Worldcoin: The Next Big Investment Opportunity?

Worldcoin is a cryptocurrency project that claims to be building an economic system that is universally accessible from anywhere in the world. The project could also implement a form of universal basic income (UBI). The Worldcoin token (WLD) is issued on Optimism, a layer 2 scaling solution built on Ethereum. The project was founded in 2019, but the token wasn't launched until July 2023.

Worldcoin is unique in that it uses a proof of personhood system, which aims to ensure that every participant is a real person and not a bot or AI agent. After verification, users receive a World ID, which serves as a digital passport. To get a World ID, users must scan their eyes with a device called an Orb, which uses multispectral sensors to obtain biometric data.

Worldcoin was co-founded by Max Novendstern, Alex Blania and Sam Altman, who is also the CEO of Chat GPT creator Open AI. Worldcoin has secured funding from prominent venture capital investors, including Andreessen Horowitz, and is listed on major crypto exchanges such as Binance, OKX, KuCoin and Huobi.

Despite its promising nature and backing from prominent investors, Worldcoin has faced privacy concerns and negative attention from regulators in several countries. There are also concerns about the tokenomics of WLD, with the initial circulating supply only representing a fraction of the total WLD supply, which may impact its price in the future.

Therefore, while Worldcoin is an innovative and unique project with potential, there are also risks and challenges to consider before investing.

Worldcoin's proof of personhood system

Worldcoin's proof-of-personhood system, known as World ID, is a digital "passport" that can be used to verify a person's uniqueness and humanness online. It aims to address the challenges posed by advanced AI, such as differentiating between human- and AI-generated content, protecting against sybil attacks, and preventing the spread of AI-generated misinformation.

The World ID system combines blockchain, AI, and custom hardware, specifically an orb-shaped biometric device that scans a person's iris to create a unique identification code called an IrisCode. This code is saved on a decentralised blockchain, ensuring it cannot be duplicated or spoofed for false identities or fraud. The iris scan is also used to create a World ID, which serves as a digital passport and can be stored in the World App, acting as a crypto wallet.

The Worldcoin project emphasises privacy, with zero-knowledge proofs preventing third parties from accessing a person's World ID public key or tracking them across applications. Additionally, the system does not collect biographical information or associate the IrisCode with personal information. The project also allows users to opt out of biometric data sharing, and they can request the deletion of their old iris codes.

Worldcoin's proof-of-personhood system aims to create a universal identity and financial public network "open to everyone regardless of their country, background, or economic status." It has already biometrically registered over 1.36 million individuals, with a fleet of around 250 custom-built Orbs deployed globally. The system has faced criticism and scrutiny from regulators and the crypto community due to privacy concerns and its promotional activities in the developing world.

Worldcoin's price volatility

Recent Price History

Worldcoin's price has been volatile since its launch in July 2023. The token initially saw a surge in value, reaching an all-time high of $4.70 in December 2023. However, it experienced a notable decrease of 35.71% between December 31, 2023, and January 30, 2024. Since then, Worldcoin's price has fluctuated, trading in the range of $1.64–$3.94 as of July and August 2024.

Market Sentiment and Technical Analysis

Worldcoin has exhibited mixed market sentiments, with bulls attempting to regain control. Technical analysis indicates that Worldcoin faces substantial resistance, with the Relative Strength Index (RSI) hovering around 36 and the token consistently testing the lower Bollinger Band, suggesting ongoing bearish pressure. The moving averages, including the 50-day and 200-day Simple Moving Averages (SMAs), have exhibited bearish signals, which may deter some investors. The exponential moving averages (EMAs) on the 4-hour chart also act as significant resistance levels, reinforcing the downward trajectory.

Regulatory and Compliance Issues

Worldcoin has faced regulatory scrutiny and compliance issues in various countries, including Hong Kong, Spain, and Kenya. These issues have resulted in temporary halts in operations and investigations into the company's data collection and privacy practices. Such developments can impact market sentiment and contribute to price volatility.

Collaboration and Adoption

Worldcoin has recently announced collaborations and expansions, including a partnership with MIMOS Berhad in Malaysia to integrate its technology into the country's digital infrastructure. Additionally, Worldcoin has expanded its operations to Europe and Latin America. These developments can positively impact the price and volatility of Worldcoin as they increase adoption and enhance the project's reputation.

Competition and Market Conditions

The performance of other cryptocurrencies and the overall market conditions also influence Worldcoin's price volatility. Worldcoin competes with other cryptocurrencies and is affected by the broader market trends and investor sentiment towards the industry. Positive news and advancements in the industry can boost the market, while negative sentiment and regulatory challenges can impact Worldcoin's price.

Worldcoin's regulatory issues

Worldcoin has faced regulatory issues in several countries and regions, including Hong Kong, Portugal, Spain, Kenya, France, and the United Kingdom. In May 2024, the Hong Kong regulator directed Worldcoin to cease all operations in the country, citing risks to privacy and personal data. The Office of the Privacy Commissioner for Personal Data (PCPD) deemed Worldcoin's data collection as "unnecessary and excessive". Worldcoin has also temporarily halted its operations in Spain, and faced scrutiny from the Bavarian State Office for Data Protection Supervision (BayLDA) in Germany.

The regulatory challenges faced by Worldcoin primarily centre around concerns related to data protection and individual privacy. Worldcoin collects biometric data, including iris and face scans, which has raised concerns among regulators and the public. Worldcoin maintains that it is designed to be fully compliant with all applicable laws and regulations governing data collection and use, and that it does not sell or monetise any personal information collected.

To address regulatory concerns, Worldcoin engages with policymakers and conducts regular meetings to explain the project's mission and technology, answer questions, and confirm regulatory compliance. They emphasise that Worldcoin does not require any personal information such as name, email, or phone number, and that all images used for verification are deleted by default. Additionally, Worldcoin claims to employ physical and electronic safeguards, including encryption, to protect user data during transit and storage.

Despite these assurances, Worldcoin's expansion has faced opposition from a sizeable portion of the crypto community and regulators worldwide. The project has been criticised for its collection, storage, and use of personal data, with some arguing that it could be misused. These regulatory issues have impacted Worldcoin's ability to operate in certain jurisdictions and may continue to shape its future expansion plans.

Worldcoin's privacy concerns

Worldcoin has faced scrutiny and skepticism from privacy experts and regulators in several countries. The project has raised concerns about the collection and use of biometric data, with investigations launched in Spain, France, Germany, Kenya, and Hong Kong.

Privacy Concerns

Worldcoin's proof of personhood system uses iris scans to create unique biometric identifiers, aiming to ensure that every participant is a real person and not a bot or AI agent. While Worldcoin claims that this process protects user privacy, critics argue that the company may use the sensitive data for personalized marketing or other purposes beyond creating secure identification. There are also worries about potential data theft, as seen with other large companies.

Regulatory Actions

• Spain: Spain's Agency for Data Protection ordered Worldcoin to temporarily cease operations for three months, citing concerns about user complaints and the handling of personal information.
• France: France's data protection authority launched an investigation in 2023, and Worldcoin has since stopped scanning eyeballs in the country.
• Germany: The Bavarian State Office for Data Protection Supervision (BayLDA) investigated Worldcoin over biometric data collection concerns.
• Kenya: The Kenyan government suspended new sign-ups and ordered Worldcoin to stop onboarding new users while investigating data protection.
• Hong Kong: The Office of the Privacy Commissioner for Personal Data concluded that Worldcoin's operations violated the region's Personal Data (Privacy) Ordinance, leading to a cessation of services.

Worldcoin's Response

Worldcoin has defended its operations, stating that they preserve user privacy and that all personal data is encrypted and protected. The company has also open-sourced its biometric data system and allowed users to delete old iris codes. Jannick Preiwisch, Worldcoin's data protection officer, accused the Spanish data protection authority of "circumventing EU law" and "spreading inaccurate and misleading claims" about their technology.

Worldcoin's tokenomics

The total supply of WLD tokens is capped at 10 billion for 15 years, after which the governance of the network can decide to implement an inflation rate of up to 1.5% and allocate the newly minted tokens. At launch, the maximum circulating supply was 143 million, with 43 million allocated to users verified during pre-launch and 100 million given as loans to non-US market makers.

The Worldcoin token has seen major price surges on top exchanges, which rushed to list it. However, there are concerns about the project's tokenomics, particularly the large proportion of tokens allocated to insiders. This has led to worries about potential selling pressure and a resulting decline in the token's value.

Worldcoin's native token, WLD, is issued on Optimism, a layer 2 scaling solution built on Ethereum. The initial circulating supply of 143 million WLD represents just 1.43% of the maximum supply, leaving room for significant expansion. This is likely to impact the token's price, and the project's tokenomics do not favour a long-term hold strategy.

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