dYdX, a decentralized exchange for crypto derivatives, says it has ended its $25 first deposit bonus program. When the exchange made the announcement, folks criticized it for requiring new users to show facial recognition before they could start trading. However, the exchange’s brief advertising campaign, which terminated on Thursday “effective immediately,” was merely attributed to “overwhelming demand,” the exchange stated.

Preventing Fraud

dYdx invited new users to join the platform on Wednesday, but they had to agree to a liveness check to receive a $25 bonus after a deposit of $500 and above. That caught the attention of some members of the community. They didn’t like the idea of requiring users to do this.

A spokesperson for dYdX explained that the promotion was not about requiring users to provide their personal information. Instead, it was focused on preventing fraud. Marc Boiron, the former chief legal officer of Polygon and dYdX, criticized the liveness checks on Twitter. He said they were ineffective and did not combine the promotion requirements.

After 24 hours, dYdX stated that it was experiencing an overwhelming demand, and the company decided to end the promotion. The spokesperson attributed the sudden change to the overwhelming number of people who joined the platform.

The team behind the promotion initially stated that the campaign would last for a limited time. However, the team noted that the exchange underestimated the amount of interest it generated. Due to the community backlash, dYdX doubled its use of facial recognition software. The company noted that it only used this tool to prevent fraudulent activity.

Some members of the community are not buying the company’s explanation. They believe the cancellation resulted from the controversy, while others have expressed concerns about the platform’s previous use of facial recognition software.

Traders Withdraw Support 

In a tweet, Adam Cochran, a contributor to Yearn.finance, announced that he would be selling his DYDX tokens and moving away from the dYdX platform. Despite being a past big supporter of the project, he said he would be moving away from it because of the lack of meaningful changes.

According to Cochran, dYdX is intentionally misleading its users by claiming that it is ok to collect and use their data if they want to participate in the reward program. He believes this behavior is dangerous and could affect the development of a decentralized perps market.

Since its inception in 2017, dYdX has attracted significant investment from various organizations such as Polychain, Paradigm, and Three Arrows Capital. Due to the controversy, the trade volume on the platform has dropped by over 35 percent in the past 24 hours.

What is Next?

In 2018, IDEX, one of the most popular decentralized exchanges then, implemented Know Your Customer (KYC) to comply with the regulations related to money laundering and sanctions. The change resulted in a significant drop-off in activity, with it now struggling to reach $10 million in daily volume. Notably, dYdX could follow in the same footsteps as more traders withdraw their support.

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