What Are Vampire Attacks and Their Role in Crypto? A Complete Guide for the Beginners

Vampire Attacks in Crypto: An Overview

A vampire attack is a type of growth strategy or aggressive marketing to drain the potential of one platform to benefit the other competitor. In simple words, a vampire attack is a method in decentralized finance (DeFi) in which one protocol offers cheaper rates with the same services than the other one to steal other’s investors and customers.

The crypto industry is expanding day by day and so is the case with competition in the crypto industry. New coins, exchanges and other related crypto firms are being introduced in the market giving rise a tough competition with one another by offering new services. There come the term vampire attacks, by which new crypto platforms steal the customers of the existing platforms by offering the same or better services at lower rates.

Are Vampire Attacks Different From Other Attacks?

Vampire attacks are quite different from the common hacks, scams or crypto attacks. Although vampire attacks are termed attacks they are not illegal. Rather, vampire attacks come in terms of competition in the crypto industry in the sense of services.

Also Read: Who Are Cypherpunks? What Is Their Role In Crypto Development? An Overview

Vampire attacks utilized different types of strategies and approaches to attract the customers of old platforms. New crypto platforms lure customers by offering better, more advanced and favourable services at lower rates than they are paying before. So, these vampire attacks are not like regular i.e., hacks, phishing attacks, brute forcing, Sybil attacks, front running attacks and insider attacks.

How Does Vampire Attack Work in Crypto?

Vampire attacks are primarily offered as incentive-based services to the customers. Whenever a new crypto firm like an exchange or broker comes into the market, works to expand and adopt a marketing tactic to get more and more customers. This helps boost liquidity and trading volume from other projects.

To make this strategy work, new platforms create attractive programs to attract users from existing crypto platforms. For example, if a new decentralized exchange (DEX) wants to get users from the old exchange, it can encourage users to move their LP tokens to the new platform for better rewards.

Rewards come in various forms, but using the new platform’s tokens is the most common way to boost usage and liquidity. This strategy helps the new platform increase token use, trading volume, and liquidity on their exchange.

Vampire Attack’s Targets

Vampire attacks are common in dApps, but there few other projects which also fall victim to vampire attacks. Those applications, exchanges or other related crypto platforms which rely on liquidity and user adoption become easy prey for vampire attacks. Non-fungible tokens (NFT) marketplace, decentralized exchanges (DEXs), liquidity pools, and yield farms are the common examples that fall victim to such attacks.

In 2022, we saw the advent of a new generation of #NFT marketplaces like #LooksRare, #X2Y2, #Blur and #MagicEden that are challenging the supremacy of OpenSea and reshaping the NFT landscape. 💪

Will these continue to bloom in 2023? https://t.co/ljUtR7ldAr pic.twitter.com/lZpxWJELj9

— CoinMarketCap (@CoinMarketCap) January 12, 2023

There are certain project features which make crypto platforms more vulnerable to an attack.

• High Fees
  Projects with high user fees are at risk. Attackers may lure users away by offering lower fees.
• High Liquidity
  Projects with high liquidity are prone to vampire attacks because they provide a big capital pool for attackers to seize.
• Established User Base
  Projects with excessive users can also be at risk because the attacker can exploit their community.
• Lack of Innovation
  Projects without innovation or benefits for users are vulnerable to vampire attacks. They risk getting overshadowed by more dynamic competitors.

Preventive Measures for Vampire Attacks in Crypto

Vampire attacks are a growing concern in crypto. As new projects and investments rise, so does the risk. Here are tips to safeguard your investment:

• Watch out for DEXes with big LP incentives; they might be planning a vampire attack.
• Research new DEXes before adding liquidity; check their reputation and funding.
• Choose DEXes with a solid security history.
• Regularly check your LP positions and be ready to withdraw if you spot anything fishy.

Conclusion

Despite the controversial nature of Vampire attacks, they can be viewed as a driving force for the web3 ecosystem. They foster healthy competition, encourage innovation, and push for improvement. These are not illegal but make the decision after complete research and opt for the best option favorable to your needs.