Only a couple of weeks apart, we have seen two tokens of projects, which have caused a storm in social media, launch. First, on July 10, Arkham Intel Exchange, an Intel-to-Earn marketplace, went live. Then, on July 24, after three years of development and beta, Sam Altman’s Worldcoin hit the exchanges. Both of them were a topic of furious debate and much backlash from the community, albeit for different reasons. Let’s take a look at the controversies, why they happened, and what insight we can gain from understanding Worldcoin and the Arkham token.
- Worldcoin (WLD) is a crypto project to introduce a blockchain-based fair and inclusive economy and a digital identity network. It has been in development since 2020, and one of its co-founders is the current CEO of OpenAI, Sam Altman.
- Arkham (ARKM) is a crypto token developed by a blockchain analytics company Arkham Intelligence for its decentralized blockchain intelligence marketplace, Arkham Intel Exchange. There, users post bounties to identify entities behind blockchain addresses or sell intel in auctions.
- The launch of Ethereum-based tokens of these projects reignited the controversies around each respective project. Worldcoin has been called “dystopian” for its requirement to scan one’s iris to receive an airdrop. Arkham is notorious for its disparagement of anonymity and privacy in blockchain networks, and now they even reward others for “doxing” prominent blockchain wallet owners.
What is Worldcoin?
Worldcoin is an ambitious project to create a global network combining identity and finance, one that is inclusive and decentralized. Its main components are World ID, a digital identity network, and a digital currency WLD (Worldcoin Grants). One of the endgame use cases of such a system is, among other things, “AI-funded UBI” (universal basic income, an unconditional regular payout to a person). A use case more conceivable to us today, however, would be to distinguish between humans and “artificial intelligence”.
The key maintainer of the World ID and the Worldcoin Protocol is Tools for Humanity (TFH), co-founded by Alex Blania and Sam Altman. According to his LinkedIn profile, the founder Alex Blania went on to entrepreneurship immediately after a research position at Caltech, where he studied neural networks and quantum systems. The latter founder has a more extensive background: Altman was the president of Y Combinator and later, YC Group, briefly served as a CEO of Reddit, and founded Project Covalence to assist clinical trials for a COVID-19 vaccine. Most notably for this project, however, he is the current CEO of OpenAI, best known for developing systems commonly known as AI, e.g. ChatGPT and DALL-E.
Proof of Personhood
For the Worldcoin crypto project to work as intended, there has to be a system of proof capable of overcoming several challenges. First of all, a digital identity entry has to equal one person, and World IDs need to be easy to get and recover but hard to lose. Secondly, ideally, the platform should be able to onboard over 8 billion people. Thirdly, this system should be fault-proof, unable to be compromised or gamed.
The best solution that would be sufficiently scalable and reliable, according to the whitepaper, is biometric recognition via iris scanning. TFH came up with a special device that they called Orb but they do not intend to be the sole operators of these iris scanners. A network of independent Orb Operators should operate worldwide, providing maximum global coverage.
As an incentive to grow the Worldcoin protocol, its creators offer the WLD tokens. They get distributed to all Orb-verified individuals in the World App. At the moment, its uses are rather limited: it already acts as a governance token but not yet as a means of payment. The Worldcoin team hopes to see developers in the ecosystem and users come up with ways to put their WLD to use in Web3.
What is Arkham?
Another hot new crypto project that has attracted $2.4B on Binance Launchpad before the airdrop is the Arkham (ARKM) token. But the airdrop is far from the only reason this blockchain project is talked about so much. Before we dive into things that made Arkham controversial, let’s unpack what the project is all about.
Meet Arkham Intelligence
The blockchain analytics company behind this hot-button project was founded by Miguel Morel in 2020. He has worked in the space since at least 2017, having co-founded Reserve. The company’s blockchain forensics contributed to reports on Alameda bankruptcy proceedings and Mango Market exploit prevention, so by now, it has built quite a reputation.
Arkham Intelligence is backed by prominent investors: OpenAI and Palantir co-founders, Tim Draper, Wintermute, GSR, and Geoff Lewis of Bedrock. To launch a token, however, they opted for an IPO on Binance Launchpad. It was the new incentives program and what it is to be used for that caused a stir in the community.
The new cryptocurrency was needed to launch Arkham Intel Exchange: a decentralized platform to identify blockchain address owners. The ARKM token is the native currency of this platform: users who want intel place bounties and blockchain sleuths can put intel for auctions.
The rationale behind this marketplace is to incentivize tracking bad actors and collecting market intelligence without centralizing control over the information in the hands of Arkham. Admittedly, bounties for blockchain intelligence are not unheard of but no single platform existed before the Intel Exchange. It is already making news headlines: one of the first noteworthy and large bounties on the platform has been issued. It was about 9 thousand ARKM for finding the wallets of none other than Do Kwon, ex-CEO of Terraform Labs convicted for fraud.
Why Are They Controversial?
Arkham Intel Exchange: “Dox-to-Earn”
Arkham Intelligence became known for its philosophy radically different from the pseudonymous spirit of the crypto community. Its whitepaper is none too shy to present highly unpopular ideas: raw pseudonymous blockchain data is useless, and anonymity online is a thing of the past. Words became actions when users discovered that the referral links had emails encrypted by Base64 attached to them. In other words, by sharing an Arkham referral link, a user would, most likely, unknowingly give away the email address they used to create an account. The team allegedly did not see anything wrong with it.
The idea of an intelligence marketplace was put on blast almost immediately after the announcement. One of the prevalent concerns was the main idea itself: users even called it “dox-to-earn”. The pushback was so loud that the CEO of Arkham felt the need to address the criticisms. He doubled down, claiming that the blockchain does not protect one’s privacy but reassured that there would be guidelines to discourage dishonest and harmful behavior.
Unfortunately, the guidelines and regulations of this market indirectly confirmed that this platform would not be as decentralized as Arkham claims. The blockchain analytics company would ultimately be the one to evaluate the fairness of each bounty and decide whether to award it. The distribution of ARKM is also raising concerns: over 50% of it is set aside for insiders: investors, advisors, and core contributors.
Worldcoin Orb: When a CAPTCHA Isn’t Enough
Worldcoin became known as the crypto project that requires iris imaging to onboard. Personal data does not get more sensitive than this, so skeptics and crypto enthusiasts opposed the idea with equal fervor. The team claimed that sufficient protections are in place to prevent data leaks or misappropriation. Unfortunately, there is little input from independent sources to back it up — and some reports of the opposite happening.
The data protection concerns have caused the authorities to intervene, albeit only after the WLD launch. The first one to probe Sam Altman’s brainchild will be the Information Commissioner’s Office of the United Kingdom. The regulator aims to learn how appropriate biometric data collection is to the goals of the project and whether TFH is equipped to handle it.
Vitalik Buterin published an in-depth blog post about the Worldcoin project and the limitations of their proof of personhood implementation. He underscored that some of the criticisms addressed to Worldcoin are inherent to biometry or ID verification as a whole. He concludes by saying that a single project is unlikely to provide a holistic solution but combining multiple approaches can, in the long run.
A new take on transparency?
The Genesis block message made Bitcoin often seen as a solution to monetary policy shortcomings. At the same time, the cypherpunk movement defined the first cryptocurrency protocol more than the 2008 financial crisis. It emerged due to concerns with the growing influence of authorities in the digital age: some of them being surveillance and censorship.
Cypherpunks and Satoshi Nakamoto envisioned a pseudonymous payment system: one in which the history of transactions should be traceable. Unless the key pair owner wishes, they can remain anonymous if their Bitcoin address is not linked to public information. This system is open to observation to anyone but at the same time, users get to keep their identities to themselves.
The decentralized design of cryptocurrencies ensured that censoring transactions would be impossible. However, the extent to which it helps against surveillance has always been arguable. On paper, having pseudonyms instead of identities would let users keep their privacy. However, it is getting increasingly hard to keep one’s identity unlinkable to blockchain addresses, both due to advances in on-chain analysis and web search.
Pseudonymity does not mean lawlessness and is not entirely incompatible with compliance. Unfortunately, as the quest for mass adoption progressed, it became apparent that compromises with the government would need to be made. Arkham and Worldcoin are products of an entirely different era, the one which accepts KYC/AML laws and tries to apply them to crypto in their own way.
Arkham embraces the reality that by now, the bulk of the blockchain data is not truly pseudonymous. They take this situation and use it to their advantage, trying to bring together a segmented market for blockchain intel. They even claim to be doing well by the crypto community by making this platform as decentralized as possible and introducing guidelines. It seems that a portion of the community saw value in this proposition, joining the hunt to identify high-profile wallets.
On the other hand, Worldcoin does not subvert the tenets of crypto but tries to uphold them, at least to an extent. World IDs are supposed to be privacy-preserving. What ends up connected to a World ID account is a zero-knowledge proof generated by the Orb. At least, it is how it is intended to work: the reports we mentioned before point to the launch being less than smooth. The idea behind Worldcoin — a global-scale alignment of incentives — is lofty and even utopian but the reality so far turns out to be different. Instead of onboarding people from developing countries to a fair and inclusive financial system, it turned thousands of them into very cheap straw persons.
Despite their differences, the ARKM and WLD are wildly controversial but fascinating specimens and a litmus paper for the crypto world today. Who would have guessed that in 2023, a doxing marketplace could have a successful launch, and people would line up to scan their irises for an airdrop?
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