Expert criticises dYdX for collecting new users’ biometric data

Adam Cochran, a partner at venture firm Cinneamhain Ventures, expressed disappointment with dYdX’s decision to collect and store biometric data of new users as part of a promotional campaign.

1/8

Very disappointed to see $DyDx going down this path.

There was some legal grounds for them to justify some blocking — but biometrics collection is never acceptable. pic.twitter.com/OcHnbCw8Cp

— Adam Cochran (adamscochran.eth) (@adamscochran) September 1, 2022

The platform promised 25 USDC to new users who deposit at least 500 USDC and completed verification by creating an image using a webcam. The promotion was voluntary.

dYdX explained the initiative was necessary to prevent the creation of additional accounts that would complicate marketing campaigns.

Cochran noted that collecting biometric data is not acceptable, even if the platform has legal grounds to justify blocking accounts.

The next day, dYdX ended the promotion, citing an underestimation of demand for the campaign. According to them, thousands of new users took advantage of the offer.

Due to extremely overwhelming demand of the $25 deposit bonus promotion, we are ending the campaign, effective immediately. Thank you to the many thousands of new users that onboarded to dYdX today. We truly underestimated the amount of interest the campaign garnered.

— dYdX (@dYdX) September 1, 2022

Cochran questioned whether thousands of users were truly interested or merely criticised the platform. He expressed hope that other industry participants will not engage in misuse of user data, especially when it concerns biometrics that are transmitted and stored by a third party.

Under the terms of the promo, user photos were transmitted to an external server that complies with the GDPR. The server does not contain a key to link the image to a specific wallet.

Cochran said he would stop using the service, despite his high activity in the past. He will not change his stance until he sees meaningful changes.

The expert stressed that he believes it is dangerous when the team prioritises growth over users. He expressed surprise that the founder of dYdX, Antonio Juliano, does not share this view.

According to Cochran, dYdX treats user data privacy as a commodity and an acceptable risk for the prospect of accelerating growth. In doing so, the team undermines trust.

“Users are not your product. Our data is not an acceptable ‘trade-off’ for your profits”, he emphasised.

7/8

Hire and empower advocates internally who can raise voices that represent their consumers and protect their interests — especially in terms of privacy.

Users are not your product, and our data isn’t an acceptable «trade-off» for your bottom line.

— Adam Cochran (adamscochran.eth) (@adamscochran) September 1, 2022

The partner at Cinneamhain Ventures expressed hope that a fully decentralized version of the v4 platform could be governed by users who place privacy first.

As noted, dYdX blocked customer accounts that had previously interacted with the Ethereum mixer Tornado Cash. The latter faced sanctions.

Representatives of the platform acknowledged that the sudden wave of blockings affected “many users” who often did not know the origin of their funds and did not directly use the service.

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