DeFi community protests facial recognition scan on dYdX
To get a deposit bonus on the decentralized trading platform dYdX, users were required to verify themselves via a facial scan.
To get a deposit bonus on the decentralized trading platform dYdX, users were required to verify themselves via a facial scan. Clearly a dubious method.
Last week, the decentralized trading platform dYdX announced a bonus program for new users of the platform. Traders would have a chance to receive a $25 bonus in USDC on a $500 USDC deposit.
The catch: to qualify for the bonus, users had to undergo a "liveness check". To do this, their face had to be scanned via their own webcam and compared to other face scans. This was meant to prevent the bonus from being claimed twice.
After only two days, the platform terminated the bonus program. The official reason: the "overwhelming demand" reportedly brought several thousand users to the site.
Backlash in the community
The promotion, however, did not sit well with many DeFi supporters. Some on Twitter accused the platform of deliberately invading users’ privacy. Others even accused dYdX of monetizing its users by turning their faces into promotion.
The decentralized platform responded to the accusations, noting that the facial scan was a voluntary action. "Any user who feels uncomfortable performing a liveness check can still use dYdX," the promo’s FAQs state.
Still, a financial incentive to hand over biometric data on a platform should be viewed critically. They essentially promise free and unrestricted access.
Are regulatory authorities involved?
Besides the privacy breach, DeFi-Watch founder Chris Blenc told View post on X that regulation coming to DeFi could have played a role. Blenc said the platform "coerced users to give up their privacy to satisfy regulators." Accordingly, the promo would have been a means to secure compliance with regulations. Blenc at least wants to view the action as a "test of possible mechanisms" that might be needed in the future for access to such platforms.
And indeed, the free access and anonymity of DeFi platforms are a thorn in the side of many of the world’s financial regulators. As a result, many projects face the prospect of government intervention when it comes to AML compliance or customer identity. Especially after the Tornado Cash saga, this is the reality. Whether intentional or not, dYdX presents a dystopian example of applying KYC rules in the DeFi space.
