Explaining Blockchain Capital’s big bet on an eyeball-scanning bullet
Image credit: Tools for humanity
This week, Worldcoin, an outfit that aims to serve as proof of personhood in a world where it’s harder every day to distinguish a human from a robot, raised $115 million in Series C funding.
Led by 10-year-old venture firm Blockchain Capital, whose plays have included Coinbase, Kraken and OpenSea, the investment brings Worldcoin’s funding to at least $240 million, although the controversial organization — founded in 2019 by OpenAI CEO Sam Altman — has a lot to prove.
Yesterday we spoke with Blockchain Capital General Partner Spencer Bogart about what gave him confidence in Worldcoin, which aims to create a global ID, a global currency and an app that enables payments, purchases and transfers. Like many, we wondered how it can achieve its goals when, at least right now, its mission primarily depends on convincing tens of millions of people to let Worldcoin scan their irises using futuristic, tech-dense globes.
Below is part of that conversation, edited for length. You can also listen to the longer conversation here.
Your co-investors in this new round include former backer Andreessen Horowitz, Bain Capital Crypto and Distributed Global. Did Khosla Ventures or Tiger Global, who are also previous backers, come up again?
They may be part of this funding; I don’t think they are a big part of it.
How much of the company do investors own? I would guess that it is difficult to negotiate with Sam Altman given the power he has and also his extensive experience on the other side of the table as an investor.
That is a correct characterization. Sam is a formidable founder and knows how to manage a cap table. Again, I’m sorry. It’s not a figure I have in front of me right now. Usually companies sell 20% off [equity] in each financing. Admittedly, things can move down or up from there significantly. I think in this case the number is going to be significantly lower than that in series A, series B and series C.
How long had you been talking to Worldcoin and what motivated you to lead this deal?
The original genesis was Sam wondering: what if I could create a cryptocurrency that I could distribute to everyone in the world and everyone got an equal share of it? For me, from a venture perspective, it’s certainly interesting [though] I don’t know that it’s something that we would be very happy to go and underwrite based on the things that our team is usually interested in.
[Meanwhile] this basically requires making sure that no one person can collect a disproportionate share of it, which requires people to be able to identify unique people. And this gets into the part we’re excited about, which is World ID. It is this ability to easily distinguish between machines and humans on the internet [because] most of the internet is supported by advertising revenue, and it costs just as much to serve bot traffic as it does to serve human traffic. That’s why various applications and service providers have used CAPTCHAs to distinguish between robots and humans. But that is no longer viable in the world of advanced automated systems and especially things powered by AI. It also doesn’t distinguish between unique people, so I don’t know if the same person is going to consume a resource excessively
That leads us to: ok, how can we provide a means to distinguish between humans and robots and ensure that each human is unique?
Which leads to biometrics.
At the root of what defines humans is biometrics, and my first thought was: why make this custom hardware to scan eyeballs? Like, billions of people are already walking around with an iPhone. Why don’t we use Face ID, right? The problem is that human facial structures do not have sufficient randomness or entropy to distinguish between unique people, on the order of tens of millions or hundreds of millions of people.
I didn’t realize that was the case.
It’s not something that has occurred to me either. I didn’t think about the fact that when you get past a hundred million people, there’s going to be a lot of people who look like Spencer Bogart; their facial structures are going to be sufficiently indistinguishable from mine. Fingerprints have the same problem; there is not sufficient randomness in fingerprints.
That leads us to two viable options, DNA that has sufficient randomness to be able to prove human uniqueness on the order of billions of people. But you are giving far too much information with DNA. Then there is iris. As it turns out, there is an insane amount of entropy and randomness in the human iris. And in this case, the team has built an insane amount of protection. You get an iris scan, it doesn’t save irises by default. It is immediately deleted on the device. It is only used to create what is called an iris code, which is a unique mapping or coding of your iris. And it compares to everyone else. And now, with these iris codes, we don’t know names or locations or anything. The only thing we know about all of them is that they are unique people.
My guess is that a corporate strategy – helping companies cut down on interaction with bots – is the most lucrative opportunity right now for Worldcoin. You can also supply this cryptocurrency to everyone, although it is not clear to me how people will use it. But before any of this can happen, you need to get a meaningful number of people in front of these balls that are strange and not easily accessible, when people are already nervous about biometrics and cryptocurrency. Worldcoin says it has now scanned the eyes of 2 million people. How many are needed for this to be meaningful? One billion?
These are the right questions. It’s about: do you have a network of demonstrably unique people? And it will only be interesting for applications and enterprises at a certain scale. But I think it will depend on the usage. When you get to 10 million unique users, there are already a number of applications that want to use it, while others are not going to be interested in using it unless you have a network of 500 million or a billion or 2 billion people.
Some of the other challenges here are yes, obviously, bullet distribution. There are currently 200 to 300 [orbs] in the wild today, with another 2,000 produced and waiting to be distributed. Then there is the matter of public perception. Ssomething that we flagged as part of the investment is: there’s going to be so much negative perception of this that no matter how confident we are that this is 100% viable, public perception will be so negative that people won’t want to participate ?
So far, the data says otherwise. Worldcoin has already brought in nearly 2 million people by operating a fairly capital-intensive boot-on-the-ground strategy, and this is only in beta testing. This is without pushing or pulling any marketing levers; this is without having the protocol even live on the mainnet. This is only in initial testing.
As for some of the things that could use this, Elon Musk has talked a lot about a bot problem on Twitter, and has highlighted the idea that if we get everyone to pay $8 a month, it will help solve the bot problem. We believe that World ID is a way to solve the same problem with lower friction and will be a higher fidelity solution. And there are a number of new applications and services that have not existed because of our historic inability to make this distinction. What they are, I don’t know, but we are interested in financing them.
Again, you can hear a lot more about the investment here, including why OpenAI itself could become a big customer of Worldcoin one day, why Bogart wasn’t bothered when hackers recently installed password-stealing malware on the devices of several Worldcoin coin operators, and why he’s fascinated by flash trades on the blockchain.