April 2022, MIT Technology Review published a harsh critique of Worldcoin’s onboarding practices, blaming the company for “building a biometric database from the bodies of the poor”. It pointed out how Orb operators targeted mostly poor populations in Asia and Africa who hardly understood anything about Worldcoin and participated in the project mostly because of the promised gain.
 
The company insists it adheres "to the strictest privacy guidelines and requirements in the markets where Worldcoin is available", but the token launch has reignited concerns about data collection and informed consent.
 
The UK’s Information Commissions Office even announced it was making an inquiry into the project.
 
Beyond dubious marketing practices and uncertain legal compliance, the technology itself has also come under scrutiny.
 
In a blog post published on Monday, Vitalik Buterin, the creator of Ethereum, voices his reservations about the Orbs’ security. Not only can they theoretically capture more data than needed (including a person’s ethnicity or medical condition), but a malicious actor could also inject them with malware, for example, in order to create fake identities.
 
Also, while Worldcoin claims that the Orbs do not store any personal data, we cannot verify this.
 
Finally, tokenomics is also a weak point.
 
Out of 10 billion $WLD, a little over 100 million was released on Monday (109 million at the time of writing, as per the company’s Dune dashboard). Such a small circulating supply reminded some crypto market analysts of pumping schemes: when true price discovery is impossible, markets are extremely prone to speculation. Coupled with an uncertain utility and a substantial amount of VC capital (investors’ tokens are blocked for only one year), the whole structure raises questions and fears of pump-and-dump.
 
Worldcoin, however, explains 1% circulating supply by the fact that many more people will need an incentive to scan their irises and underlines the project’s truly global ambitions.
 
The prospects
 
Every project that involves biometric data collection must exercise utmost caution, and Worldcoin is yet to prove its capability in that regard.
 
Nonetheless, as Vitalik Buterin put it, “the world without proof of personhood also has dangers”, and it is better to start testing solutions now.
A functioning digital identity system would also be beneficial to web3, solving one of its main problems – user onboarding. Worldcoin has released a developer kit and encourages web3 developers to include World ID in their DApps.
Writing by D.Center