Pantera Capital: Why are we investing in Worldcoin?

Authors: Cosmo Jiang, Cody Poh

Compiled by: Deep Tide TechFlow

We have been researching how blockchain can integrate into a world where AI is rapidly proliferating, in which "Proof-of-human" is a prominent field. In a future where AI agents and AI-generated content are becoming increasingly prevalent, distinguishing between humans and robots will become an urgent necessity. For many scenarios, we may accept or even prefer interaction with robots. However, in critical areas such as advertising, dating, or government services, certifying the unique identity of real people becomes particularly important. Using permissionless blockchain to verify online "humanity" in a global and censorship-resistant manner is undoubtedly one of the best options.

World (formerly known as Worldcoin) is a blockchain protocol that builds a privacy-preserving global identity and financial network through the concept of "proof of humanity". "Proof of humanity" means proving that a person is both human and unique. World uses its biometric device "World Orb" to perform iris scans, certifying users as unique real individuals, and issues a World ID on its blockchain Worldchain for each user. This technology, developed by Tools For Humanity (TFH), is being promoted globally. The native token of the World protocol, WLD, is designed as a global internet currency and is used for protocol governance.

OpenAI's CEO Sam Altman is also a co-founder of World. His motivation for founding World was to maintain human uniqueness and centrality in an internet world filled with AI-driven content. If World is widely adopted, it will provide a scalable and reliable global solution for distinguishing between real people and AI, while protecting user privacy. This capability has far-reaching implications, not only expanding economic opportunities but also promoting the global democratic process.

Since investing last year, we have had the privilege of meeting with Sam Altman, TFH CEO Alex Blania, and team members. World held its latest public event on April 30, providing investors and industry professionals with an in-depth introduction to its product roadmap and growth strategy. Based on this, we believe it is an excellent opportunity to share our investment logic and look forward to the exciting progress ahead.

Overview of Investment Logic

We believe that World’s "proof of humanity" solution will become a key infrastructure in the future where humans coexist with AI. Our investment logic is mainly based on the following reasons:

Human proof as a key tool: With the surge of autonomous AI agents and AI-generated content, verifying unique human identity is crucial for commercial and governmental applications. In extreme cases where AI-driven productivity may replace human labor, governments may need to implement Universal Basic Income (UBI) programs, and "human proof" will become an indispensable tool.

Superior verification solution: World’s biometric solution combines blockchain technology, surpassing existing government and private verification systems as it crosses jurisdictional boundaries and possesses censorship resistance.

Early signs of growth: Since its establishment less than two years ago, the World protocol has certified over 12 million unique individuals. The adoption of Worldchain has also shown strong growth, with approximately 45,000 new wallets added daily.

Experienced Leadership: World has greatly benefited from the involvement of OpenAI founder Sam Altman. Altman's global influence and reputation are powerful tools for building trust with international government agencies and promoting strategic cooperation.

The vision of World is not only about technological innovation but also a profound reflection on the future social structure. At the intersection of AI and blockchain, it may become a key bridge connecting humanity and technology.

World ID application scenarios and potential

We believe that "proof of humanity" is crucial for many application scenarios, and World ID may have significant potential in scaled commercial applications. Especially in the fields of advertising and government services, World ID can bring substantial benefits. Considering the scale of these end markets—advertising is a trillion-dollar market, and government services account for 25% of the U.S. GDP—adding even a small amount of value through a unique human identity solution represents a tremendous growth opportunity for World.

World has identified gaming, dating, and social networking as three core application scenarios in the short term, significantly enhancing user experience by distinguishing between unique humans and robots. The protocol has established partnerships in these areas:

Gaming Sector: Razer is collaborating with World to launch Razer ID, which will verify the identity of real players and enhance fairness in competitive gaming. Razer ID will debut in the game "Tokyo Beast" in the second quarter of 2025.

Dating field: World recently announced a partnership with global online dating leader Match Group, allowing users to verify profiles through World ID. This move aims to reduce bots and fake accounts, enhancing user safety and trust.

Social Domain: World has launched World Chat in the World App, helping verified individuals connect and communicate securely. World is currently in negotiations with several major social media platforms.

Advertising field: Japan's second-largest marketing agency Hakuhodo plans to use World ID to establish an anti-fraud advertising network aimed at eliminating bot-driven advertising fraud.

The Mini App ecosystem of World plays a key role in unlocking new possibilities and application scenarios for World ID. Currently, there are over 300 Mini Apps on World App, all of which can leverage World ID and the World App wallet to facilitate creative experiments and proof of concepts. While the potential of future application scenarios has not yet been fully developed, early experiments show promising prospects:

Kalshi: A prediction market Mini App that allows certified individuals to bet on real-world events. As more verified users participate, the platform's credibility increases, creating deeper and more diverse markets that help the public better understand popular opinions.

Aqua: This Mini App uses World ID to measure the online interactions of verified humans, ensuring that content creators are compensated based on genuine user interactions rather than bot activity.

Worldle: This is a Wordle competition Mini App where certified humans can place bets and compete against each other.

The construction method of World Chain itself provides unique advantages for verified humans. The gas fees for verified humans are subsidized by the fees collected from non-verified humans (i.e., robots), ensuring that humans benefit from the increased business activities from on-chain agents.

Distribution Strategy

World is a network, and the value of the network increases with the number of users. Currently, the World network is still in its infancy, with only 12 million verified users, so user acquisition is a top priority. The free token incentive mechanism is similar to PayPal's early "$10 growth hacker" strategy. However, since initial verification requires face-to-face identity authentication, the current bottleneck is actually the physical distribution of devices. To scale World to the next 100 million users, the key is to enhance the scalability of Orb devices in manufacturing and cross-jurisdiction distribution.

To achieve this goal, World is accelerating the production of Orbs, aiming to make its devices as ubiquitous and accessible as ATMs. The team has developed a self-service Orb that users can operate independently without staff assistance, enabling large-scale global deployment and reducing operational costs. Meanwhile, World is developing a more portable verification device, Orb Mini, which resembles a smartphone. The Orb Mini is expected to be deployed in 2026 and is anticipated to become a key tool for expanding the network user base to over 100 million.

After driving validation through physical distribution and economic incentives, the next challenge is to improve user retention by building actual application scenarios. Expanding the Mini App ecosystem of World is crucial for user growth and engagement. As of now, the downloads of World App have exceeded 55 million, and this ecosystem is gradually becoming the foundation for users' daily interactions, providing scalable leverage for accelerating user acquisition. We are beginning to see the emergence of some interesting applications, covering multiple areas from DeFi to gaming to social media.

We believe that the launch in the United States this year is a key growth unlock. World announced its launch in the U.S. in May, covering six cities (Atlanta, Austin, Los Angeles, Miami, Nashville, and San Francisco) in the first phase. World plans to deploy 7,500 Orb devices in the U.S. alone by the end of 2025. They also expect to provide World devices in high-density shopping locations nationwide through promotional activities with retail partners.

World's goal is to verify 50 million people by the end of this year, with the long-term vision of signing up each unique individual. You can find nearby scanning locations here.

In addition, World recently launched its first commercial in the United States, titled "Human and You Know It". You can check out the content of the advertisement.

Government Relations

Many people still believe that World circumvents privacy laws and government regulations, but the truth is quite the opposite. This misunderstanding stems from past regulatory actions. Cautious government regulators have challenged World’s expansion, demanding it suspend operations in certain regions, such as Hong Kong, Kenya, Spain, and Portugal.

In recent years, the regulatory attitude has undergone a positive change. This shift can be attributed to multiple factors, including the Foundation for Humanity (TFH) enhancing education and communication with local governments, as well as the accelerated proliferation of artificial intelligence, which has made all sectors recognize the need to learn and adapt to new world paradigms with an open mindset.

Recently, World has made significant progress in collaborating with local governments, particularly in the rapidly digitizing Southeast Asian markets such as Thailand, the Philippines, and Indonesia. Before entering these markets, World actively engaged with government officials to ensure they fully understand the platform's technology and its embedded privacy protection measures. To meet regulatory requirements for data privacy and storage, World has assembled a top-notch legal and public policy team.

A successful example is the collaboration between World and the Malaysian government service provider MyEG. MyEG provides offline services such as driving license examinations, identity card applications, and updates. By partnering with MyEG, the Orb verification service was integrated into its existing government infrastructure, demonstrating World’s ability to embed technology into government services and setting a precedent for similar collaborations in the future.

Commercialization and Potential Growth

At the event called "At Last", World began to outline its plans for the commercialization of World ID. At the most basic level, revenue sources include transaction fees on the World Chain. Additionally, World ID service fees will be introduced, which will be charged to applications utilizing the World ID service. The fees are divided into two parts: Credential Fees, retained by the credential issuer; and Protocol Fees, which belong to World ID. As foundational investors, we are excited about the value accumulation plan announced by World, as it indicates that the World protocol has successfully created excess value for its stakeholders.

By making reasonable assumptions, a compelling investment case can be constructed. If World can verify 5 billion unique users (about 60% of the global population), and each verified user can generate $5 in revenue per year, then the protocol will achieve an annualized revenue of $25 billion. This $5 accounts for less than 0.005% of the global per capita GDP, and considering the broad application of World technology in huge markets such as advertising, such a proportion is reasonable.

With a reasonable growth multiple, this annualized revenue of $25 billion, combined with an almost 100% free cash flow conversion rate, has the potential to drive a market capitalization exceeding $250 billion. These figures demonstrate the global commercialization potential of World ID and its significant market value in the future.

Conclusion

We are confident in the progress that the World team is making. In this rapidly evolving era of artificial intelligence, the protocol uniquely addresses the critical challenge of verifying unique human identities. This opportunity is particularly timely, coinciding with the government's changing attitude towards digital identity, World’s recent entry into the U.S. market, and the increasing application of World ID across different regions and diverse scenarios.

Of course, there is still a long way to go from the current situation to realizing the long-term vision of World. Questions about whether the protocol can achieve scalability quickly enough, the effectiveness of its growth incentive mechanisms, and the reflexive effects of its volatile cryptocurrency are still worth pondering. Furthermore, World is not the only organization aware of this critical foundation of "human identity"; most large tech companies are also developing their own identity solutions. Although decentralized and censorship-resistant solutions are theoretically superior, that does not mean they will necessarily prevail in practice.

With the popularization of artificial intelligence, people are increasingly recognizing the significance of World’s mission to build powerful and secure authentication solutions, which is worth striving for. The Wall Street Journal and Time magazine have both featured World in special reports over the past few months, highlighting its important role in the context of the growing prevalence of AI agents that are difficult to distinguish, especially in the fields of payments and social networks. Blackrock also reiterated the strategic importance of "human authentication" in its annual shareholder letter, particularly against the backdrop of the continuously growing on-chain economy and asset tokenization.

Although World is still in its early stages of development, there is no doubt that it is led by an outstanding management team chaired by Sam Altman. If successful, its "big hairy audacious goals" (BHAG) will bring about significant growth potential. Looking ahead, we anticipate continued progress for World in terms of geographical expansion, strategic partnerships, and strong growth in the Mini App ecosystem. As investors in this agreement, we feel immensely excited and honored.