Blockchain Capital: Why lead the investment in Worldcoin?
Why invest in Worldcoin through Blockchain Capital?
Author: Blockchain Capital
Translation: Wu Shuo Blockchain
Attached: Tools for Humanity, the technology company behind Worldcoin founded by Sam Altman, CEO of OpenAI this week, raised $115 million in Series C financing, led by Blockchain Capital, with follow-on investment from a16z, etc.
Over the past decade, we have evaluated thousands of ambitious and inspiring cryptocurrency projects, but Worldcoin is undoubtedly one of the most ambitious and reliable efforts, with the goal of bringing cryptocurrencies to over a billion people.
Through the use of a novel distribution strategy, Worldcoin has the opportunity to become the largest gateway to crypto, complemented by the most widely adopted crypto wallet, and most importantly, it will establish a new concept for the Internet – Proof of Personhood.
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Given recent advances in artificial intelligence, Proof of Personhood is particularly useful for distinguishing humans from robots on the Internet. More details will be provided later.
It is worth noting that it is working: despite extremely limited footprint in initial testing and no marketing activity, Worldcoin has still successfully introduced nearly 2 million people. This is just the beginning: Co-founders Sam Altman and Alex Blania are focused on scaling it to the global population.
Initial Impression
The contributors to the Worldcoin protocol have done a poor job of spreading their story.
Like most people, our initial reaction to Worldcoin was negative. It seemed essentially Orwellian, like a harmful combination of hardware, biometric technology, and encryption technology – not for the faint of heart.
Even Edward Snowden criticized it by saying, “Don’t classify eyeballs…”
But these criticisms are off the mark.
To evaluate Worldcoin from first principles, our team spent hundreds of hours carefully studying Worldcoin’s detailed documentation, talking to dozens of contributors to the project’s hardware and software, and debating everything from bottom-up technology to GTM strategies for the project.
What initially looked like a dystopian attempt to create a global currency with privacy-invasive (and capital-intensive) hardware is actually something entirely different: a completely privacy-protecting solution to address a growing problem. Additionally, our evaluation concluded that Worldcoin has the contributor community (including its initial development team in Tools for Humanity, “TFH”), the technology (both software and hardware), and the strategic imperative necessary to support billions of users worldwide.
What is Worldcoin doing? To register and verify users, Worldcoin scans everyone’s iris (the colored part around the pupil). This scan verifies that the person is indeed a real, living, unique individual. The scan is performed using a custom hardware device called “orb”.
When it comes to biometric technology, there are valid reasons for concern and sensitivity, especially when you add some encrypted elements. Some science fiction movies and novels even include some concept of “eye harvesting”. So a dystopian view quickly emerges in the mind.
However, what actually happens inside is that the orb takes a photo of the iris, and then the device generates a unique code of iris randomness (an “iris code”) for it. By default, the raw biometric data is destroyed immediately, and the iris code is the only thing that leaves the orb.
In TFH’s World App (the first wallet of the Worldcoin ecosystem), verified users will receive a World ID, allowing them to privately prove to anyone they choose that they are indeed a unique individual. These on-chain identities are fully encrypted and secure. Even if the iris code is reversible, there is no way to know how anyone uses the World ID, nor is there any way to track individual users.
In other words, World ID is a privacy-protecting identity protocol that does not collect or store anyone’s biometric information.
As part of this process, users can also create their own encrypted wallets in the World App. Considering the witch attack resistance of World ID, the World App is the world’s first self-hosted wallet with a known user base-all other wallets can only rely on guesses to obtain DAU/MAU and other indicators at most.
Not bad…but why?
At first glance, it is difficult to understand the value that a personal identification protocol can create. This is a basic reality of “category creators”-as a new unit, it is difficult to quantify the utility and value of personal identification in the early stages.
However, at the highest level, it is easy to recognize that, with the recent advances in AI, it will become increasingly difficult and important to distinguish people from robots on the internet.
More specifically, we can consider the applications in Web3 that have practicality today. One such opportunity in Web3 is airdrops: many token-based projects want to provide token rewards to each unique user (e.g. for signing up, transacting, or any other unique behavior that token-based projects want to incentivize).
Unfortunately, identifying unique users is difficult. Some projects may require users to provide government-issued ID as a witch defense mechanism – but this poses the following problems: 1) excludes more than half of the global population who lack appropriate identification documents; 2) greatly increases friction; 3) given the long history of data security breaches, many users have reason to be skeptical about providing such information. As a result, the originally intended rewards for unique users are disproportionately distributed to the witches who attack the mechanism and launch thousands of wallets to collect large amounts of free rewards.
So, airdrop issuers can use World ID as a personal identification mechanism to complement their airdrop standards and reward unique users.
And the applications of personal identification go far beyond cryptography. To distinguish between users and “bots,” internet services have introduced a lot of friction – we have become so accustomed to this friction that we hardly think about it anymore.
Friction, sustainability, and trust
One example of this slow friction is the increasing difficulty of captchas. The purpose of intelligence tests like CAPTCHA is to mitigate the risks and costs of witch and DDoS attacks. However, CAPTCHAs have become so challenging that most real users find it difficult to provide the correct answer.
More importantly, this is frustrating for both users and network service providers. The interesting fact is that people around the world spend a total of about 200-500 years each day solving CAPTCHA puzzles (4.6 billion internet users encounter CAPTCHA once every 10 days, and solving it successfully takes 15-35 seconds). All of this, just to prove that we are human!
But the real problem is not CAPTCHAs – they are just a common symptom, not the root cause. The real problem is that we cannot quickly and reliably distinguish between bots and real people online – and given the recent advances in AI, this challenge is becoming increasingly widespread and damaging.
The potential impact of this impotence is significant: the vast majority of the web relies on ad-based revenue to pay for infrastructure costs. However, in a scenario with a high robot-to-human ratio, the cost of providing service for this (robot-intensive) traffic will exceed the revenue from serving ads to humans. Many websites and web-based services will become economically unsustainable, and these web-based services may cease to exist. We can hardly imagine other services that were never created because the current state (not to mention further growth) of this problem made them economically unviable from the outset.
This problem also goes beyond technical or economic issues and extends to the cultural field. We cannot distinguish between robots and humans, which seriously undermines the trust of digital communities. The challenge for human users to identify information (humans) and filter noise (robots) in their interactive digital communities is increasing.
Obviously, as we continue to advance AI, intelligence tests like CAPTCHA will not be able to solve the problem. This is where the role of identity verification protocols like World ID comes in.
WorldID and Identity Verification
By providing tools that conveniently distinguish between robots and humans, identity verification protocols like World ID can improve the user experience, maintain the economic sustainability of existing web services, open up design space for new web services, and provide the basis for increasing trust in digital communities. We believe that a privacy-protecting identity verification protocol will become a basic element of the internet. Specifically, World ID empowers individuals to verify their humanity online while maintaining anonymity through zero-knowledge proofs. Verification is as simple as clicking a button to sign a transaction.
What happens behind the scenes? Behind the scenes, World ID sets are maintained as a collection of identity commitments, in the form of Merkle trees. By using zero-knowledge proofs, users can demonstrate their proof in the Merkle tree without disclosing their specific identity. Essentially, this allows World ID users to confirm their status as a verified human without revealing who they are, ensuring that user activity is truly kept private.
Although the exact types of new web services are still to be seen, some easily achievable results (as outlined by some World ID developers) include:
Advanced spam filters: intelligent tests such as browser DDoS protection and CAPTCHA without the need to browse
Reputation systems: Reputation systems can significantly improve by preventing the creation of multiple accounts. For example, they can unlock uncollateralized loans in DeFi.
Governance: One person, one vote (or similar) becomes feasible in a privacy-preserving way through World ID.
Identity verification: Biometric-based identification can be part of a solution to digital identity theft.
Fair allocation of scarce resources: With personhood-proof protocols like World ID, it is possible to distribute scarce or valuable resources directly on the internet without the risk of witch attacks.
These are just preliminary ideas for how to use World ID and Proof of Personhood online. The biggest use cases and opportunities are probably yet to be imagined. We are excited to see others implement and leverage World ID in creative ways.
Team, Track Record, and Traction
One of the core reasons we are excited to partner with TFH, the team that supported early development and growth of Worldcoin, is the quality of the team and their track record of solving hard problems and generating real traction.
Sam Altman and Alex Blania are co-founders of TFH and originally conceived Worldcoin. Sam brings a unique perspective from the cutting edge of AI as co-founder and CEO of OpenAI, and as former President of YCombinator, he brings direct insights into scaling and success for startups. Alex Blania is the perfect complement to Sam: a founder with a unique focus on detail and execution whom we strongly suspect will become a household name in the next decade. Together, they embody the subtle balance between vision and execution.
Perhaps most importantly, Alex and Sam have recruited proven talent to help them realize TFH’s ambitious vision. The team has already collectively built an early track record of solving hard problems. Specifically, the team has designed and produced many custom hardware solutions previously thought impossible or impractical. The team has successfully attracted nearly 2 million users, despite being in an early beta release and with almost no marketing.
Finally, we believe that TFH has a unique opportunity, with the right technology, team, and timing, to expand the fundamental elements of privacy-protecting identity on the internet—and in doing so, Worldcoin could become the largest on-ramp to the world of crypto, while World App could become the most widely adopted crypto wallet.
