Crypto Community Controversy About dYdX’s ‘Liveness Checks’

dYdX has received controversy from the community when it requires users to verify their identity with a webcam to benefit from the promotion.

Following the Treasury Department’s suspension, the decentralized derivatives exchange was recently chastised for blocking several accounts tied to Tornado Cash. It reneged on the blocks days later.

According to the decentralized exchange, customers were requested to authenticate their identification with a webcam to qualify for a $25 promotional offer this week. Users that deposit at least $500 on their first transaction are eligible for a $25 bonus, but they must first display their face via webcam.

On the dYdX blog, the team described the checks as “Liveness Checks” and stated that they were carried out to prevent anyone from taking advantage of the offer several times.

Because Ethereum addresses serve as accounts for DeFi apps like dYdX, “it is rather difficult for a dApp to offer promotions without being Sybil-attacked,” according to the essay. It said webcam checks “offered the best UX for our users to indicate that they are, indeed, one person without revealing their full identity.”

While dYdX stated that the checks are not required for all exchange users, the decision to perform them as part of the promotion has drawn widespread criticism from the crypto community.

A Twitter user name @LeftsideEmiri highlighted the update in a Wednesday tweet:

Cinneamhain Ventures partner Adam Cochran wrote after dYdX responded to the post:

“No matter the cause, this is an absolutely horrible idea and you should walk this back immediately.”

dYdX team member Corey Miller responded to Cochran to defend the decision:

“There is absolutely no acceptable reason to be collecting user biometrics. You’d be better dropping the incentive program entirely. Honest question — what other ways are there to run sybil resistant campaigns in a web3 native way (that actually has good UX)?”

There are also some users who disagree with dYdX’s program:

However, the dYdX team has also noted that “Liveness Check” is optional:

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