And responses to some common criticisms of the idea: https://news.ycombinator.com/item?id=46459959
I also forgot to mention in my original post that the token issuer is not a monopoly. Any company that wants to participate can do so, just like there are many brands of tobacco and alcohol. Require websites to accept at least 5 providers to ensure competition.
To be clear though if it's being used as wedge for privacy violation then it should not exist at all. And from reading TFA preventing that may need a similarly coordinated counter-effort.
On a spectrum of options, no verification is the least privacy intrusive. Baking it in at the OS level or forcing passport uploads are the most intrusive. My proposal is in the middle.
A determined actor could maybe follow you to the store when you purchase your verification code, take a quick picture with a powerful camera (or bribe the store to do it sneakily) and unmask you online. But there's no way to do it at scale. And if you buy the code from a reseller (ask a panhandler to buy one for you, perhaps) then it's even more robust.