Alejandro Arrieche
The decentralized crypto exchange dYdX announced that they will stop offering a sign-up bonus to users who opt to provide what they call a “liveness check” after crypto enthusiasts on social media slammed the firm for this initiative.
On 31 August, dYdX launched a promotional campaign that extended a $25 bonus to users who opened an account with the exchange and deposited 500 USDC tokens or more.
However, users who wanted to claim the bonus had to complete what the firm called a “liveness check”, which consists of sharing an image of their face with the firm as an extra layer of security.
The company reasoned that this helped them prevent a Sybil attack that may aim to exploit the offering by creating several wallets and depositing 500 USDC with each so the hacker can gain $25 for every account he creates.
According to dYdX, the image used for the liveness check was going to be stored at an external server controlled by a GDPR-compliant company.
Crypto Community Slams dYdX Amid This Alleged Intent to Comply with KYC Rules
Crypto enthusiasts and those who advocate for a fully decentralized crypto industry were discontent with the exchange’s requirement and used their social media accounts to voice their opinion.
Most deem this as an effort from dYdX to silently introduce a “Know Your Customer” protocol without explicitly doing so. This would allow the firm to comply with traditional banking rules and it may help them in convincing authorities from certain countries that they have established anti-money-laundering protocols.
You should do a liveness check through a USB thermometer that takes a temperature reading in my exterior cavity tbh.
After all images can be tampered with these days.
Never can be to safe, we need to crack down on all this illegal activity and it's a small price to pay.— Midgetwhale (@derpaderpederp) September 1, 2022
A day later, dYdX announced that it was ending the promotion due to “overwhelming demand”. It is unclear if the public’s negative reaction to the liveness check requirement was part of the reasoning that led to this decision.
Before shutting down the offering, the company stated that they do not require its users to provide any kind of personal information.
“Verification of unique users to prevent fraudulent farming of reward fees does not represent a change in dYdX’s ideological conviction about accessibility, transparency, mutability, or censorship”, the exchange’s developing team tweeted.
dYdX Recently Banned Accounts Connected with Tornado Cash
This latest controversy follows another move that also prompted a set of negative reactions within the crypto community as dYdX opted to enforce the sanctions imposed by the United States government on the cryptocurrency mixing protocol Tornado Cash for assisting criminals in laundering billions of dollars in digital assets.
In a blog post published on 29 August, dYdX informed the community that certain accounts within the exchange were banned from making trades by using its platform due to their interactions with the sanctioned crypto protocol.
Even though dYdX is a non-custodial exchange, meaning that users’ assets are not deposited in a centralized wallet, they can still block certain addresses so they cannot use the exchange’s ecosystem in any way.
Those who advocate for fully permissionless and trustless decentralized finance (DeFi) protocols did not take long to roast dYdX for its decision to comply with the mandates of a government entity. In this case, the Treasury Department.
You are not decentralised anymore then, useless service
— Fameboy (NFT) (@fameboy) August 30, 2022
The price of the native token of the dYdX exchange is dropping 1.5% in the past 24 hours to $1.54 per coin. However, the value of DYDX has advanced by 1.3% since the month started despite these latest controversies.
dYdX is the third-largest decentralized exchange in the crypto ecosystem with a market share of 0.0006% according to data from CoinMarketCap. In the past 24 hours, $429.5 million worth of cryptocurrencies have been traded through its platform.
The exchange is one of the few decentralized solutions that provides a user-friendly interface including an iOS-compatible mobile app. In addition, the developing team stated that they will be launching an Android-compatible interface for the exchange a year from now.
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This article was written for Business 2 Community by Alejandro Arrieche.
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