dYdX Faces Volley Of Criticism Over Webcam Checks

Decentralized exchange dYdX has been singed on social media over its identification request, which requires users to verify their identity through their webcam. 

Only after identification would users be eligible to avail of benefits from a promotional offer the platform is running. 

A Bait For More Information?

Why has a $25 promotion led to users of the platform and social media criticizing the decentralized exchange? The details lie in the identification verification process for users to sign up and be eligible for a $25 bonus. dYdX, in a blog post on Wednesday, had announced that any new users that had deposited $500 USD Coin (USDC) for their first transaction on the exchange were eligible to receive a bonus of 25 USDC. 

However, to be eligible for the bonus, users were required to do a “liveness check.” The exchange explained that the verification process would need access to the user’s webcam to “compare if your image is associated with another account on dYdX.”

A Blatant Invasion Of Privacy 

While the giveaway has been marketed as entirely voluntary, users on Twitter slammed the exchange and its promotional offer, calling it a blatant invasion of user privacy. Chris Blec, the founder of DeFi Watch, accused dYdX of trying to bribe users to allow their faces to be scanned under the guise of a promotion. Blec hypothesized that dYdX and other platforms could offer users more incentives, expecting them to part with more information. Blec stated, 

“In the past, I have lauded @dYdX for being honest about its centralized parts. But unfortunately, that changes today. They are bribing users to allow their faces to be scanned & disguising it as a ‘promotion.’ I’ve long predicted this would happen in DeFi, and now it’s begun. What dYdX is doing now is just wrong. They’re misleading users on the intent. They know that every face scan they’re collecting is from an innocent. A criminal won’t face-scan but can still use dYdX. They’re bribing new users to give up privacy just to satisfy regulators.”

dYdX Offers Explanation 

dYdX, on its part, reasoned that the “liveness check” was simply a solution that offered the best UX for users to indicate that they are one person without revealing their identity. A dYdX spokesperson stated that the promotion did not require any personal information from users, and the image verification was only intended as a measure to root out fraud. Marc Boiron, former chief legal officer at dYdX, stated that the liveness checks were ineffective unless combined with other requirements. 

Acting On Behalf Of Regulators? 

Blec remained unimpressed with the explanation dYdX had to offer, claiming that it could be acting on behalf of regulators. He stated, 

“It’s ridiculous to assume that a crypto exchange paying people to scan their faces is for any reason *except* some form of regulatory compliance, or at least testing a mechanism that they plan to expand in the future.”

Adam Cochran, general manager at Cinneamhain Ventures, stated, 

“No matter the cause, this is an absolutely horrible idea, and you should walk this back immediately. There is absolutely no acceptable reason to be collecting user biometrics. You’d be better dropping the incentive program entirely.”

dYdX countered from its Twitter account, stating that the verification process had nothing to do with any regulators or regulations and was simply a way to detect if you were a unique person. 

dYdX Reputation Takes A Hit 

The latest controversy comes only weeks after dYdX had come under fire over its response to the Treasury Department’s ban on Tornado Cash. Within days of sanctioning, the exchange stated that it had blocked accounts tied to wallets that had previously interacted with the program.

Last year, dYdX ran an airdrop, but users based in the US were excluded from the airdrop and did not receive any tokens. There was considerable speculation that dYdX excluded its US-based clients over fears that it could lead to an SEC investigation of the protocol. This came after repeated warnings from SEC Chair Gary Gensler, who stated that some crypto tokens could be considered unregistered securities. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.