WoldCoin controversial tokenomics

Hello anon,

WorldCoin (WLD) launched a couple of days ago, here some thoughts

🌎What is WorldCoin?

Worldcoin is attempting to revolutionize identity and financial networks via a combination of digital identity (World ID) and digital currency (WLD)

Goal is creating economic opportunity for every person, designing a path to Universal Basic Income driven by AI

• World ID: digital identity (it preserves privacy); serves as a privacy-preserving digital identity, allowing users to prove their uniqueness in the digital world while retaining their privacy

• WLD: Worldcoin currency, accessible simply by virtue of being human

• World App: Worldcoin wallet, allowing users to obtain their share of the WLD currency

• Orbs: Biometric verification devices for validating uniqueness and ensuring privacy; there are currently 1,500 Orbs across 35 cities worldwide.

WorldCoin goal seems noble, even tough many are worried about potential security concerns based on the biometric data necessary to utilize the platform

🧮 Tokenomics

10bn tokens allocated as follows

• 75% to community

• 13.5% to investors

• 9.8% to team

• 1.7% in reserve

Unlocks of investors and team will start on 24th July 2024 (linear)

Most of the supply will be released between Jul-2024 and Jul-2025 (~40% of total) For the first year, WLD should be almost unlocks-free

Community allocation will unlock across 15 years

At launch, 1.43% of total supply will hit the market (143m tokens)

💬 Why tokenomics structure is controversial

🧑1. Allocation to insiders

Allocation to insiders was increased from 20% to 25% according to Coindesk as the network was more “complex and costly” than imagined

🛟2. Low float

At launch, only part of the community allocation will be tradable (143m tokens)

• 43m WLD are allocated to users who verified with the Orb during the pre-launch phase of the project

• 100m WLD are loaned to 5 market makers with loans expiring in 3 months

• Therefore, circulating supply is very low and artificially boosts the total FDV (classic “Alameda style” structure)

📉3. Market makers have majority of supply and have incentive to dump

As mentioned, 100m WLD were loaned to market makers to make the coin very liquid around launch (majority of supply)

• Market makers can exercise an option to purchase the tokens at specific prices after the 3-month period

• Formula for determining the price is $2 + ($0.04 * allocation/1million). Given that market makers are 5, the formula is $2 + ($0.04 × 20million/1million) = $2.8 (assuming each market maker receive equal allocation)

• Therefore, market makers have incentive to sell if the price goes above $2.8 as they can re-buy at lower prices after 3 months

• As @MomoCrypto suggest, price above $2 is selling area for market makers who own majority of supply: would be very careful if the price reaches that zone

  

👥4. Incentives alignment for team and investors

The disparity between vesting schedule of team/investors (3 years) vs. community (15 years) does not seem fair

• Team / investors can sell after only 3 years while community remains locked for 15 years? Not sure if it will end nice

• This is worsened by the fact the FDV is currently crazily high due to launch with low float, and unlocked tokens generate incentives for dumping

• Valuation needs to gradually go down to make sense, and price as well

• If valuation is artificially crazily high and necessarily needs to go down + founders / investors can sell before the community = community will be left with tokens that will be worth less

• Founders are artificially billionaire (on paper) at launch, but they will become wealthy soon (not on paper) as they can sell before anybody else

📝 TL,DR

• WoldCoin has a noble purpose, providing UBI via AI

• Noble purpose seems a way to hide the fact that the token is structured with predatory tokenomics

• Most people are worried about privacy, but real issue is that token will eventually be down a lot in price since valuation currently is artificially inflated due to flawed tokenomics

• Centralisation is also a main issue: team has a lot of power on decision regarding global UBI right now - and considering how they structured the tokenomics, they do not seem incredibly “altruist”

• Project does not start very well.. only time will tell if they will be able to deliver

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