World Coin, Hard to Talk About Fairness?

As hot as ChatGPT is, Worldcoin is just as cold.

Everyone is confused.

From the official announcement of a major update to the official listing of Worldcoin token WLD on trading platforms, it only took 3 hours.

Not only was there a sense of urgency from the sudden listing, but what’s even more terrifying is the indifference from users after the announcement.

Unlike Sam Altman’s other product, ChatGPT, which initially had “no admission required,” it is actually quite difficult to get started with Worldcoin. And with Sam’s shift from UBI to a focus on Proof of Personhood (PROOF OF PERSONHOOD) for Worldcoin, it will probably take some time to see the significant impact that Worldcoin’s AI-driven UBI will have on the real physical world, just like ChatGPT.

(UBI, Universal Basic Income, refers to the unconditional, qualification-free, and non-review process of regularly distributing a certain amount of money to all members by a collective organization, in order to meet the basic living conditions of the people and implement basic human rights through economic security.)

And based on the current situation of receiving one WLD token per week, it is still premature to discuss meeting basic living needs.

Although Worldcoin often participates in various cryptocurrency conferences, integrates many mainstream protocols, and uses a Web3-style token “airdrop,” based on the situation on the first day of token listing, Worldcoin has not gained favor from the cryptocurrency community—although they are currently the main supporters of the token.

Centralized distribution

With the halo of OpenAI, both the cryptocurrency and technology communities have high expectations for Worldcoin. However, this time, the token listing of Worldcoin is not much different from a regular token sale except for its sudden occurrence. The only thing worth noting is that among the entire process of token listing, only five market makers obtained a large number of tokens.

For a world-class project with the initial goal of UBI, the most important thing when listing tokens is to be listed on multiple mainstream trading platforms and to provide sufficient liquidity for the community users in the mainstream cryptocurrency field to purchase—making the market makers the only group that can purchase WLD at the first moment, and also possibly the group that needs UBI the least.

The maximum circulating supply of WLD at the time of listing was 143 million WLD, including: 43 million WLD allocated to users who were verified through Orb before the project started; 100 million WLD loaned to market makers operating outside the United States (to be repaid after 3 months)

Although there were over 2 million users participating in the registration, the initial maximum circulating supply was 143 million WLD. However, according to the data provided by Worldcoin, the current circulating supply of WLD is only 107 million. This means that market makers currently hold tokens that account for 93.3% of the circulating supply, which is more than 14 times that of the community. The centralization of token distribution in the initial stage far exceeds the IEO projects of mainstream cryptocurrency platforms like Binance.

Not only that, it seems that the Worldcoin project has quietly set a “fair” price for WLD through market makers. 5 market makers borrowed WLD tokens from World Assets for a period of 3 months and returned them upon maturity. If unable to return, WLD tokens must be purchased according to the following formula: $2 + (0.04 X loan amount / million).

The simplest and roughest calculation, if these 5 market makers evenly distribute these 100 million tokens, it means that each of them will receive 20 million WLD tokens at a price of $2.8.

Of course, these market makers who hold the power to “kill or save” the WLD tokens should not act recklessly. It is believed that Worldcoin’s partner institutions are not ordinary people either. Not only is it impossible for ordinary secondary market users to speculate on the game between these five entities, we also have no way of knowing the specific terms of borrowing and market making. All we can say is that Worldcoin has forcibly implanted the concept of $2 into the minds of those who care about the price of WLD tokens through this method.

In addition to secretly setting prices, which is a common practice in the crypto circle, VCs, as a common part of the crypto circle, naturally cannot be absent. Worldcoin, which has received multiple rounds of large financing, has naturally allocated enough tokens to investors. According to previous reports from ChainNews, the valuations of Worldcoin’s first two rounds of financing were $1 billion and $3 billion respectively. If calculated based on the current price of $2 for WLD, Worldcoin’s market value is $20 billion. Top investment institutions such as a16z and Coinbase Ventures, which participated in Worldcoin’s investment earlier, undoubtedly received excessive returns.

Token distribution: Community Fund 75%; investors 13.5%; team 9.8%; TFH reserves 1.7%

Among the many investors in Worldcoin, we can also see the founder and CEO of the bankrupt crypto exchange FTX, Sam Bankman Fried (SBF), and the bankrupt well-known crypto fund Three Arrows (3AC). Even Kyle L Davies, co-founder of 3AC, directly stated today, “If my investment theory is correct, the 3AC venture portfolio will be the best performing portfolio in 2023. Congratulations to Worldcoin.”

Discussion on Market Makers

Although Worldcoin’s official website states that they believe in the inherent worth and equality of every individual, the fact that market makers have over 95% of the actual initial allocation has sparked a lot of discussion.

For example, a 400,000 WLD order in the early stages on the Bybit platform sparked widespread discussion. This certainly does not belong to any community member, as 400,000 WLD tokens accounted for about 40% of the total amount received by the community at that time.

BlockTower founder Air LianGuaiul believes that the current situation of WLD is a common cryptocurrency market manipulation model. LianGuaiul further explained this situation:

  • With this common cryptocurrency market manipulation model, a valuation of over 10 billion USD can be created for startups.

  • Lock the capital of founders and investors, and airdrop a small portion of tokens to retail investors.

  • Then give more tokens to market makers and incentivize them with options to maintain the token price at a certain limit.

  • The result is that retail investors see the price and liquidity on the trading platform, but the tokens they receive are less than 5%, usually less than 1% of the total tokens. The media reports “project success” eagerly, VCs record them on their books, and raise new funds based on false returns.

  • Then, 3-18 months later, when the tokens are unlocked, retail investors, who believed the tokens should have held their value, are hit by insiders dumping the tokens.

LianGuaiul said that there may not be a real “conspiracy” because some “participants” may not truly understand the game they are involved in. This is the power of incentives. Even without any explicit coordination or conspiracy, market manipulation and volume brushing may still occur. This is because if the incentive mechanism is designed properly, participants may naturally take these actions to maximize their interests.

Wintermute CEO Evgeny Gaevoy also stated that choosing mature market makers is more suitable for token issuance than using AMMs. He also gave an example, saying that if AMMs were used, about 40% of the capital raised by the project would need to be invested to ensure a better experience. This poses too much risk for the project team.

Anything can be discussed except fairness

Regarding the situation where WLD has extremely low token circulation and a very high fully diluted market value, many users have expressed that this is similar to the notorious “Sam coins” Serum, Oxygen, and MAPS on Solana.

Vance Spencer, the founder of Framework, also sarcastically stated that the $30 billion FDV listing is one of the fairest things he has ever seen.

In fact, even before the release of WLD at ETHCC, community members created a project called Buttcoin, directly targeting Worldcoin. In the satirical introduction of the project, it jokingly stated that Buttcoin is more meaningful than existing identity solutions: anyone can take a picture of your eyes, but you only send a picture of your butthole to people you trust.

After the token sale, blockchain detective Zach pointed out that:

  • The most shocking thing is how the Worldcoin team boasts about how many users they have. In reality, they have been exploiting people in developing countries. It also brought up the issue of black market sales of Worldcoin accounts.

  • Zach quoted a message from Coindesk stating that Worldcoin has increased its internal share from 20% to 25%. However, in early Worldcoin introductory videos, it claimed that WLD is better than BTC; BTC is only held by a few wealthy individuals.

US users cannot use World APP.

There are also many meme images related to eyeballs and irises posted by users on Twitter, indicating that they are not willing to sacrifice their privacy for tokens.

The Bitcoin community also does not buy into the way WLD scans people’s eyes, believing that Worldcoin represents slavery, while Bitcoin signifies freedom.

Vitalik praised Worldcoin’s use of Layer2, ZK, and decentralized governance technologies and concepts in “What do I think about biometric proof of personhood?”. He also expressed concerns about Worldcoin’s privacy, inability to be widely adopted, centralization, and security. He hopes to create open and democratic mechanisms to avoid the centralized control of project operators and the dominance of wealthy users, which is particularly important in decentralized governance.

As an individual user, faced with the current situation of WLD’s release, would you choose to join this global consensus protocol of personhood proof, which is formed by one WLD coin per week?

Regardless, from the current progress alone, it seems difficult for Worldcoin to achieve its ambitious goal of acquiring 1 billion users by 2023.

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