Q9 Weekly | A Brave New World(Coin)

Q9 Capital
8 min readJul 27, 2023

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27 July 2023

  • Dogecoin jumps 11% on Musk’s Twitter (X) overhall
  • Crypto startups raised >$200mn last week
  • Sam Altman’s Worldcoin goes live. What is it?

The Federal Reserve on Wednesday approved a much-anticipated interest rate hike that takes benchmark borrowing costs to their highest level in more than 22 years. Financial markets had largely priced in the quarter percentage point move to a target range of 5.25%-5.5%. The hike weighed on the majority of cryptoassets with Bitcoin remaining near a one-month low just above $29k.

The softening of prices suggests investors are looking for some positivity to cling to, but with little forthcoming for now it is very much wait and see.

Various Crypto-Assets, 1 Week (%)

Source: CoinMarketCap

X Marks the Spot Price

Crypto traders are buying up DOGE in hopes of the token playing a larger role on Twitter, which rebranded as “everything app” X on Monday. DOGE surged by 11% over the week to 8 cents, with trading volumes at $2.3bn. Most of these volumes came from the South Korean exchange UpBit — known for attracting speculative plays.

DOGE Price, 1 Month

Source: TradingView

Twitter (or X) could soon accept DOGE tokens in the coming months, given owner Elon Musk’s seeming infatuation with the meme coin. Advertisers could be able to pay DOGE for ads and for other uses.

Such speculations aren’t entirely unfounded. In April, Musk teased DOGE payments on Twitter in a tweet, proposing Dogecoin as one of the payment options for Twitter Blue, the site’s subscription service with premium features.

Raising Spirits (and Cash)

Venture capital and investment firms poured $201mn into crypto projects last week with eleven companies announcing funding rounds. The largest rounds belonged to a $54mn raise for metaverse startup Futureverse and a $40mn Series A round for RISC Zero, a provider of zero-knowledge proof tools for developers.

These raises are yet another set of examples that infrastructure projects continue to raise capital despite the extended crypto winter. Second-quarter venture funding for web3 companies was down 76% compared to the same period last year, but weeks like this show a positive trend out of the doldrums.

Venture capital firms raised a combined $37bn from investors in 2021 and 2022 to pour into crypto startups. This year, the investment spigot has been comparatively dry, with crypto VC firms raising just $1.8bn in web3 funding in the first half of 2023. While it’s too soon to say if the trend has reversed, this week’s news is another positive narrative shift for crypto.

Worlds Apart

Worldcoin (WLD), the audacious and controversial global ID project founded by AI pioneer Sam Altman, went live on Monday. The much-anticipated project has been verifying users with its iris-scanning “Orb” since last year, and recently started airdropping WLD tokens to some early users.

The project is aiming to build a reliable solution for “distinguishing humans from AI online,” enable “global democratic processes” and “drastically increase economic opportunity.” The startup has raised about $250mn altogether and counts Andreessen Horowitz, Khosla Ventures and Reid Hoffman among its backers. It’s whitepaper can be read here.

For the first 15 years, the startup is capping the total supply to 10bn “WLD” tokens. At launch on Monday, the maximum circulating supply of the token, which is ERC-20 based, is 143mn.

WLD Token Distribution

In the works for over three years, Worldcoin has been quietly signing up individuals in many countries, giving those onboarding 25 WLD tokens. The start-up announced that its technology, including its Worldcoin token will be available in 35 cities across 20 countries.

However, the company’s goals face being stymied by US regulators cracking down on digital assets based on fears over cryptocurrencies being used as a vehicle for speculation and fraud. For this reason, Worldcoin tokens will not initially be available in the US.

Geographic Distribution of Orb-verified Individuals

Crypto exchanges Binance, Huobi, Bybit and OKX have all listed Worldcoin’s WLD token for trading, contributing to a 20% price jump to $2.25.

WLD Price Since Launch on Monday

Source: CoinGecko

Into Orb-it

Biometrics and digital IDs are increasingly used to allow people to vote and access basic services like healthcare and food banks — and the Worldcoin solution is aiming to revolutionise access to services and democracy across the globe using “proof of personhood”.

Here’s a WorldCoin blogpost explaining why they believe proof of personhood is needed.

Source: WorldCoin

To receive a token, people who sign up to Worldcoin must have their irises scanned through an orb-shaped device — a way of ensuring that anyone who signs up is human and only signs up once. It’s founders say this is necessary for a future in which distinguishing between humans and robots becomes increasingly challenging due to a surge in artificial intelligence technology. Once users have proved they are not robots, they can be issued one of the company’s tokens.

Worldcoin is mostly trying to innovate on the authentication side. Anyone can use cryptocurrencies such as Bitcoin, signing up with as many identities as they want, but Worldcoin is trying to get one and only one address to basically everyone on the planet.

According to the Worldcoin website, the only data the orb stores is an “IrisHash”, a set of numbers generated to identify the individual. The orb does not store any biometric data. Images collected by the Orb are promptly deleted unless explicitly requested by the person signing up.

The latest figures from Worldcoin suggest 1,500 Orbs will be available in 35 global cities as the year progresses — helping the total number of weekly registrations surge from 40,000 people a week to 200,000.

Cryptic ControversAI

The project is certainly not without its controversies.

Ethereum co-founder Vitalik Buterin is just one among many with criticisms, lashing out against Worldcoin’s privacy and data security risks in a lengthy blog post — including the Orb biometric hardware device. Buterin argues that an effective, reliable proof-of-personhood system, like Worldcoin, “seems very valuable,” but warns there are big risks in the race to develop one.

Part of the controversy around it is the use of biometric data, specifically iris scans, to do so. One can think about a million scenarios in which iris data can be used in many ways following a hack or without consent. Online commentators often criticized the project for its potential lapses in protecting user biometric data, and characterized its overall ambitions and goals as “dystopian.”

A Worldcoin spokesperson counters “the only personal data that leaves the Orb is a message containing a numerical representation of the most important features of the image, the iris code, to validate uniqueness”. But what if the orb itself is hacked or a backdoor is found? It’s a considerable amount of data for prospective users to give up … and if the data goes missing, it could cause problems forever.

And while there are billions of smartphones, there are only a few hundred Orbs. Even with much higher-scale distributed manufacturing, it would be hard to get to a world where there’s an Orb within five kilometers of everyone. And if Orbs do become prolific, there’s nothing to stop a government from banning Orbs in their country — or using this technology to coerce citizens.

Buterin also points out that Orbs are hardware devices where backdoors could be installed into the system — allowing malicious manufacturers to create many bogus human identities. “If even one Orb manufacturer is malicious or hacked, it can generate an unlimited number of fake iris scan hashes, and give them World IDs.”

The currency itself is also no different from other cryptocurrencies in its volatility. There’s nothing to say that any company is going to accept this for payment or that you can do anything with it.

An investigation by MIT Technology Review also raised concerns over Worldcoin’s method of collecting biometric data from developing countries, such as Indonesia, Kenya and Colombia during the testing of the project. The investigation found that the company used “deceptive marketing practices, collected more personal data than it acknowledged, and failed to obtain meaningful informed consent” from users.

The project is still in its infancy and is going to face enormous hurdles and teething problems. But its ambitions are huge and, if successful, promises to revolutionise digital identity and KYC. One thing we can all agree on… it’s going to be a brave new world(coin).

Sam Altman scanning his Iris with an Orb

In the News…

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