There is a new cryptocurrency in the works that has the backing of some of the biggest names in tech. Worldcoin is the startup behind the upcoming crypto project, and the founding team includes the former head of the Silicon Valley business incubator Y Combinator, Sam Altman. Additionally, the list of investors behind the project includes Andreessen Horowitz, LinkedIn founder Reid Hoffman, and the venture arm of Coinbase.
According to comments made to Bloomberg, Altman’s involvement in Worldcoin stems from his more general interest in universal basic income (UBI) and the future of wealth redistribution. The basic premise, at least based on what we know so far, is to create a new cryptocurrency from scratch that gives coins to every single human on earth (if they want them). To help guard against fraud in the initial distribution of coins (and perhaps other aspects of the cryptocurrency network), Worldcoin wants to use an iris-scanning hardware device to confirm that each user is a unique person.
The case for Worldcoin
So, what’s the case for Worldcoin’s upcoming cryptocurrency? Angel investor and podcaster Jason Calacanis shared his thoughts on the topic during Tuesday’s edition of This Week in Startups. In his remarks, Calacanis covered some of the issues he sees with Bitcoin (BTC) and how Worldcoin’s eventual offering may be able to bring some improvements.
“Right now Bitcoin is so toxic and feels like a multi-level [marketing] scam because you have FOMO (the fear of missing out) because you know somebody like myself who bought in for under USD 100,” said Calacanis. “And everybody has to convince the next group of bagholders or participants (depending on how you want to frame the crypto project); you have to convince them to buy in. And you have to take this leap of faith, and it starts to feel like a Madoff Ponzi scheme where the new people coming in are doing it for the benefit of the people who got in early and that is scary.”
Calacanis went on to point to the bear market following the then all-time high bitcoin price of nearly USD 20,000 in December 2017 and the more recent drop from the all-time high of roughly USD 65,000 hit in April of this year as further examples of how Bitcoin can, in his view, be toxic and scary. While Calacanis pointed out there are a number of different ways in which Worldcoin could fail to achieve their goals, he also sees the potential for the startup to create a serious competitor to BTC.
“This seems to me to be a way to restart the crypto ecosystem with a level playing field,” said Calacanis. “The game will be started anew. Just like when a new social network comes out, there are a group of people who get to take the top slots in that social network . . . Every time a new social network emerges, some group of popular people get some of the top slots, but some of the top slots open up for new inventory . . . Every new medium gives a chance for the top 100 [or] top 1,000 to be resorted, if you will. And that is really exciting. The new medium here is a cryptocurrency.”
Calacanis pointed to Clubhouse, a social network based on voice, as the most recent example of new people gaining status by being early adopters of a new social media platform.
“This, to me, seems like a brilliant idea, and I will be watching this like a hawk,” Calacanis continued. “And we’ve always said that a better project will come along that could challenge the other projects. This happens in every technology. For some reason, the Bitcoin people in their toxicity, in their multi-level marketing, you know, worst moments are saying there will never be a replacement for Bitcoin . . . The fact that they don’t believe there could ever be another [cryptocurrency] is proof of how they are part of this multi-level marketing cult.”
Near the end of his Worldcoin segment, Calacanis put the chances of Worldcoin taking the wind out of Bitcoin’s sails at anywhere from one in a thousand to one in a million. However, this was seemingly more of an on-the-spot, throwaway line than a serious, thought-out prediction.
Those who don’t know Bitcoin history are destined to repeat it
I strongly disagree with Calacanis’s criticisms of Bitcoin, but I’d like to keep the focus on the supposed value proposition of Worldcoin. Needless to say, Calacanis is free to sell his BTC if holding it is too scary for him.
It’s possible that Calacanis is mistaking the conviction in predictions made by some Bitcoin users as toxicity. Maybe these Bitcoin users simply know something Calacanis does not know.
For example, there have been many cryptocurrency projects over the years that have attempted to do something similar to what Worldcoin seemingly intends to do. Calacanis mentioned Stellar (XML) as another crypto project that tried to distribute their coins “fairly” to a large number of people. Indeed, Stellar lumens have been distributed for free via a variety of methods, including two of the largest cryptoasset companies in the world: Blockchain.com and Coinbase.
In the case of Coinbase, users were able to receive some free lumens after reading pro-Stellar propaganda via the Coinbase Earn program. In the case of Blockchain.com, users who went through an identity verification process were able to receive USD 25 worth of lumens. At the time, in 2018, I wrote about how this deal was good for Blockchain.com growing their userbase but not necessarily a smart move on the Stellar project’s end. Stellar lumens are down 82.5% against bitcoin in the roughly two-and-a-half years since my post on the topic was published. (Learn more: Stellar’s Free XLM Either Unclaimed or Exchanged for Other)
Auroracoin (AUR) is perhaps an even better direct comparison to what Worldcoin plans to do. In 2014, the idea with Auroracoin was that half of the supply would be distributed to the citizens of Iceland. Instead of a device that scanned people’s irises, Auroracoin used a national ID system to guard against Sybil attacks. It was basically the Worldcoin concept restricted to the country of Iceland. It should be obvious that Auroracoin failed to achieve its goals because you’ve likely never heard of it. In other words, Auroracoin’s return against BTC is even worse than that of the aforementioned Stellar lumens.
As a funny aside, one of the other top altcoins around the time of Auroracoin was called, you guessed it, Worldcoin (WDC).
@kyletorpey Yeah but now it has eyes
— Paul Sztorc (@Truthcoin)
So, what were the key failures of the “fair” distribution programs tried out by Auroracoin and Stellar?
As I explained in a post on Auroracoin seven years ago, the problem with handing out a cryptocurrency to everyone for free is that these people can do whatever they want with it once they own it.
What are most people going to do with a cryptocurrency they don’t understand or care about when it’s handed to them for free? Obviously, they’ll sell it for something else. They may even decide to exchange it for some bitcoin.
After all, while BTC is still wildly volatile when compared to traditional fiat currencies, the reality is the cryptoasset is still much further along the process of becoming money than any of the altcoins. In many ways, the people who are given a cryptocurrecy for free instead of paying for it or earning it are basically the opposite of “hodlers.”
For more recent examples of the perils of giving away your cryptocurrency to others for free, see how blockchain-based social network BitClout hands out their cryptocurrency to social media influencers and the Ethereum (ETH)-based dog token shiba inu (SHIB) gifted a large amount of their supply to Vitalik Buterin.
Central banks to the rescue?
If you’re a fan of UBI, you may be more likely to get your way via central bank digital currencies (CBDCs) than decentralized cryptocurrencies. After all, CBDCs need to compete with bitcoin somehow, and it’s unlikely to be in the area of censorship resistance. The only way the UBI “feature” makes sense is if it’s implemented via government decree, as the cryptocurrency market works on a completely free market basis. People aren’t going to adopt a new form of money in the free market just because it has the morals of UBI or “fair” distribution attached to it, especially when Bitcoin already solved the digital scarcity problem and has strong network effects built around it. But don’t worry, China already has the dystopian biometrics figured out, so we may not need Worldcoin’s iris scanner.
Also, we’ll assume the investors in Worldcoin won’t be getting more than their “fair share” of the new currency for now, as that would go against the entire supposed value proposition of the project.
In other words, cypherpunks write code, but there also needs to be incentives for people to run that code. Bitcoin exploits the greed of the individual to incentivize adoption, which is a much stronger incentive than the morals of proposals like Auroracoin or whatever Worldcoin creates.
Put differently, what Calacanis refers to as a “Madoff Ponzi scheme” is the real form of fair distribution. Those who are willing to take risks may also get rewards. This is how the world has always worked. People talk a big game and like to virtue signal when it comes to moral superiority, but at the end of the day, they tend to do what’s best for them as an individual. That’s why they choose Bitcoin.
– Bitcoin Is More ‘Public’ Money than Central Bank-Issued Fiat Currencies
– Why Ethereum is Far From ‘Ultrasound Money’
– Imagine Bitcoin as a Reserve Asset. What Then?
– The Initiative Q Saga Offers Crypto Important Lessons