Worldcoin, the cryptocurrency project co-founded by OpenAI’s Sam Altman, is facing scrutiny from leading crypto trader DeFiSquared. In a recent analysis, DeFiSquared raises serious questions about Worldcoin’s tokenomics, specifically the distribution and unlocking program of its native altcoin project WLD.
DeFiSquared put altcoin WLD on its agenda
DeFiSquared argues that Worldcoin’s design could lead to a massive wealth transfer from unsuspecting investors to project insiders, not what the project claims (universal basic income). They argue that this wealth transfer can be facilitated by what they call the “predatory altcoin economy.” The core of DeFiSquared’s criticism revolves around the high rate of inflation that WLD is projected to experience due to its tokenomics. They highlight several factors contributing to this inflation:
- Grant emissions and operator claims: Currently WLD is experiencing a daily devaluation of 0.6% due to these mechanisms.
- $200 million WLD sale: The Worldcoin Foundation plans to sell an additional 18% of the circulating supply to trading firms at a discount, further increasing downward pressure on the price.
- Unlocking VC and team allocations: In just 70 days, a significant portion of WLD tokens allocated to VCs and the Worldcoin team will begin to be unlocked, leading to a 4% daily increase in supply. DeFiSquared estimates this translates to $50 million in daily selling pressure.
FTX similarity
DeFiSquared argues that this oversupply increase, combined with the Foundation’s alleged manipulation tactics (ending its market maker contract in December 2023), has created an environment ripe for insider enrichment at the expense of individual investors. They note that the low volatility, high FDV strategy is a tactic reminiscent of Sam Bankman-Fried’s maneuvers at FTX. On FTX, insiders can hedge their holdings at inflated valuations before unlocking them.
DeFiSquared also criticizes the project for potentially misleading investors about its connection to OpenAI. While the co-founder connection exists, DeFiSquared emphasizes that Worldcoin is a separate entity with no active involvement from Altman. They claim that leveraging the OpenAI partnership could be a tactic to inflate WLD’s price through unfounded hype.
Critical expectation for unlocks
DeFiSquared warns investors to be wary of strategically timed announcements approaching the token unlock period in July. They believe these announcements may be a ploy to create “exit liquidity”; In this case, insiders use positive news to push the price higher before selling their holdings, leaving retail investors holding the bag.
DeFiSquared’s analysis paints a worrying picture for Worldcoin. The project’s tokenomic design emphasizes high inflation and potential insider manipulation, raising serious questions about its long-term viability and commitment to stated goals. Investors are advised to consider these concerns carefully before investing in WLD. It is not yet known whether Worldcoin will be the “largest transfer of wealth” as DeFiSquared predicts, but in the opposite direction.
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