Why Everyone Is Mad at Sam Altman’s Worldcoin

Edward Snowden and other privacy advocates dogpiled the former Y Combinator leader’s deeply ill-conceived crypto project.

AccessTimeIconOct 25, 2021 at 7:02 p.m. UTC
Updated Oct 25, 2021 at 7:12 p.m. UTC

Sam Altman’s Worldcoin project, which promises to distribute a universal basic income (UBI) to global citizens willing to have their retina scanned, came in for a fresh round of incredulous backlash from privacy advocates after announcing new funding last week. Early info about Worldcoin first surfaced in June, and I eviscerated it for the ominous implications of gathering biometric data from the global poor (and the godawful optics of naming the Big Brother device at the center of it all the “Orb”).

But it seems Sam Altman doesn’t read CoinDesk, because four months later the project is moving ahead basically unchanged. Altman’s effort to build the CIA’s wet dream will now be backed by $25 million from Andreessen Horowitz, Coinbase Ventures, and Digital Currency Group (Yes, that’s CoinDesk’s parent company: We don’t like everything the bosses do, and we write about it!). Somehow dropping that quarter in the piggy bank adds up to a $1 billion valuation for Worldcoin, a demonstration of just how absurd the VC shell game can get.

The announcement of new funding was met with renewed criticism on exactly the grounds we laid out in July, but from much more influential players than lil’ old me. Most notably, NSA whistleblower Edward Snowden blew a hole in Worldcoin’s claim that its centralized database of hashed iris scans was not a privacy risk. Snowden argued that biometrics should never be used for identity or security, because “the human body is not a ticket-punch.”

Getting blasted for bad privacy practices by Edward Snowden pretty much demands a response, and Altman’s was… interesting.

What makes this statement so shocking (and I believe disingenuous) is that it was made in the middle of perhaps the biggest-ever moment of reckoning for Web 2.0 companies that base their business models on data gathering. Altman was president from 2014 to 2019 of Y Combinator, arguably the premier Silicon Valley startup incubator, and is deeply enmeshed in the Web 2.0 data-mining world. Peruse YC’s portfolio page and you’ll see plenty of “machine learning,” “AI” and “computer vision” – almost always code for “we’re going to leverage user data.”

Over the past few weeks, that model has faced a withering, long-delayed backlash. Facebook is in the middle of what would, in a country with a functional legislature, be a fight for its life: Whistleblower Frances Haugen has revealed reams of internal documents showing that Facebook executives, including Mark Zuckerberg personally, used its massive data-gathering operation in ways that it knew were bad for society – but would increase Facebook’s bottom line.

Google, meanwhile, is now the subject of an antitrust suit brought by 15 U.S. states and Puerto Rico, which alleges in part that the search giant gamed its own data-driven advertising engine to drive up prices, and engaged in other shady data-driven actions such as misleading or coercing Chrome users into accept additional tracking. (Funny how that Chrome logo looks a lot like ... an orb.)

Meanwhile Apple, the nominal Big Tech privacy champion, has dropped a megaton bomb on data-hungry business models by making it easy and appealing for iOS users to opt out of tracking. Users have taken them up on that en masse, with immediate, major impacts on ad revenues at Facebook and Snapchat.

Every single person in Silicon Valley is watching these moving pieces like a hawk. They’re a threat to the way the Valley has come to do business over the last decade, with the potential for huge disruptions to the bottom line – including Altman’s, given his presumably substantial personal stakes in a variety of data gathering and surveillance-based operations. Y Combinator has supported some crypto projects, including Coinbase, but it doesn’t appear to be part of a principled stance: It’s been rumored that some recent Y Combinator startups have been pushed to abandon crypto-based ideas in favor of software-as-a-service models, which often involve some data-monetization angle.

But you can watch the trees attentively and still miss a whole damn forest, as Mark Mulvey, author of the tech and crypto investing newsletter Surf Report, summed up nicely in response to Altman’s declaration of surprise.

There are really only two explanations here. One is that Altman truly is unaware of the turn against invasive technology, which makes him unfit to lead the Worldcoin project. The other is that he’s feigning surprise as a weak PR strategy to deflect criticism without actually addressing it. Either way, Worldcoin doesn’t seem likely to change its stripes.

Subverting privacy isn’t Worldcoin’s only faux pas: The funding announcement also revealed that 20% of all Worldcoin tokens will be set aside for the development team. In crypto, this used to be known as a “premine” and ranks among the biggest red flags that a project is intended to enrich insiders. The revelation invited critical comments from crypto-influencers including pseudonymous trader Dan Darkpill.

Worldcoin’s decision to use a massive premine is extremely strange given its supposedly charitable focus on distributing tokens to individuals in the developing world. Unlike equity in a company awarded to venture capitalists, premined tokens often have a shorter “lockup” period before insiders can sell, or none at all. Worldcoin’s declaration that the premine funds will be used for development indicates they will be market-sold for fiat, directly undermining the value of the tokens Worldcoin distributes in exchange for those heinous iris scans.

That’s a major reason crypto idealists have an ongoing debate about the best way to do a “fair launch” that doesn’t privilege insiders at the expense of users. It’s also a major sketch factor for a project that touts its social beneficience without a clear explanation (yet) of how it’s going to generate all those UBI payments while still turning the profit its investors expect.

There remains no indication that Worldcoin is going to revise its plans to Doxx The Entire World Or Get Rich Trying. The entire episode is grimly emblematic of the persistent appeal of the old Web 2.0 model of sucking data out of users like a vampire squid. Despite the towering mountain of evidence of its harms to individuals and society, the financial upside of surveillance capitalism is apparently just too addictive for Silicon Valley’s big-data junkies to kick.

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David Z. Morris

David Z. Morris was CoinDesk's Chief Insights Columnist. He holds Bitcoin, Ethereum, and small amounts of other crypto assets.