Vampire attacks are targeted attacks on cryptocurrency platforms that do not look like real attacks but come disguised as a new crypto project or fork that advertises to have more benefits than the original version under consideration. Such vampire attacks gradually loot all investors of a cryptocurrency platform. Vampire attacks are often targeted on decentralized exchanges, NFT marketplaces, and yield farms.
Such activities are referred to as vampire attacks because they gradually suck out the blood and life from the targeted cryptocurrency platforms. Such attacks are not always done with a malicious intent to harm a cryptocurrency platform. These attacks happen inadvertently as part of the aggressive, competitive strategies for growth in the cryptocurrency market.
Vampire attacks usually happen with crypto platforms that rely on the users and other external liquidity providers for validation. The new project or the vampire project markets itself as a project with many use cases and benefits than the original crypto platform. The users will naturally move to the new platform, and the original crypto platform will become nonexistent.
Examples Of A Vampire Attack?
Forks are evident instances of vampire attacks. They often offer better incentives for users, nodes, developers, investors, partners, and more. The fork gradually sucks the life out of the original crypto platform and goes on to become the default platform.
Some prominent examples of Vampire attacks are given below.
- SushiSwap/UniSwap: UniSwap was a decentralized crypto exchange that was doing good in the market. SushiSwap, originally intended to be a fork of the UniSwap platform emerged as an alternative with enhanced features in August 2020. Gradually, UniSwap lost a large amount of liquidity to SushiSwap.
- Blur/OpenSea: Blur is an NFT marketplace. It acted as a vampire attack by incentivizing the migration of traders from competing platforms such as OpenSea through airdrop incentives. The platform temporarily overpowered OpenSea in terms of high trading volume and royalty fees.
- Dash/Masternode: The masternodes, which were native innovations of the Dash network, became a threat to the network itself after many forks copied its use cases to build new protocols. Masternode projects such as PivX, SmartCash, ZCoin, and Dash Diamond were conceived as forks that copied the functions of the Dash network to beat it in the market.
How To Avoid Crypto Vampire Attacks?
Even though vampire attacks are not done on purpose, there are several methods that cryptocurrency platforms can employ to prevent such attacks.
1️⃣Lock-in Period
A lock-in period can sometimes prevent liquidity providers from withdrawing the liquidity immediately after receiving their rewards. This is a method that is widely used by new exchanges to prevent liquidity loss.
2️⃣Token Withdrawal Restrictions
Restricting the number of Liquidity Pool (LP) tokens that each user can withdraw during a given time can prevent the mass migration of users and liquidity to other prospective platforms. This prevents high slippage of the decentralized exchanges due to sudden dips in liquidity.
3️⃣Voting Mechanism
Every DEX should work as a full DAO structure with a voting mechanism so that users have a say in the working of the protocol. In case of an imminent vampire attack, users can choose protocols aligned with their interests while giving room for further growth.
4️⃣Dynamic Rewards
Vampire attacks can be prevented by offering dynamic rewards to incentivize loyalty. Such rewards can help in retaining users who contribute to liquidity or remain active for longer. In this way, platforms can reduce user deception, attract loyal users, and retain existing users.
5️⃣Security Audits
Cryptocurrency platforms can attract users by beefing up the security of the platform through regular security audits. Platforms can boost user confidence by setting them apart from competing platforms that are not adequately secure.
Also, Read: Cryptocurrency Money Laundering
The Bottom Line
While vampire attacks can prove to be disastrous for various well-off cryptocurrency platforms, it is also a sign of competition among different cryptocurrency platforms. The possibility of such attacks will serve as a wake-up call for cryptocurrency exchanges, NFT marketplaces, and other relevant institutions to make regular innovations and improvements to attract new users and retain the existing ones.
It should also be noted that many new platforms that have earned significant reputations through vampire attacks later proved to be not as good as they were advertised to be. So, you should take caution to make informed decisions to escape the volatility of cryptocurrency markets.
