- Crypto project Worldcoin, co-founded by Sam Altman of OpenAI, is under scrutiny by leading crypto trader DeFiSquared.
- DeFiSquared raises serious questions about Worldcoin’s tokenomics, particularly the distribution and unlocking program of its native altcoin project, WLD.
- DeFiSquared argues that Worldcoin’s design could lead to a significant wealth transfer from unsuspecting investors to those inside the project.
Worldcoin, a crypto project co-founded by Sam Altman of OpenAI, is under scrutiny by leading crypto trader DeFiSquared. The trader raises serious questions about Worldcoin’s tokenomics, particularly the distribution and unlocking program of its native altcoin project, WLD.
DeFiSquared Takes on Altcoin WLD
DeFiSquared argues that Worldcoin’s design could lead to a significant wealth transfer from unsuspecting investors to those inside the project. They claim this wealth transfer could be facilitated by what they call a “predatory altcoin economy”. At the heart of DeFiSquared’s criticism is the high inflation rate WLD is expected to experience due to its tokenomics. They highlight various factors contributing to this inflation:
Grant Emissions and Operator Demands
Currently, WLD is experiencing a daily devaluation of 0.6% due to these mechanisms. The Worldcoin Foundation plans to sell an additional 18% of the circulating supply to commercial firms at a discount, further increasing the downward pressure on the price.
Unlocking of VC and Team Allocations
Within just 70 days, a significant portion of the WLD tokens allocated to venture capitalists and the Worldcoin team will begin to unlock, leading to a daily increase in supply of 4%. DeFiSquared estimates this to equate to a daily selling pressure of $50 million.
Similarities with FTX
DeFiSquared argues that this excessive supply increase, combined with the Foundation’s alleged manipulation tactics, creates a ripe environment for insider enrichment at the expense of individual investors. They point out that the low-volatility, high-FDV strategy is reminiscent of tactics used by Sam Bankman-Fried at FTX. At FTX, insiders can protect their assets with inflated valuations before unlocking.
Critical Expectations for Unlocking
DeFiSquared warns investors to be wary of strategically timed announcements approaching the token unlocking period in July. They believe these announcements could be a trick to create “exit liquidity”; in this case, insiders use positive news to boost the price before selling their assets, leaving individual investors holding the bag.
Conclusion
DeFiSquared’s analysis paints a worrying picture for Worldcoin. The project’s tokenomic design, with its emphasis on high inflation and potential insider manipulation, raises serious questions about its long-term viability and commitment to stated goals. Investors are advised to carefully consider these concerns before investing in WLD. Whether Worldcoin will become the “greatest wealth transfer” as predicted by DeFiSquared, and whether this will be in the opposite direction, remains to be seen.
