Reminder of Worldcoin and Venture Capital (VC) in the era of cheap money

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Yesterday, the company behind the Sam Altman-led Worldcoin project announced that it had raised $115 million in venture capital. The rise feels like an atavistic last gasp for the prestige-driven, slot-structured Silicon Valley fundraising genre favored by a decade of cheap money. Because whether for ethical or financial reasons, there seem to be few rational explanations to support the project.

To sum up, the pitch of Worldcoins is basically twofold. At its heart is The Orb, a device that scans users’ retinas, so they can then confirm their identity online. The Worldcoin token, in turn, is intended to be distributed as a form of Universal Basic Income (UBI) and is currently being offered as an incentive for early eyeball scan volunteers.

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In one of the many missing premises around Worldcoin, however, it is unclear how the Worldcoin token can be expected to have any value to recipients once it circulates. It’s extremely difficult to imagine how what amounts to an Ethereum-based meme coin with no apparent tokenomic pattern is going to be redeemable for essentials like food and long-term shelter.

This makes it easy to deduce that the UBI element of the project is just a front for its real purpose: solving the problem of digital identity. But in fact, Worldcoins’ approach to this problem is equally dire, presenting a dazzling array of privacy risks and moral entanglements.

This duality is just one example of the slyly incoherent mess of motte-and-bailey rhetoric used to launch Worldcoin. The company’s message goes to great lengths to describe both a charity project and an opportunity for huge profits (a deeply troubling two-step Altman also pursued with OpenAI).

It’s the apotheosis of Silicon Valley’s dangerous delusion that it can both get richer and make the world a better place through massive data collection.

The danger of this self-aggrandizing mindset has become increasingly clear as Worldcoin moves from proposition to practice. Even at this early stage, it sows the seeds of global chaos and mass exploitation, under the guise of Western generosity.

MIT Technology journal interviewed dozens of participants at the start of the ongoing Worldcoin integration process in 24 countries, including 14 developing countries. Their findings were overwhelming.

Our survey found wide discrepancies between Worldcoins’ public messaging, which focused on privacy, and what users experienced. We found that company representatives used deceptive marketing practices, collected more personal data than they acknowledged, and failed to obtain meaningful informed consent. These practices may violate the European Union’s General Data Protection Regulation (GDPR), a likelihood that the company’s data consent policy has been acknowledged and required users to agree as well as local laws.

Meanwhile, in China, a black market in iris biometric data has reportedly emerged among users hoping to join the Worldcoins wallet app and, it seems likely, collect Worldcoin rewards. According to the vendors, the data comes from developing countries like Cambodia and Kenya. In other words, the core model of Worldcoins already encourages privacy breaches.

It’s not just a moral issue either: the GDPR in particular is a very serious set of laws, with huge fines attached to violations. And while Worldcoin has played down the risks, their reliance on an army of orb handlers to onboard customers means the manipulations will inevitably continue. This completely undermines the promise of Worldcoins to solve digital identity.

It reminds me of a 70s cartoon from a Playboy magazine that I smuggled in during my teenage years. The one-panel gag showed two lovers awkwardly entangled in the sheets of a hotel room. The wedding rings on the bedside table imply that they are having an affair. The woman, whose exaggerated face conveys deep boredom, gets the punchline:

Sam, honey, not only is it immoral, but you’re doing it wrong.

The $115 million fundraiser was led by a company called Blockchain Capital. Along with the announcement, Blockchain Capital General Partner Spencer Bogart posted a short Twitter thread explaining the rationale for the investment.

The thread is extremely empty and, intentionally or not, quite misleading. Bogart begins by saying that he has completely changed his mind about his earlier belief that Worldcoin was a dystopian Orwellian nightmare and a noxious combination of hardware, biometrics, crypto and AI.

But in the following thread, Bogart offers absolutely no refutation of these concerns. Instead, he simply argues that Worldcoin is the most compelling solution we’ve seen in decades. [S]ybil problem i.e. the vulnerability of digital worlds to identity theft.

Since he offers no assurances about the downsides of this compelling solution, Bogart’s implicit argument is that putting the biometric information of impoverished people in the developing world at immense and fundamental risk is a trade-off. valid for resolving the digital identity.

This is particularly unfortunate as it seems to ignore a vastly superior set of identity solutions being pursued in the crypto ecosystem, by people far more genuinely concerned with getting it right than Sam Altman appears to be. They include decentralized, privacy-preserving, user-controlled solutions that would lead to much better long-term results.

But they are difficult to explain, while the pitch of Worldcoins is easy as long as you don’t think about it too much.

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