What is a Vampire Attack in Crypto Industry?

“Vampire attack” is a strategy used by a new blockchain project to quickly steal users and their money from a more popular competing app.

Most of the time, the people who make a new app make it similar to the “original” in terms of features, but they offer better incentives to users through native token rewards.

What Does the Vampire Attack Mean?

The three parts of a typical vampire attack are:

• Find the project in charge.
• Use the original’s business model, architecture, or code to make a similar one.
• Make the main difference from a well-known competitor by giving them too much money.

The result of this strategy should be that the new project “sucks” users and their money away from the protocol that is being attacked.

The idea for the vampire attack came from the world of decentralized finance (DeFi). Most of the time, the source code for DeFi applications is open source. So, it’s easy to copy and run a similar app with just a few small changes.

Also, “copy” developers can easily make their own governance tokens and use them to make liquidity farming, a common way for users to make money, more profitable.

How did a vampire attack happen at Uniswap?

In the DeFi space, the decentralized exchange Uniswap started to become very popular in 2020. By the start of September 2020, the protocol’s daily trading volume had reached $1.8 billion, which was about the same as the top centralized cryptocurrency trading platforms.

From this situation came a project called SushiSwap. Its unknown creators didn’t hide the fact that the new protocol is a split off of Uniswap. SushiSwap was different in a big way, though. It had its own SUSHI token, which users got as a reward for farming in pools.

In 2022, how did the vampire attack on OpenSea happen?

The “vampires” also hurt the OpenSea NFT marketplace, which is where most non-fungible tokens are bought and sold.

At the beginning of 2022, LooksRare, another NFT trading platform, went live. Even though, unlike SushiSwap, the people who made it didn’t copy OpenSea’s smart contracts but instead wrote their own, the main part of their attack was also a platform token called LOOKS.

People who traded NFTs on LooksRare were given LOOK as a reward. But there was one catch: you could only take part in the distribution if you traded 3 ETH on OpenSea between June and December 2021.

In addition to this “promotion,” users of the new platform could also get LOOKS by staking, which would give them an annual return of about 500%. The commissions for sales on LooksRare were also more profitable. Because of the vampire attack, the number of trades on LooksRare went up quickly, while the number of trades on OpenSea went down.

At the same time, LooksRare had a lot fewer active users than its competitor. Researchers think that the few people who use the new marketplace actively use flash trading, which means that they make a lot of fake transactions in order to get LOOKS rewards. According to the CryptoSlam report, by the beginning of April, 95% of all transactions on LooksRare were fake.

After that, the site changed its rewards and started cracking down on unfair behavior, which made less people use it. The number of transactions dropped from $69 million on May 1, 2022 to just $1 million on August 15, 2022, according to The Block. At the same time, the number of fake trades dropped from 98% to 13%. At the same time, OpenSea got back to the top of the market for NFTs.