Worldcoin Launch Supply Mostly Made of Market Maker Loans

As Worldcoin’s native token WLD surged on Monday, the identity-oriented organization released a whitepaper explaining its tokenomics, providing key insights into the newly launched coin.

WLD’s total supply, the maximum amount of coins created by the network, will be fixed at 10 billion WLD for at least the network’s first 15 years, according to the document. After that period, in the year 2038, an inflation rate of 1.5% could be instituted by voters.

Minted ahead of launch, the 10 billion tokens had a fully diluted valuation of $20.6 billion, as of this writing, according to CoinGecko. The tokens' circulating supply, reflected as market capitalization, was valued at around $219 million across 106 million WLD tokens.

The mismatch between WLD’s total and circulating supply is concerning based on other projects’ histories, Tom Dunleavy, the founder of Alethia, a protocol for driving token transparency standards, told Decrypt.

“Most tokens that have a small amount of distribution or a large fully diluted valuation have shown themselves to be easy targets for quick sell-offs,” he said. “The history of airdrops, in general, has not been favorable.”

Worldcoin did not immediately respond to a request for comment from Decrypt.

Listed on a handful of crypto exchanges after the Worldcoin Protocol went live, WLD was up 22% over the past day to $2.04, as of this writing.

Co-founded by Sam Altman, CEO of ChatGPT-maker OpenAI, Worldcoin aims to be a financial and identity network. It has an app for payments and uses biometric data harnessed from shiny, metal orbs to create so-called World IDs—in a way that’s generated controversy.

Notably, the whitepaper’s availability wasn’t as ubiquitous as Worldcoin’s name may suggest. The document’s link was “not available” for Decrypt in the US and UK. That’s despite the ability for Worldcoin users to verify their identity across 14 locations in both regions. However, the document was accessible for Decrypt in Colombia.

The circulating supply of WLD was capped at 143 million tokens at launch, which the whitepaper recognizes is “relatively low” compared to 10 billion tokens. The document states that “this is due to the goal of creating a network of as many human beings as possible.”

Of the token’s circulating supply, 43 million was set aside for early users and 100 million were loaned to five market makers outside the US. The loans have a duration of three months and give market makers the option to purchase WLD tokens instead of returning the loan.

Sadettin Kerim, digital assets product manager and researcher at Yapı Kredi, a Turkish commercial bank, told Decrypt the “agreement is an absolute win for market makers” regardless of whether they pay back the loans in tokens or elect to buy them later.

“If they do not face a huge market demand, they will easily dip the price and then buy it back,” he said, adding that it’s “easy money for them.”

According to a formula in the whitepaper, market makers would have the option to purchase WLD tokens at $2.80 if they don’t want to return any WLD loaned, assuming the 100 million tokens were distributed evenly.

“If market makers stabilize the price above $2.80, returning the loans will not be the best case for them,” Kerim said, explaining they’d likely buy tokens on the open market instead.

Overall, Kerim said the agreement “is an easy and effective way to manage the market” for the WLD because it will lead market makers to “compete with each other based on their strategies.”

However, in terms of what could be in store for token holders, Dunleavy described the 3-month window for market makers’ loans as akin to a cliff.

“After that, they have no incentive to either facilitate liquidity or hold on to those tokens,” he said. “In the very short term, there likely could be some price stability because of liquidity supported by those market makers. But in the medium to long term, that is speculative at best.”

Regarding its total supply, 75% of WLD will be allocated to members of the Worldcoin community over time, with 25% split across the protocol’s initial development team, investors, and a reserve of 170 million WLD. 

Bruno Faviero, co-founder and CEO of token distribution platform Magna, told Decrypt WLD’s earmarked allocation for community members is “laudable,” but its low circulating supply—of which a majority is loans—makes it especially “difficult to gauge the community’s reaction.”

The 170 million WLD reserve will be managed by Tools For Humanity (TFH), a US-based technology firm that helped get Worldcoin off the ground. Tokens that belong to the network’s team and investors are locked up at launch, the document states.

The share of tokens not set aside for Worldcoin’s community increased to 25% from 20% because the network’s launch and development “proved to be more complex and costly than TFH initially anticipated,” the whitepaper states. The change was announced in 2021.

On Monday, Worldcoin had verified the identity of more than 2 million people across 35 countries with biometric data. And while anyone in the world is able to obtain a World ID verification, WLD is not available for residents in the US or other restricted territories—tokenomics whitepaper apparently included.