This Worldcoin thing seems to have latched on and captured some buzz. Two weeks ago, I wrote about why this is the case (it's mostly a somewhat-AI connection and the iris-scanning orb, with a touch of altruistic UBI thrown in). The question now becomes, "Does this Worldcoin thing have longevity or will this too pass?"
Auroracoin flashback
Monday I was jogging, listening to a crypto podcast, and sweltering in heat. The podcast hosts were talking Worldcoin, the orb, and possibilities of surveillance state actions. This was all kind of predictable as this has been the discussion of Worldcoin from the start. Yet, for some reason, I was reminded of Auroracoin. I felt I had figured out the intrigue of Worldcoin initially, but now, I think I've got this Worldcoin thing figured out going forward.
To back up, Auroracoin was intended as a cryptocurrency for the residents of Iceland. It came out in 2014, rather early in crypto-time, and I wrote a post on it in a blog I called "The Satoshi Times" (I've since chronicled each of the articles over to Hive with the @SatoshiTimes account).
The Auroracoin experiment was this: every Iceland resident was to get airdropped 31.8 coins. The intriguing thing about this is the island thing. Economists love islands. They love the isolation an island has and how and island has historically provided a unique playground in studying an economy. It makes for a contained, experimental atmosphere. In my original blog post, I theorized possible things Icelanders might do, such as: get the coins or not, hodl them, spend them, lose the keys, get them stolen. My thought then was that some people would wind up with fewer or zero coins, some would wind up with more, some would be gone forever. I'd forgotten this, but looking back, I see I drew and included a graphic:
Once the airdrop went live and "price discovery" began, the chart began. The chart for Auroracoin started out strong, peaking at $28 per coin.
Within a week or so, the Auroracoin dropped quickly, had a little bump in the 2017-18 frenzy, then flatlined. It's now at $0.016 USD (see current price). Those 31.8 coins are now worth about half a dollar: $0.51.
There was one thing I did not include in my flowchart list of possible actions, and it's a glaring omission...people might flip their Auroracoin for another coin, likely for BTC.
I wrote a followup post two weeks later and brought this point up. I wrote this:
The idea of an Iceland-only currency seems a bit wrong. Many Icelanders sold their coins to whomever. It's better labeled as a Icelander-first coin. Then, it's on the world wide web and is international. The concept of a local-only coin seems futile.
This illustrates the problem cryptocurrencies bring about with the island-studied-by-economists concept: crypto knows and follows no borders. Coins follow economic principles (and code), not lines on maps. It would have been true that, when buying/selling, more Auroracoins would wind up in someone's wallet as compared to others. But, the wise Auroracoin holders unloaded them quickly into BTC while Aurora had some decent initial value. The speculators who bought those early Auroracoins didn't come out too well.
Worldcoin island
What occurred to me while jogging Monday was this:
Worldcoin is just Auroracoin on a really big island, the Earth/world island.
Here's what I see happening with WLD:
I believe 20 or so were given out, WLD is just under $2.00 now. Since WLD is focusing on developing nations, that $40 to $50 could mean food on the table for a family. The early recipients of WLD (see current price) might do well to flip it as fast as possible [not financial advice, DYOR].
But, the tokenomics and distribution of WLD do not look good to me. First, it's a bit hard to even find the tokenomics, emission, inflation, distribution, etc. on the WLD website, and that's a huge red flag in my book. Secondly, I understand it to be that each person who validates "personhood" via the orb will receive tokens as a Universal Basic Income (UBI). It's unclear to me if this UBI is in perpetuity, e.g. each month? each year? or if it's a one time only airdrop. If it's a perpetual UBI (isn't that the whole point of UBI, else it's just called a one time gift?), that really bodes poorly for WLD in my view.
A continual UBI to anyone validated would mean a few things. First, there would be constant, persistent downward pressure on the value of WLD tokens. In other words, there would be constant emission and inflation. Like trying to top-off a bucket with water although the bucket has a gaping hole in the bottom, it's hard to get ahead that way. Secondly, as more and more people proved their personhood (which would happen if WLD had any value), that downward pressure would constantly grow even greater. It would be a Catch 22...the greater the WLD value, the more incentive for people to prove personhood, get their UBI, and thus create even more inflation (i.e., less WLD value). Third, although the main premise of the orb and WLD is to prove personhood, people have an amazing capacity for working the system. If something has value and is being given out, people find ways to clever ways to finagle it. I'm very skeptical that just because an eyeball was scanned, pilferage or scammery would not occur. Again, if WLD was worth the effort, people would find a way to get it. Again, Catch 22, the greater the WLD value, the greater the chance for bad actions. And, the greater the inflation and downward pressure on value.
In sum
I did one last followup on Auroracoin a year later. I see the same fate with Worldcoin. When you strip away the popular chatter about AI, the orb, and UBI (and this chatter will decline), the economics and incentives behind Worldcoin are the only things that matter. And, in my view, the economics and incentives do not look good for WLD. My guess...it will fade.
For fun, one more image...
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Great post @crrdlx.
Your analysis was the best, i really enjoyed it.
From my opinion, i was never a fan of this worldcoin from the beginning due to lots of hype, but that doesn't mean i have personal issues with the founder or related board.
The verification process was the craziest part. Still don't understand why a company would be asking for so much information when this was suppose to be decentralize.
And lastly, every coin that comes into the market must definitely start from a lower state. Time has a way of making things work, lets see what happens.
Fair enough on your points, we'll see how it goes.
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