Worldcoin and Encointer: Two Different Economic Inclusion Models

On July 24, the Worldcoin project officially launched, once again sparking widespread attention and discussion. Worldcoin is a Web3 project that identifies users by scanning their irises to establish digital identities and a cryptocurrency network.

Worldcoin’s vision is to provide equal economic opportunities for everyone around the world, regardless of nationality and background. Users only need to scan their eyes once with Worldcoin’s spherical scanner “Orb” to prove that they are real individuals, and they will receive a certain amount of WLD tokens.

There is a similar project in the Polkadot ecosystem called Encointer. Like Worldcoin, Encointer aims to provide a more fair and inclusive economic system, offering users basic income ( UBI ). Encointer allows any community to create and distribute its own local currency, promoting local economic activities and verifying users’ real identities through offline gatherings.

We will compare Worldcoin and Encointer below to understand how they operate and their similarities and differences.

Vision and Implementation Method

Worldcoin was founded in 2019 with the goal of establishing the world’s largest human identity and financial network, allowing everyone to share in the opportunities of global economic development. Worldcoin believes that with the arrival of the AI era, we need a way to differentiate between real humans and AI online, and that everyone should have a digital identity and wealth. Therefore, Worldcoin is committed to building a global, fair, and inclusive open-source financial protocol to create a collectively owned global currency, WLD, which will be fairly distributed to as many people as possible.

Encointer was also established in 2019, with the vision of enabling communities around the world to generate autonomous currencies to stimulate local economies. Each community currency has its own unique symbol and name, as well as predefined issuance and distribution cycles. The value of community currencies is formed based on local supply and demand dynamics, unaffected by external macroeconomic factors.

Encointer believes that economically underdeveloped areas often lack growth momentum. Although people may have skills and products to sell, they lack purchasing power. Encointer provides free and easy-to-use technology that allows any community to generate its own currency, which is regularly distributed evenly among all active participants, thereby promoting local economic activity.

How It Works

Both use a similar “three-piece set”—DID + protocol ( token ) + wallet.

Worldcoin is primarily composed of three parts:

1. World ID: A digital identity system based on iris scanning, providing each individual with a unique and hard-to-fake identity identifier. Users can generate a World ID by using the Orb scanner developed by Worldcoin to perform an iris scan.

2. Worldcoin: A cryptocurrency protocol based on Ethereum’s second-layer technology. It adopts a distribution mechanism similar to basic income (UBI), regularly distributing a certain amount of WLD tokens equally to all users verified through World ID. Users can trade or invest with WLD, or exchange it for other fiat or cryptocurrencies.

3. World App: A mobile application compatible with World ID and the Worldcoin protocol, allowing users to manage their digital identity and assets. Users can register through the World App to participate in iris scan verification, obtain WLD tokens, and conduct transactions with other users.

Encointer is also mainly composed of three parts:

1. Encointer Identity System: A system that verifies human identity based on physical meetups ( Ceremony ) to prevent multiple identities or bots from gaining extra income. Physical meetups are regular social events that require each participant to meet and communicate with three other strangers, proving that they are real and actively participating members of the community.

2. Encointer Protocol: A cryptocurrency protocol developed on the Substrate framework that allows any community to create independent and customizable currencies. Each community currency has a unique symbol and name, as well as a defined issuance amount and distribution cycle, with its value formed based on local supply and demand, unaffected by external macroeconomic factors.

3. Encointer App: A mobile application compatible with the Encointer protocol and identity system, allowing users to easily create or join community currencies, participate in physical meetups, and receive allocated currencies. Users can view and manage their coins, and they can also invite friends to join and endorse their identities.

Methods of Verifying User Identity

One major difficulty in operations involving “distributing tokens” to users is how to verify that the user is a real person, to prevent “witch attacks” where one person controls multiple accounts.

Worldcoin uses iris scanning for verification. The iris is a unique and relatively unchanging biometric feature of each person, making it harder to forge than facial recognition, so users can prove they are real people through their irises without the need for national ID documents.

Iris collection is not a common method of identity verification, which is why Worldcoin specifically developed the “Orb” device to scan irises. Worldcoin recruits local operators in various places, providing Orb devices for operators to conduct “on-the-ground” promotions, educating local users on how to complete the scan.

However, collecting biometric information such as iris data is quite sensitive, bringing considerable controversy and promotional difficulties to Worldcoin. In the original plan, after collecting eye images, a unique identifier called IrisHash was to be generated through hashing, and then the eye images would be permanently deleted, with the use of a Semaphore zero-knowledge proof system to enhance privacy protection. However, in order to optimize the data algorithm for generating unique identifiers, the team has still established an iris database for users who did not raise objections. Although the team promised to delete all iris data after the algorithm optimization is completed, no specific deletion timeline has been provided. If this biometric information is stolen, it could infringe on user privacy.

In addition, some countries have explicit regulations regarding the use of private data by commercial companies, prohibiting the transfer of biological information of their citizens abroad, while Worldcoin’s data processing institutions are located in countries such as the United States, the United Kingdom, Germany, Japan, and India. Reports indicate that Worldcoin has suspended operations in at least 7 countries.

In contrast, Encointer uses participation in physical meetups (Ceremony) for verification. Physical meetups are social events held regularly, requiring each participant to meet and interact with three other strangers to prove that they are real individuals who exist and actively participate in community life.

After users download the Encointer app, each community participant is randomly assigned to a small physical gathering, which is held regularly at randomly chosen locations in the local area. At the start of the event, each participant scans the QR codes of other participants to confirm attendance, and these confirmations are recorded on the Kusama blockchain ledger. Since all Encointer gatherings take place simultaneously, it is impossible for any one person to attend more than one event per cycle (, as one person cannot be in multiple places at once ). This ensures that one person cannot control multiple Encointer accounts.

This verification method also does not require users to provide any official identification documents, allowing Encointer to be open and inclusive to people without formal identification.

Compared to Worldcoin, Encointer’s verification method does not collect users’ biometric information, nor does it require centralized institutions or third-party audits to store user identity information, ensuring user privacy and autonomy. Additionally, there is no need for specialized scanning equipment; users can register from anywhere in the world using just a smartphone. Regular gatherings also help strengthen connections among community members and enhance community cohesion.

However, the certification through real person attendance at events is still somewhat troublesome ( and not friendly for social anxiety ). Moreover, the number of participants in offline events is generally limited by the venue, so the number of attendees is usually not large, which makes Encointer more suitable for small-scale local currencies.

Development Status

Worldcoin had its first registered user in May 2021, and has since been expanding Orb deployment and recruiting new operators, completing more iris photo collections. Before the mainnet launch, the rewards for users were in the form of WLD “vouchers.” On July 24, 2023, the Worldcoin mainnet officially launched, and the rewards promised to users were finally fulfilled.

According to official data, 346 Orb devices have been deployed in 34 countries, with 2.21 million people verifying their identity and registering for World ID by scanning. In the past 7 days, the World App wallet has averaged over 120,000 transactions per day.

The Encointer blockchain became the second system parachain of Kusama in January 2022, ( Common Good Parachain ), providing real identity verification infrastructure for the ecosystem.

Encointer does not directly issue tokens but provides a platform for communities to create local tokens. Currently, there are two communities using Encointer.

Firstly, Zurich Leu in Zurich, Switzerland, provides additional income for community users, helping local businesses to develop. Although Zurich is relatively affluent, it still faces serious inequality, and citizens are open to new concepts such as basic income, making it very suitable for such social experiments.

The second is Green Bay in Wisconsin, USA, which has issued a local community currency called Green Bay Dollar. Green Bay has over 100,000 residents, and the main purpose of the Green Bay Dollar is to encourage users to support local businesses, foster community engagement, and help businesses build customer loyalty and reward outstanding employees.

Summary

Worldcoin and Encointer both aim to leverage Web3 technology to achieve economic inclusivity. However, they differ significantly in their verification methods, target users, and operational approaches.

Worldcoin is a global project with a unified token WLD, which requires the use of a dedicated Orb device to scan the eyes for registration, after which WLD is distributed to registered users. Encointer is a local project where each local community can create its own currency without the need for any dedicated equipment; it only requires users to regularly participate in offline meetings and verify their identities with other randomly assigned users on-site.