Identity track unicorn questioned: Worldcoin faces multiple challenges, Humanity founder exposed for failed entrepreneurial history

Author: Nancy, PANews

Recently, the blockchain identity verification platform Humanity Protocol announced that it has raised $30 million at a valuation of $1 billion. However, the CEO was reported to have previously founded the unicorn company Tink Labs, which went bankrupt, resulting in hundreds of millions of dollars in losses for investors. Meanwhile, Worldcoin, also in the DID space, is facing controversy due to the upcoming massive token unlock, global regulatory setbacks, and the diminishing effect of OpenAI's endorsement.

The newly minted unicorn Humanity Protocol is off to a rocky start, while Worldcoin is mired in reputation and business development challenges. The two unicorns in the DID space, each valued at $1 billion, are facing a new test.

DID Protocol Using Palm Recognition Technology, CEO Previously Led a Unicorn Company to Bankruptcy

Humanity Protocol is considered a competitor to Worldcoin in the same space.

Founded in 2023, Humanity Protocol is a Polygon CDK-based identity verification system developed in collaboration with Human Institute, Animoca Brands, and Polygon Labs, aiming to provide an accessible and non-invasive method for establishing human proof in Web3 applications. Humanity Protocol plans to launch its testnet in the second quarter of this year, with a waiting list exceeding 510,000 people.

In terms of biometric technology, unlike Worldcoin's use of iris scanning, Humanity Protocol employs palm print recognition, which is considered a less invasive identity verification solution. However, iris recognition has advantages over palm prints in terms of uniqueness, stability, and non-replicability for identity identification, making it superior in overall security performance compared to other biometric technologies, and it also has higher accuracy and stability requirements, along with greater development difficulty and costs.

Regarding user data and identity ownership, Humanity Protocol, like Worldcoin, has introduced zero-knowledge proof technology; in terms of funding background, Worldcoin has completed multiple rounds of luxurious financing, achieving its $1 billion valuation in Series A, while Humanity Protocol has also completed several rounds of financing. Currently, Humanity Protocol has officially announced that it has secured $30 million in seed funding led by Kingsway Capital, with participation from over 20 institutions including Animoca Brands, Blockchain.com, and Shima Capital. Additionally, it has raised about $1.5 million from a group of KOLs, with the KOL round's valuation reported to be $60 million.

Moreover, Humanity Protocol can also be easily accessed via smartphones, similar to Worldcoin. The project will release an application that uses smartphone cameras to scan palm prints for identity verification, and will later introduce an additional layer of security using palm vein networks and small infrared cameras for identity confirmation. In the future, this system is expected to be applied to KYC processes on financial platforms and even allow access to physical locations such as hotels and office buildings through palm prints. Additionally, Humanity Protocol plans to issue tokens for payment verification fees.

Regarding the project's launch, Polygon co-founder Sandeep Nailwal commented that Humanity Protocol not only can effectively resist Sybil attacks but also can integrate verifiable credentials locally into a decentralized verifier node network, laying the foundation for building broader blockchain and real-world applications.

After attracting market attention due to its high valuation, Humanity Protocol CEO Terence Kwok was subsequently reported by foreign media Protos to have nearly led his $1.5 billion smartphone company to bankruptcy, burning through $170 million of investor funds.

It is understood that Terence Kwok founded Tink Labs in 2012, headquartered in Hong Kong, which once had 12 million global users and received investments from Foxconn Technology Group, Kai-Fu Lee's Innovation Works, and Meitu's chairman Cai Wensheng, among others. The company primarily provided smartphones for hotel guests to use during their stay, aiming to offer an alternative to roaming fees to enhance their hotel experience and sell collected customer preference data. Interestingly, behind Tink Labs' heavyweight shareholder investments, Terence Kwok's father, Guo Desheng, is considered an important reason, as he was a former star private banker at Goldman Sachs, with high-profile clients including Li Ka-shing and Guo Huanian.

According to the Financial Times, Terence Kwok began to incur losses due to aggressive expansion policies, the decreasing cost and prevalence of roaming fees, and hotels' reluctance to pay for the smartphones he provided. In just 2017 and 2018, the company reported nearly $200 million in losses and subsequently faced a liquidity crisis. A former employee stated that Tink Labs' investor SoftBank was concerned that the company "was transferring funds from its Japanese joint venture to other regions to maintain operations," which forced the company to abruptly halt a major project. Kwok reportedly struggled to pay employees and contractors and ultimately laid off a large number of staff before shutting down Tink Labs on August 1 of that year. In January 2020, Tink Labs' European division began liquidation and subsequently entered bankruptcy proceedings.

The former head of human resources operations at Tink Labs remarked, "I never thought it would last, but I didn't expect it to close so quickly; Kwok only cared about 'making money'." Furthermore, according to Fortune Insight, Terence Kwok had previously stated during his time at Tink Labs, "If a startup fails, you can return to school; the opportunity cost is minimal. Three months of entrepreneurship is like getting an MBA."

Worldcoin Set to Unlock Large Amounts of Tokens, Facing Regulatory Investigations in Multiple Countries

While Humanity Protocol is generating market buzz, Worldcoin is embroiled in serious issues related to token unlocks, regulatory scrutiny, and insider profit-taking.

According to recent analysis by DeFi researcher @DefiSquared on the X platform, Worldcoin could become the largest wealth transfer event of this cycle, facing severe inflation issues. The fully diluted market cap of the WLD token is as high as $60 billion, and due to the issuance of tokens for distribution and operator claims, it is depreciating by 0.6% daily. Additionally, the amount of WLD to be unlocked in the coming months is expected to increase significantly, potentially leading to large-scale sell-offs.

@DefiSquared's analysis indicates that once the tokens of Worldcoin's VC and team begin to unlock, the supply of WLD will increase by 4% daily. According to Token Unlocks data, WLD will face a daily sell-off pressure of $31.5 million starting July 24 (calculated based on the price on May 16).

At the same time, Worldcoin recently revealed on its blog that its foundation's subsidiary, World Assets, will sell 500,000 to 1.5 million WLD tokens weekly for private sales over the next six months, with a maximum value of $179 million based on current prices. @DefiSquared pointed out that this portion of tokens accounts for 16.7% of the existing circulating supply (calculated based on 210 million circulating tokens as of May 16) and is being sold at a discount. This funding comes from the "community" portion of the WLD token supply but is being sold to counterparties to benefit the foundation.

"The token economic model of Worldcoin was designed to be predatory from the start, benefiting the team and early investors. In December last year, the foundation even deliberately terminated market-making contracts (note: Worldcoin previously announced that it would terminate agreements with five market makers on December 15, 2023), allowing prices to be inflated under low circulation." According to the latest research data from CoinGecko, WLD is one of the four crypto projects with the lowest circulation among the top 300 by market cap. In this regard, @DefiSquared believes that this low circulation and high valuation manipulative design directly benefits insiders, as they can hedge their overvalued locked shares through contracts and OTC trading before the unlock.

Additionally, @DefiSquared noted that most retail investors may not even be aware that Sam Altman (CEO of OpenAI) is no longer actively involved with Worldcoin, and that the project has no relationship with OpenAI. According to a Bloomberg report in April this year, Worldcoin was then seeking partnerships with tech giants like OpenAI.

It is worth mentioning that Worldcoin is also facing regulatory bans or investigations in multiple countries, including Spain, Portugal, South Korea, and Hong Kong, due to user data privacy issues. To address this, Worldcoin's main supporters have not only met with relevant government officials to improve relations but have also open-sourced their iris recognition inference system this year to enhance transparency and implement new personal data self-custody strategies. Additionally, they have recently open-sourced a new SMPC system and securely deleted old iris code to help improve the security of biometric data. Similarly, Humanity Protocol may also face regulatory issues arising from user data collection.