An in-depth explanation of Worldcoin's token economics and governance mechanism.

2023-07-24 18:24

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The governance token of Worldcoin, WLD, has an initial supply cap of 10 billion, with 75% allocated to the Worldcoin community, 9.8% to the initial development team, 13.5% to Tools for Humanity investors, and 1.7% reserved for Tools for Humanity.

Original Title: "Worldcoin Whitepaper Reveals: How Tokens are Distributed and Released?"

Translated by: Foresight News

Worldcoin today officially announced that the Worldcoin protocol, World ID, WLD token, and World App are now available globally (in regions where permitted by law). Subsequently, multiple exchanges such as Huobi, OKEx, Bitget, and Binance have announced the listing of WLD.

Foresight News has translated Worldcoin's token economic distribution and release model for readers' reference.

WLD Token Economic Distribution Model

Within 15 years after the token launch, the initial supply limit of Worldcoin is 10 billion (enforced by the WLD smart contract). After 15 years, if users can decide through governance to activate inflation mode, the maximum annual inflation rate is 1.5%. The maximum circulating supply at the initial launch will be 143 million WLD, of which 43 million WLD will be allocated to users who verified using Orb during the Pre-Launch phase, and 100 million WLD will be loaned to market makers operating outside the United States (the loan will mature after 3 months).

Worldcoin token economic model is as follows:

75% of the tokens will be allocated to the Worldcoin community, with the majority going to users and a portion going to the ecosystem fund and network operations. The foundation will manage the distribution of these tokens according to its bylaws and authorize governance decisions for gradually decentralized token management. 9.8% will be allocated to the initial development team, Tools for Humanity (TFH), and other service providers who have taken the initial steps to develop Worldcoin. TFH currently provides services to the Worldcoin Foundation and operates the World App. (The allocation ratio in the chart and article is inconsistent.) 13.5% will be allocated to TFH investors. TFH investors provide funding that enables TFH to support the multi-year pre-launch phase of the Worldcoin project. The remaining 1.7% will be reserved for TFH's reserves. After launch, TFH will retain a reserve of 170 million WLD tokens. (The allocation ratio in the chart and article is inconsistent.)

It is worth noting that Worldcoin announced in 2021 that the token allocation to TFH and the initial development team was 20%, and the latest white paper has increased this allocation to 25%. Worldcoin's explanation for this is that the responsible development and launch of the network is more complex and expensive than TFH initially expected.

Before achieving decentralization and self-sufficiency in Worldcoin, the Worldcoin Foundation will support the Worldcoin ecosystem and mainly distribute community tokens to:

User donations (60%), including Genesis donations (25 coins), Welcome Grant incentives (1 WLD coin obtained after verifying Orb, decreasing over time), and regular donations.

Network operation (10%), initially focused on developing incentives for Orb manufacturing, Orb operation, market operation support, bug bounty programs, etc.; after the transition phase, it is expected that all operator rewards will be paid in WLD. During the transition phase, some operator rewards will be paid in USDC.

Ecosystem Fund (5%), including protocol development, Orb development, standard setting, review and certification, ecosystem grants, incentive programs, liquidity reserves, and foundation operations.

Where World Assets Ltd. has signed loan agreements with five market makers operating outside the United States. These five entities received loans of 100 million WLD within three months of the token launch. At the end of the three months, each entity must repay its loan or may choose to purchase any amount of tokens, up to the amount of the loan received. The purchase price of WLD will be set according to the following formula: 2.00 + (0.04 * X), where X is the number of tokens purchased divided by one million.

The Worldcoin Foundation has established an ideal token distribution goal, as shown in the following figure:

WLD Release Model

About the WLD release model, the two most important points are:

The team and investor tokens are locked upon release; tokens claimed by users will not be locked.

The maximum circulating supply at initial launch will be 143 million WLD, of which 43 million WLD will be allocated to users who have verified with Orb during the Pre-Launch phase of the project, and 100 million WLD will be loaned to market makers operating outside of the United States (with the loan due after 3 months). Worldcoin has stated that the number of tokens allocated to users during the distribution period is expected to increase significantly, as new and existing Orb verified users will be able to apply for a 25 WLD Genesis Grant.

The following image shows the WLD unlocking plan for the next 15 years. The release speed of WLD tokens allocated to the Worldcoin community by governance will depend on factors such as the growth rate of Worldcoin users.

Note: This chart shows the earliest unlock status of all tokens.

Among them, the token unlocking schedule allocated to the community is enforced by four smart contracts. Tokens allocated to users and operators will not be locked.

The table below shows the unlocking status of community tokens for each specified time period. Within each time period, the same amount of tokens are unlocked daily.

The tokens allocated to TFH investors will be locked in a contractual manner for 12 months after these investors exercise their respective token subscription rights, and then will be unlocked on a daily basis over the following 24 months.

Regarding the tokens allocated to the initial development team, the tokens allocated to previous and current team members will be locked in a contract for 12 months after release, and then unlocked on a daily average over the following 24 months.

The tokens allocated to TFH reserves will also be locked in contract form for at least the same duration as the token lock-up period applicable to TFH investors and team members. The exact lock-up period will depend on the allocation time of these tokens.

WLD Utility and Allocation Objectives

Worldcoin states that its Pre-Launch phase will run from May 2021 to July 2023. During this period, over 2 million people in more than 30 different countries have verified their World ID on Orb. Over 4300 WLD tokens have been allocated to these users prior to release. At launch, Worldcoin will begin rolling out 1500 Orbs to meet global demand for World ID.

Worldcoin Foundation will manage the project and strive to gradually decentralize governance and ecosystem, and provide most of the WLD token supply to participants in the Worldcoin protocol. The distribution entity of WLD tokens is World Assets Ltd., a subsidiary of the Worldcoin Foundation.

Worldcoin states that WLD is designed as a utility token with governance properties. In addition to the traditional "one token, one vote" governance mechanism, the introduction of World ID paves the way for a "one person, one vote" mechanism. These two mechanisms can be combined in various ways to achieve new governance methods.

After the token launch, the Worldcoin Foundation will solicit proposals and collaborate with the community to discuss the interaction between World ID and WLD tokens in the Worldcoin governance model.

Other use cases include users may choose to use WLD tokens to pay for certain actions in World App or other wallet applications, make other payments (such as remittances, tipping artists, buying and selling goods and services). Worldcoin suggests that in the long term, WLD tokens can also be seen as a global store of value.