Worldcoin

Digital payments are forecasted to reach almost $8 trillion in 2022, generating a need for improvement in digital identity management and the security market, both of which are fundamental to facilitating secure transactions. Current typical identity verification systems remain vulnerable to breaches of supposedly secured information. The submission of various passwords, usernames, and personal documents to online identity checking mechanisms often pose a great deal of risk for identity theft and other consequences of stolen information. Blockchain has welcomed a new technological roll out of identity verification that empowers individuals and allows for autonomous control over privacy. With decentralized identity verification, personal data control is restored to individuals who no longer need to place their trust in industries and centralized organizations and can utilize a singular login for multiple services, ncreasing efficiency and convenience. The transparency and protection of self-sovereign identity (SSI) and digital transactions via blockchain technology show promise in redefining individual security.

What is Worldcoin?

Worldcoin aims to use biometrics to create a protocol with the ultimate goal of facilitating the expansion of global engagement with cryptocurrency networks. The protocol’s co-founders Alex Blania, CEO and founder of Stealth Startup; Sam Altman, CEO of OpenAI and former president of Y Combinator; and Max Novendsterm market the cryptocurrency as a “collectively owned global currency that will be distributed fairly to as many people as possible.” Although blockchain is a promising technology, it is far from mainstream adoption as currently only an estimated 3% of the world’s population are active participants (TripleA). To assist with expanding mainstream adoption, Worldcoin has taken a unique approach through allowing theoretically every human being to claim a free share of their native coin. This poses the challenge of creating a means of effective, trustworthy identity verification to ensure that every claim stems from a verified individual human who can prove they are not a bot and have not already claimed their allotted share. To solve this problem, they created a biometric retinal-scanning device called the Orb. The currency has faced criticism, however, for its creators’ proposed methods and designs.

Worldcoin can attribute its $25 million of fundraising success, as of October 2021, to a list of notable investors including Andreessen Horowitz, 1confirmation, Coinbase, Day One Ventures, Hypersphere, and Kenetic Capital. The venture capital interest has allowed the company to achieve a billion dollar valuation. Among the currency’s angel investors are Reid Hoffman (Co-founder of LinkedIn), Sam Bankman-Fried (Founder of FTX), Denis Nazarov, and Jesse Walden. Other contributors include early members of protocols like Polkadot and Solana as well as other projects.

The Orb & Zero Knowledge Proof (ZKP)

To address the issue of identity verification, the founders of Worldcoin developed a biometrics-based mechanism known as the Orb, which captures an image of an individual’s eyes and converts it into a numeric code, eliminating the need for any personal information or data to be stored for identification purposes. This is a significant step in revolutionizing user privacy protection, enhanced by the way cryptography prevents the unique numeric code from being traced to that individual’s transactions or other activity along the blockchain. This device marks a departure from the ways of the centralized systems of the past decade that require and store all kinds of personal information, ushering in an era of new technological approaches to personal security as well as regulation to ensure a nonpartisan process based in equality. This technology should be factored into debates around the need for big tech to collect large amounts of data on individuals for the purpose of monetization.

The first step of the identification process for individuals looking to claim their first free share involves the retinal imaging process, which produces an image that never leaves the Orb’s system and is promptly deleted following its conversion to a unique code. Iris recognition was chosen since the high information density of an iris reliably ensures uniqueness and fraud resistance and significantly reduces the likelihood of false match rate (FMR) errors while remaining practical. The first layer of privacy lies in the irreversible function that makes the back-tracing of the user’s identity or image from their code impossible. The second step following the production of a unique code is the creation of a one-time use certificate that allows for creation of a wallet. Unlike the numeric codes, all certificates are identical, thus eliminating any connection between the user’s code and their wallet. Similarly, access to an individual’s wallet provides no means of acquiring their unique code, representing another layer of zero-knowledge encrypted privacy for users. Orb devices are undergoing testing to improve their design and verify their abilities. A single device can currently integrate approximately seven hundred new individuals per week. The full capacity goal is to increase device production to over fifty thousand per year.

Some hotspots for onboarding users include Chile, Kenya, Indonesia, Sudan, and France. Chile is home to the orb operator that has been active for the longest, signing up over eighteen thousand users in just over six months. The field tests that are currently underway have facilitated over 130,000 sign-ups worldwide via the orb.

Technicalities & Scaling

Worldcoin plans on launching their network as an optimistic rollup on top of Ethereum. This allows Worldcoin to grow in the open, individualistic, and permissionless space of the Ethereum blockchain, while also being scalable. Worldcoin has ambitious goals of simultaneously providing millions of people with digital wallets while also expanding a network of verified users through the blockchain, though in reality their potential to achieve these lofty goals is questionable. Compatibility with pre-existing platforms and services is enabled through the token being based on the popular ERC-20 standard, and it could potentially serve as a foundational component for app developers and will have bridges to other protocols like Solana and Polkadot.

Criticism

While some see Worldcoin as revolutionary, it also raises questions regarding certain facets of the development process. There is concern over the possible implications of globally gathering biometric data regardless of individual economic status, despite that information not being linked to personal identities. The Worldcoin launch page suggests the existence of a database that could store biometric data, and despite being unlinked from individual identities, the concern is that this has the potential to provide key investors with insights into human populations. The timing of such a proposal is questionable given the surveillance and compliance measures of the pandemic and the controversial use of biometrics for identity verification that could be construed as invasive. The name of the device central to these operations has also come under fire with “the Orb” creating bad optics and perhaps perpetuating fear of ‘dystopian’ developments. The concept calls into question whether or not identity verification via iris scan is a realistic target.

Regulation of such technology is another point of concern since iris-scanning devices can capture biometric data of individuals from a distance, without their approval. The process exists in a questionable space along the privacy spectrum since it retains data that represents a permanent physical feature of humans. The decentralized structure of control that awards a great deal of power to entrepreneurs who become orb operators around the globe also increases the potential for abuses of privacy and access to personal data. Worldcoin is attempting to create an inclusive, worldwide network as well as work towards a universal base income initiative, but 20% of the token supply goes to developers and investors. This could signify a possible red flag since it seems counterintuitive to their emphasis on creating an equitable economy via blockchain technology.

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By Nina Narayan

February 20 2022

Disclaimer: This report is for educational purposes and should not be construed as investment advice. Additionally, the author may hold any of the assets mentioned.