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What Are Vampire Attacks- How Do They Manipulate The Crypto Industry?

Vampire attacks can be best described as an aggressive growth or marketing strategy to outcompete the competitors by draining the customers out of the existing platform.

Claudia Fischer

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Vampire Attacks Guide Article

Vampire Attacks: An Overview

Vampire attacks are originally termed for such attacks when an attacker drains the energy of any network and leaves that useless or inefficient. However, in the crypto community, vampire attacks are termed for such activities when a new protocol or crypto platform offers better services at cheaper or lower rates to attract the customers of the existing platform. 

This term is now being used by the crypto community where new crypto platforms attempt to attract the customers of the existing platforms by offering specific services which are not efficient or affordable on the existing platform. So, the new protocol offers the same or better services at cheaper rates to the customers and makes them adopt the new protocol.

In other words, vampire attacks can be best described as an aggressive growth or marketing strategy to outcompete the competitors by draining the customers out of the existing platform. Although such a strategy is termed in negative connotation as “attacks” it isn’t like the other hacks or attacks which affect the crypto market rather it manipulates it.

In the world of NFTs (non-fungible tokens) or Decentralized Finance (DeFi), vampire attacks occur when a new project of a fork of any existing platform offers the same and better services or incentives or rewards to attract the user by targeting the weak point of the existing platform. In such a way vampire attacks affect the network and cause a major loss in liquidity as the user shifts from one protocol to the new protocol.

Are Vampire Attacks Different From Other Attacks in Crypto?

Vampire attacks are termed as ‘attacks’ but they are not attacks but strategies to drain the energy or users of any platforms. Vampire attacks are different from the other attacks in crypto i.e., black or grey hat attacks, scams or hacks. Vampire attacks are considered to be legal but manipulating forms of competition. 

As it is clear that vampire attacks are different from the regular types of crypto attacks, we need to know about the different types of nuanced hacks or attacks existing in the crypto industry.

vampire attacks types

Apart from the regular crypto hacks, scams or phishing attacks, a few other nuanced crypto attacks are discussed below;

Sybil Attacks

Sybill attacks happen in DeFi when an attacker poses a fake identity to fool a user or system. The attacker manipulates the system and liquidates the funds of the user or the system.

Front-running Attacks

In front-running attacks, the attacker usually manipulates the transactions or transference in the guise of time delay and rolls out the funds of the users.

Insider Attacks

Insider attacks are usually carried out by the person working inside the ecosystem who uses the privileges of access and deceives the system by stealing the funds. Normally, the developer or any person working at the backend commits such kinds of crimes.

51% Attacks

Such attacks are carried out by some expert or a group of attackers who temporarily gain access to the 51% shares of the users and double the funds. This type of attack is commonly carried out in blockchains.

Common Victims of Vampire Attacks

Vampire attacks are quite common in Decentralized Finance (DeFi) and dApps are more prone to vampire attacks. However, some of the DeFi projects become an easy target of vampire attacks due to certain reasons. 

Also Read: 2023’ Top 3 Innovations of Decentralized Finance (DeFi)

Generally, the DeFi projects which mainly rely on liquidity and user adoption are more exposed to vampire attacks. Such easy prey includes liquidity pool projects, NFT (non-fungible tokens) marketplace and DEXs (decentralized exchanges).

There is a set of features which makes any DeFi project exposed to the vampire attack which are discussed below.

High Liquidity

Such projects having higher liquidity are more prone to vampire attacks as they offer enormous capital to the attacker to roll out. 

High Fee Structure

Those DeFi projects which charge heavy fees are the ones the vampire attacks focus on. The attacker offers the same and refined services to the users on a far lower fee structure.

Lack of Innovation

Those projects or protocols which do not modify themselves with the growing and advanced technology become easy prey for vampire attacks. The new protocols look for the needs of the users and lure them with advanced features.

Developed User Base

Those projects which have an established user base given an exact spot for the attacker to attack and manipulate the customers. 

How to Carry Out a Vampire Attack?

As of now, we know which kinds of DeFi projects are more prone to vampire attacks, now we shall understand how vampire attacks are carried out. There are four steps which a normal attacker follows to carry out the vampire attack in the crypto space.

  1. The attacker identifies the target platform and offers a higher incentive to lure the customer of the existing platform. Airdrop is a common example of such incentives.
  2. Vampire Attacker introduces a new liquidity pool and expands its offerings
  3. Offer the native token of the new platform as a reward.
  4. Increase the trading volume and liquidity over the new defi protocol.

Significant Examples of Vampire Attacks in Crypto

Blur Outperformed OpenSea

Blur, an NFT marketplace attracted many users from the competing platforms by giving incentive rewards under the veil of airdrops and outperformed the competitive NFT marketplace, OpenSea.

SushiSwap Against UniSwap

Sushiswap, the decentralized exchange offered enhanced incentives at the launch to attract the customers of Uniswap. However, Uniswap outperformed the competitor due to its user base.

Dash/Masternode Projects

Dash has faced multiple vampire attacks from different projects and then it developed the master nodes for blockchain utilization. 

Precautionary Measures For Vampire Attacks

After reading the article, one can understand how vampire attacks are carried out and how they manipulate the crypto industry. It can have positive impacts on the industry in the sense of giving rise the competition for better and cheaper services. On the other hand, it can adversely affect the market in the sense of putting the well-reputed firm or users at a loss. 

One should have a complete idea about the practices and methods by which these attacks can be tackled. There are certain things by which users and institutions should be aware to cope with the vampire attacks which are given below;

  • Be cautious of the decentralized exchanges (DEXs) offering enormous LP incentives because there are possibilities that they might be planning some kind of vampire attack
  • Do a complete research about the reputation of the exchange before adding funds or liquidity
  • Choose the most safe and secure exchange to ensure the safety of your assets
  • Keep navigating your LP positions daily and withdraw your digital assets if you find anything suspicious

Final Verdict

Apart from the controversial nature of the Vampire Attacks, they can be viewed positively for driving competition in the Web3 ecosystem for better and cheaper services. Sometimes, these attacks can be misleading as the system behind the attack might be doing that for personal gains. One should be cautious about such attackers and must adopt safety and security measures. Although these are not illegal they do have the power to manipulate the crypto market. 

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