Citing “extremely overwhelming demand,” the decentralized trading platform dYdX has ended a deposit scheme promotion which required its users to verify their identity by webcam.
Despite the claim of success from dYdX, a strong backlash to the scheme on social media may also have had a hand in its sudden and immediate termination.
Don’t know your customer
On Aug 31, dYdX introduced a bonus scheme for new users. In exchange for depositing $500 of the USDC stablecoin, its users were told they would be eligible to collect a one-time deposit bonus of $25 in USDC. The catch? To receive the bonus users would also have to submit themselves to a “liveness check.”
This liveness check involved sending biometric data via webcam to dYdX. The company would then send that information to a third party. An “external server controlled by our provider, which is GDPR-compliant.” The General Data Protection Regulation (GDPR) is a privacy and security law passed by the European Union.
According to the exchange, this sensitive information would then be used to ensure that individuals did not attempt to spam the promotion with multiple claims.
The proposal, reminiscent of Anti-Money Laundering/Know Your Customer (AML/KYC) requirements, instantly drew the ire of Crypto Twitter users, many of whom began the work of mercilessly roasting what they perceived to be the intrusive nature of the program.
A great success story
With Twitter swimming in flavorful commentary about the scheme, dYdX decided to end the offer just days after its launch.
“Due to extremely overwhelming demand of the $25 deposit bonus promotion, we are ending the campaign, effective immediately,” said dYdX in a tweet.
“Thank you to the many thousands of new users that onboarded to dYdX today. We truly underestimated the amount of interest the campaign garnered.”
The recent backlash against dYdX comes just weeks after another controversy enveloped the firm. In mid-Aug, dYdX was among a host of crypto companies (including Aave and Uniswap) which implemented sanctions against Tornado Cash at the behest of the U.S. Treasury department.
While government sanctions cannot be controlled by dYdX, many users, whether rightly or wrong, did not appreciate the manner in which DeFi protocol acquiesced to government demands. With that wound still fresh in the mind, the introduction of a liveness check appears particularly badly timed. dYdX may have a way to go before it can rehabilitate itself in the eyes of these users.