Crypto is bothered by the iris-scanning UBI project
July 28, 2023
Exploring transformation of value in the digital age
By Michael J. Casey, Chief Content Officer
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The attention of the crypto community seems to focus less on classic crypto people and more on two adjacent individuals currently hogging the limelight: Open AI CEO Sam Altman and Elon Musk, who happens to be the most prominent early investor in Open AI. This week, Musk cryptically hinted that dogecoin might be a part of his abrupt Twitter rebrand to “X” while Altman launched a token for Worldcoin, one of the most audacious projects in crypto history. This week’s column asks whether or not privacy advocates and others in the crypto community are right to be concerned about that project, which involves scanning people’s irises in the name of delivering a universal basic income to the world.
For this week’s podcast, my co-host Sheila Warren and I talked to Adrian Hale, the Director of Economic & Community Development at Foundry about the company’s efforts to create local jobs initiatives in New York state, where Foundry and other miners face a two-year ban on new facilities and are engaged in a PR battle with local and state governments. (Foundry, a leading bitcoin mining operator, is owned by the Digital Currency Group, which also owns CoinDesk.)
Are Worries Over Worldcoin Warranted?
(Danny Nelson/CoinDesk)
Not since Facebook/Meta’s failed digital currency Libra/Diem has a crypto project elicited as much angst and hyperbole as Worldcoin, the biometrics proof-of-human project co-founded by Open AI founder Sam Altman.
Clearly, many people are enthusiastic about this project, which Worldcoin posits as a way to empower humanity in the face of artificial intelligence’s rapid expansion, with its proof of unique personhood solution intended to distinguish people from deep-fake bots and underpin an equitable distribution of all that AI-generated wealth.
The token leapt more than 40% within minutes of Worldcoin’s mainnet going live on Monday as some 250,000 people who’d scanned their irises via one of Worldcoin’s silvery orbs received an airdropped token. Some 2 million people worldwide have now signed up to be scanned, with Altman tweeting this week that this was happening at a rate of one person every eight seconds.
Jeff Wilser visited Worldcoin’s offices in Berlin and delivered an in-depth feature about Worldcoin’s incubation and launch, including the nugget that the CEO had never held a job before helming this complex logistical and regulatory effort.
Many are upset by this project. The hue and cry was especially loud from within the crypto community, with lots of allusions to a Big Brother-like leviathan gaining access to highly sensitive personal data.
Our own David Z. Morris has done a good job staking out the critic’s side of it. In a column a month ago, Morris acknowledged the potential benefits of Worldcoin’s universal basic income (UBI) ambitions but added that Altman and his cofounders “have hit on a way to make this appealing premise seem utterly dystopian.” He warned of the dangers of a centralized entity gathering retina prints and noted that the $5000 cost per orb – along with logistics challenges of distributing it worldwide – make a mockery of any plans for a “universal” rollout. (In a side note, Morris added that the name “orb” is “creepy as hell,” suggesting it implies “the Eye of Sauron, Foucault’s Panopticon, the Saudi Intelligence Orb, Saruman’s palantir, and the for-profit spy firm named after it.”)
On the other side are backers like Jake Brukhman, a partner at Coinfund, which invested in Worldcoin in 2021. On CoinDesk TV, Brukhman predicted the project would onboard billions of people into cryptocurrency, with the financial inclusion benefits that come with it. Brukhman, Altman and other supporters inside and outside Worldcoin dismiss the privacy concerns by highlighting that neither the company’s servers nor its devices store any raw human data, converting the scans instead into unique, non-discoverable hash codes.
A more balanced, but still cautionary take came from Ethereum founder Vitalik Buterin, who in a blog post applauded Worldcoin’s commitment to privacy and the sophisticated technology it is using to protect people’s data. But he highlighted “four major risks” with the project, noting that there were no ways within a centralized model to guarantee that people’s data is absolutely safe. He said it’s impossible to know whether a “backdoor” was built into the hardware of the orb that would allow the company, or perhaps a government, to access the data at some point.
It’s the economic mode
I kinda sit in the middle.
Notwithstanding Vitalik’s point on the impossibility of perfect privacy, I think fears of a major breach of people’s biometric data and the threats that could pose to them are likely overblown – or at least they’re no greater than the privacy threats we face elsewhere. (We store far more data on our iPhones using similar device-localized cryptographic protections, for example, and let’s not forget that the biggest crypto exchanges must collect “know-your-customer” (KYC) identifying information on all their clients.)
My concern is with the corporate centrality of it all and with the misaligned incentives it will foster. Why is UBI even the responsibility of a private company? Doesn’t that create uneasy dependency among its poorer recipients? And what exactly is the token for? Worldcoin seems to be hoping it will form the basis of an ecosystem of decentralized AI applications as it promotes its software development toolkit for developers.
I lifted this week’s chart from a story by Omkar Godbole on how open interest – a measure of the value of outstanding contract exposures – in bitcoin and ether futures on the Chicago Mercantile Exchange has reached record levels.
As Omkar explains, the trend is driven by institutions, which tend to favor the regulated CME contracts over on-chain crypto offerings, increasingly using these derivative instruments as a hedge against the volatility stoked by a regulatory backlash in the U.S. But it might also be a sign those institutions are positioning to profit from a snapback in markets if the various exchange-traded fund (ETF) applications by institutions such as BlackRock, Invesco and Fidelity gain approval.
The Conversation: DogeX
After Elon Musk abruptly changed the name of Twitter to X this week, most of the world was left scratching their heads. But the ever optimistic Dogecoin community saw nothing but hope. Speculation grew that the change marked a strategic shift that would lead to the introduction of on-platform payments and that dogecoin would be chosen for that purpose.
The price of $DOGE rose in response. And then Musk did something to stoke the flames even further: he put the dogecoin “D” next to the company logo “X” in the location field for his profile page. Is he just toying with these people? Is he manipulating the price? Or is he seriously going to doge-ify Twitter, X, or whatever we’re calling it now?
Relevant Reads: Worldcoinage
Worldcoin’s token launch prompted a world of debate. In addition to the breaking news overage of the launch and the markets reporting on the token’s performance in crypto markets, CoinDesk’s look at it from a variety of other angles:
Jeff Wilser offered a deep dive into the making of the orb in an insightful profile piece that included sit-down interviews with Altman and his co-founder Alex Blania.
In a sign that concerns about Worldcoin’s model might extend beyond the crypto community and touch regulatory agencies, the U.K. Information Commission will make inquiries into the project. Camomile Shumba and Eliza Gkritsi reported.
It is now more important than ever to set industry standards and align on practical short-term and long-term objectives through pointed conversations with the best legal minds and Washington D.C.’s most important decision makers.
Join us at State of Crypto: Policy and Regulation on October 24 in Washington D.C. for an unprecedented opportunity to evaluate, dissect and ultimately shape crypto regulatory frameworks that support a vibrant, secure and healthy future for the digital economy.
