Gm,

This week, we take a look at the controversial Web3 project Worldcoin, and its lofty goal of creating a global universal ID system to enable anyone on the planet to claim basic income every week.

We’ve seen long lines of people queuing for the iris scan; governments cracking down on the data collection; theories that this is a balance to OpenAI; and more.

No matter your thoughts on Worldcoin, we see huge potential to use decentralization to completely remodel ID verification. That’s the core premise of Terminal 3, the company that makes this newsletter possible. Earlier this week, Terminal 3 announced it raised pre-seed investment— you can read the full details here.

We won’t plug T3 every week, but with the company just out of stealth mode and this topic close to our hearts, we hope you don't mind this exception. 

We’d love to get your thoughts on Worldcoin, decentralized ID and more—you can email sowhat@terminal.io or just reply to this email.

All the best,

Jon and Gary

What’s going on?

Worldcoin, a four-year old project with the ambitious goal of providing universal basic income (UBI) across the world, became one of the most discussed topics in the tech world after launching its token (WDC) on July 24. Notably, OpenAI CEO Sam Altman is a co-founder.

The project uses iris scanning technology to verify personhood for each user, after which they can claim one WDC each week. The scans are performed offline using dystopian-looking orbs (see above) and that’s where the controversy begins. Worldcoin says the biometric data is strictly used for individual verification before it is destroyed, but media reports have shown that hasn’t always been the case.

Worldcoin said more than two million people had scanned their iris over the last two years with the pace accelerating since the token became available to retail investors. Already, though, the program has caught the attention of governments, a number of which are concerned. 

So What?

1. We need better ID

The most fascinating part of the Worldcoin project is decentralized identification (DID). 

Storing identification data is a massive issue, and not just in Web3. Sensitive user data is leaked or hacked constantly. Innumerable company databases store details such as social security numbers, bank account details, passports and more, and the fallout from these hacks is brutal.

DID flips the concept by putting sensitive user data in secure and decentralized storage, and then using ‘proof’ of its existence, as opposed to the underlying data itself, for verification. So rather than sending a copy of your passport to your bank, insurer, creditor, etc, institutions can just ask for a proof of your identity or certain information (often called 'verifiable credentials').

That’s why Worldcoin reluctantly uses iris scans. It came to the conclusion that there was no other way to verifiably prove personhood. But, once verified—and data destroyed—a user’s Worldcoin ID could be used as DID for any number of services in the future. That’s the plan, at least.

2. Basic income for all

The core focus of Worldcoin’s DID is to qualify people for 'universal basic income', or UBI, a type of welfare payment that any human on earth would have a right to.

Altman promoted UBI for many years. In 2016, he set up a UBI research project at Y Combinator—the US tech accelerator program where he was President—and Worldcoin is a clear manifestation of his belief in the idea.

Considered somewhat radical then, UBI makes more sense today given the rise of artificial intelligence (AI) and its potential to take jobs and reshape economies. The fact that OpenAI—Altman’s other company—is leading the AI charge brings almost perfect symmetry, although Altman said he doesn’t see Worldcoin as a response to the impact of AI.

3. But many concerns

Even with noble intentions, the concept of Worldcoin has spooked governments. Just as cryptocurrencies carry a threat to undermine sovereign currencies and even economies, the concept of identification and welfare from a third-party has the potential to radically change a nation’s power dynamic. 

Then there’s the data. Last year, MIT Review reported on the shoddy data management in early Worldcoin scanning efforts. It concluded the project was developing “a biometric database from the bodies of the poor.” Worldcoin claims it destroys iris data once it is used for verification but figures such as Edward Snowden cautioned against using biometrics in the first place.

Trust in technology platforms isn’t high given how services like Facebook and WhatsApp have been manipulated to sway elections in the Philippines or exacerbate cultural tensions in India, Myanmar and other countries. Unsurprisingly, governments are looking closely:

• Kenya suspended the service
• France questioned the legality of the data collection
• Germany began investigating the project last year
• The UK will also probe the project

Outside of stepping on the toes of elected officials, Worldcoin freely admits that its tokenomics—the way it plans to bring utility to its token—are not finalized.

The project raised $240M from investors including a16z and Khosla Ventures, including one round that saw investors buy WDC tokens before its public launch. 

That’s a model that has been criticized for enabling early investors to easily ‘dump’ their pre-bought tokens on retail investors. It’s too early to see whether such a dynamic will play out here—it certainly doesn’t go hand-in-hand with basic universal income.

News bytes

It’s been a crazy week in the world of decentralized finance (DeFi) after an issue with programming language saw more than $50M stolen from DeFi service Curve 

Crypto trading is banned in China, but Binance still reported does $90 billion in volume per month in the country

Despite crashing market prices, Tether—one of the world’s most prominent stablecoins—is insanely profitable

Zkpass, a privacy protocol that enables DID and other secure data services we mentioned earlier, landed investment from Binance, Sequoia China and others

A report from web development platform Alchemy suggests developer activity in Web3 increased by over 300% in Q2 2023 despite the market lull

That’s all for this week!

You can share your feedback, questions or requests via email to: sowhat@terminal.io