Worldcoin's metrics have been impressive so far. According to the project's official statistics, over 7 million users have been verified through their iris-scanning Orb technology as of early 20241. The World App has garnered significant downloads across various regions, with particularly strong adoption in emerging markets.

However, I'd argue there's a huge original sin – the way the token allocation is being done.

This issue is exacerbated when examining Worldcoin's two primary goals:

1. Create a universal proof of personhood
2. Create a digital financial system for the underbanked, onboarding billions onto crypto rails

When World was launched, only goal 1 was really considered – and under this case, the tokenomics – despite their flaws – made some sense. However, as I'll argue, only goal 2 really matters in the near term – and under goal 2, the tokenomics need to be considered more carefully.

Universal Proof Of Personhood Doesn't Matter (At Least Not Yet)

Here's a bold claim – universal proof of personhood does not matter in the immediate future.

Ultimately, there are two use cases for digital identification:

• Simple personhood verification - mainly for anti-DDoS protection
• Robust person authentication - mainly for financial services

Personhood Verification

This use case is already well-served by captchas like Google's notorious reCAPTCHA v2, or via OAuth providers (like Sign in with Apple or Google).

The issue is that this basic personhood verification need is very well addressed by existing solutions. Worldcoin has already tried "Sign in with World," but in an environment where Sign in with Google/Apple already exists with much wider adoption – it's difficult to gain traction. In 2023, a study from Auth0 showed that just these two methods represented over 70% of oauth logins.

Moreover, these systems can afford to be somewhat imprecise. As a developer, if a few bots manage to sign up for my app, it's not catastrophic – which undermines Worldcoin's unique selling point of providing high-certainty humanity verification.

Person Authentication

This is mainly for services that would typically require a national ID – e.g., accessing government transfer payments, financial services, or age-restricted content.

I'm much more bullish on this working out as the primary use case for World, and this is something that Worldcoin is spending more resources on (as evidenced by their recent partnership with the Malaysian government on passport recognition).

That said, this requires significant focused GTM to become the de-facto standard.

A good empirical example is how ID.me became a widely adopted identity standard for US government-related services.

ID.me spent years working to get the proper certifications and to build credibility with governmental entities. According to a 2022 report, ID.me had secured contracts with 27 states and multiple federal agencies, providing identity verification for tens of millions of Americans6.

You need 80% adoption in 1 country for this approach to work effectively - not 1% in 80 countries, which is what World has traditionally pursued through its global Orb operator strategy.

I am bullish on this focused approach since, with the right partnerships, Worldcoin could gain significant traction. For one, they could follow ID.me's playbook and secure partnerships with high-value yet widespread use cases – specifically, ID.me aligned with the Treasury Department as the primary verification method for accessing IRS accounts.

Worldcoin could also partner with local fintechs – entities that have existing distribution networks and can respond to WLD incentives in ways governments typically cannot.

In sum:

• Basic personhood verification is not that valuable – but robust person-authentication is
• Person authentication is hard to mak9e useful at scale – requiring focused geographic efforts:
  • Significant time to build coverage in specific countries
  • Strategic partnerships to ensure proper distribution and adoption

Crypto Onboarding Is the Most Interesting Aspect of Worldcoin

As mentioned earlier, this is something that Worldcoin has focused on more recently with the launch of mini-apps towards the end of 2023. The World App is now open for other developers to build mini-apps, with reports indicating hundreds of thousands of daily active users8.

These mini-apps are essentially webapps optimized for mobile devices that utilize the Worldcoin SDK to integrate World-specific functionality.

But wait – "Why bother with utility if World is solely focused on the identity problem?" – you may wonder.

Currently, World – and specifically the WLD token – has limited utility beyond speculation. This is problematic since until Worldcoin reaches a critical mass of users where it can find broader utility (some unknown point far in the future) – the token behaves essentially as a memecoin.

The ultimate opportunity for WLD is as the foundation of a financial application ecosystem. As mentioned above, identity verification is the bedrock of high-value (particularly financial) use cases. It's logical that identity verification is built in – not to mention that the rewards for being part of the network are financial in nature.

We know USD stablecoins have PMF in developing markets – evident in Tether's $150 billion market cap. If Worldcoin could use the attention-grabbing approach of distributing tokens globally as user acquisition for a financial super app, this would be enormously valuable.

You can't effectively onboard everyone simultaneously though – it is negative value to onboard marginal users in geographies where the product doesn't address significant needs.

Why?

It's easy to pad numbers and please investors with raw user metrics – many will sign up solely to jeet sell their WLD tokens immediately, and these users may have no use for a financial app if they have little/no money to begin with or already have access to superior financial services.

So what countries are worth focusing on?

If you were a fintech startup in the same position, you'd target regions with poor access to USD banking rails but with middle-income populations.

These would include Vietnam, Turkey, Argentina, and Brazil.

In sum:

• Crypto onboarding for revenue purposes matters – perhaps more than personhood verification
• Onboarding should be strategically focused in the "right geographies" with the greatest product-market fit

The Over-allocation Problem:

So what are the fixes?

First, Worldcoin needs to fix the equal-incentive-per-person approach and make it more granular based on strategic value.

It's clear that Worldcoin is vastly overpaying in certain countries and risks underpaying in countries that matter more to its long-term success. Some specific examples that have been widely reported:

• In Bengaluru, India, crowds became so disruptive that Worldcoin had to close down two verification locations due to safety concerns
• In Kenya, thousands of people queued up at registration centers, with some waiting multiple days to register, creating logistical nightmares
• The large crowds at one pop-up registration center in Nairobi were deemed a "security risk," forcing many people to be locked out of the process and leading to regulatory scrutiny

Worldcoin has recently taken steps to reduce rewards across the board, which is a good step to ensure that excessive token distribution doesn't tank the price too much, but this approach is too broad and undifferentiated.

With this uniform reduction, they might end up paying the market-clearing price for signing users in Bengaluru, India, but risk paying too little in Buenos Aires, Argentina – a market that matters much more for their financial services adoption strategy due to Argentina's history of currency instability and openness to cryptocurrency solutions.

Conclusion:

Worldcoin represents an incredibly ambitious protocol, and it offers an exciting opportunity for developers to build upon – with access to populations and geographies and providing distributions that few products – web3 or web2 can possibly dream of offering.

However, to achieve its potential, Worldcoin must reconsider its token distribution strategy to focus on quality over quantity, prioritizing regions where its financial services can create the most value rather than simply maximizing raw user numbers.