Pantera Capital: Why do we invest in Worldcoin?

Authors: Cosmo Jiang, Cody Poh

Compiled by: Shenchao TechFlow

We have been studying how blockchain can integrate into a rapidly AI-populated world, where "Proof-of-human" is a prominent area. In a future where AI agents and AI-generated content are becoming increasingly prevalent, distinguishing humans from robots will become an urgent necessity. For many scenarios, we may accept or even prefer interacting with robots. However, in key 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 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 individuals and issuing a World ID for each user on its blockchain, Worldchain. 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.

Sam Altman, the CEO of OpenAI, is also a co-founder of World. His intention in founding World was to help humanity maintain its uniqueness and central position 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 humans and AI, while protecting user privacy. This capability has far-reaching implications, not only for expanding economic opportunities but also for promoting the global democratic process.

Since our investment last year, we have had the privilege of meeting 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 rationale 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 business and government applications. In extreme scenarios 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 identification systems, as it crosses jurisdictional boundaries and is resistant to censorship.
• Early growth signs: 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 benefited greatly from the involvement of OpenAI founder Sam Altman. Altman's global influence and reputation are powerful tools for building trust with international governmental agencies and promoting strategic cooperation.

The vision of World is not only 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 humans 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 scalable 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 US GDP—even adding 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 to verify the identity of real players and enhance fairness in competitive gaming. Razer ID will make its debut in the game "Tokyo Beast" in the second quarter of 2025.
• Dating Sector: World recently announced a partnership with global online dating leader Match Group, allowing users to verify their profiles through World ID. This move aims to reduce bots and fake accounts, enhancing user safety and trust.
• Social Field: World has launched World Chat in the World App, helping verified individuals connect and communicate securely. World is currently negotiating collaborations with several major social media platforms.
• Advertising field: Japan's second largest marketing agency Hakuhodo plans to use World ID to establish a fraud-proof advertising network aimed at eliminating bot-driven ad fraud.

The Mini App ecosystem of World has played 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 for 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 verified human online interactions, ensuring that content creators are compensated based on genuine user interactions rather than bot activities.
• Worldle: This is a Wordle competition Mini App where verified humans can place bets and compete against each other.

The construction method of World Chain 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 generated by 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 verification, 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-jurisdictional 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 global large-scale deployment and reducing operational costs. At the same time, World is developing a more portable verification device, the 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 download count of World App has exceeded 55 million, and this ecosystem is gradually becoming the foundation for users' daily interactions, providing scalable leverage for accelerating user acquisition. We are starting 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 unlocking of growth. World announced its launch in the US in May, covering six cities initially (Atlanta, Austin, Los Angeles, Miami, Nashville, and San Francisco). World plans to deploy 7,500 Orb devices in the US alone by the end of 2025. They also expect to provide World devices in high-density retail locations nationwide through promotional activities with retail partners.

World aims to verify 50 million people by the end of this year, with the long-term vision of signing up every 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 ad content.

Government Relations

Many people still believe that World circumvents privacy laws and government regulations, but the reality is the complete opposite. This misunderstanding stems from past regulatory actions. Cautious government regulators have challenged World’s expansion, demanding it pause 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 is attributed to several factors, including the Foundation for Humanity (TFH) strengthening education and communication with local governments, as well as the accelerated proliferation of artificial intelligence, which has led various sectors to 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, especially 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 understood 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 exams, ID card applications, and updates. By partnering with MyEG, the Orb verification service has been integrated into its existing government infrastructure, showcasing World’s ability to embed technology into government services and setting a precedent for future similar collaborations.

Commercialization and Potential Growth

At the event titled "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 have been introduced, which will be charged to applications using 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 convincing investment case can be built. If World can verify 5 billion unique users (approximately 60% of the global population), and each verified user can generate $5 in revenue annually, then the protocol would achieve an annualized revenue of $25 billion. Moreover, this $5 accounts for less than 0.005% of the global per capita GDP, and considering the widespread application of World technology in massive markets like advertising, such a proportion is reasonable.

With a reasonable growth multiple, the 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 future market value.

Conclusion

We are confident in the progress the World team is making. This protocol uniquely addresses the critical challenge of verifying distinct human identities in the rapidly evolving era of artificial intelligence. This opportunity is particularly timely, coinciding with the government's shift in attitude towards digital identity, World’s recent entry into the U.S. market, and the increasing widespread 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 achieving the long-term vision of World. Questions about whether the protocol can scale 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 that recognizes the 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 popularity of artificial intelligence, people are increasingly recognizing the significant importance of World’s mission to build a powerful and secure authentication solution, which is worth striving for. The Wall Street Journal and Time magazine have featured World in special reports over the past few months, highlighting its important role in the context of the growing prevalence of artificial intelligence agents that are increasingly difficult to distinguish, especially in the fields of payment and social networks. Blackrock has also reiterated the strategic importance of "human authentication" in its annual shareholder letter, particularly in the context of the growing on-chain economy and asset tokenization.

Although World is still in the early stages of development so far, there is no doubt that it is led by an outstanding management team chaired by Sam Altman. If successful, its "Big Hairy Audacious Goal" (BHAG) will bring potential for exponential growth. Looking ahead, we anticipate that World will continue to make progress in geographic expansion, strategic partnerships, and strong growth in the Mini App ecosystem. As investors in this agreement, we feel incredibly excited and honored.