Definition of Vampire Attack

" in the crypto market The concept of "vampire attack" is very simple. It means that the attacker creates a protocol that is the same or similar to the one being attacked, and at the same time gives it a more profitable and attractive incentive mechanism to gain the other party's market share or users. This way, it means "sucking blood".

We use two examples to further understand this concept.

SushiSwap ? Uniswap

SushiSwap can be called the first and most famous "vampire" in the encryption market, and its attack target is Uniswap.

Weaknesses of Uniswap

Uniswap is an open source AMM decentralized exchange. In the DeFi Summer of 2020, Uniswap enjoyed the dividends brought by the market. With the joint blessing of the V2 version, its TVL increased from US$70 million in June to US$300 million at the end of August, and was promoted to the DEX track. head player.

For more information about Uniswap, please refer to the entry: What is Uniswap

At the same time, there are also hidden dangers in the development path of Uniswap - —It did not issue governance tokens at the time, nor did it change its incentive mechanism with the development of the platform (at that time, the rewards for liquidity providers were only transaction fees). This is undoubtedly a major weakness of the platform, because liquidity While sex providers support the operation of the platform and bear impermanent losses, they are unable to obtain more dividends with the rapid growth of the platform. At this time, the developer anonymously known as "Chef Nomi" seized on this weakness.

SushiSwap Innovation

Nomi established SushiSwap, which is equivalent to a simple fork of Uniswap. It is worth noting that SushiSwap has a very key new feature: the platform’s governance agent. A combination of currency (SUSHI) and liquidity staking rewards.

As a governance token, SUSHI also has the characteristics of a platform currency. In SushiSwap, 0.25% of the transaction fees in the pool are directly allocated to active liquidity providers, and 0.05% is allocated to active liquidity providers. It is exchanged for SUSHI and distributed to SUSHI holders (essentially equivalent to a repurchase). This means that liquidity providers can not only get a share of platform transaction fees, but also receive token rewards.

The next thing is the point. SushiSwap stipulates that SUSHI will only be rewarded to users who provide liquidity in the form of Uniswap LP tokens. In other words, this is to attract Uniswap users to participate in SUSHI mining together.

The “blood-sucking” process

SushiSwap’s staking contract and SUSHI distribution began on August 28, 2020. The initial rewards are very aggressive, with the initial interest rate being as high as 1000% annual interest rate. Under such incentives, users rushed to Uniswap to deposit assets into eligible pools (13 pools including USDC/ETH, SUSHI/ETH, etc.) in exchange for Uniswap V2 LP tokens, and then quickly These tokens are put into the SushiSwap contract.

After 100,000 blocks (about two weeks), SushiSwap launched liquidity migration, that is, all Uniswap LP tokens were transferred to SushiSwap and exchanged for corresponding token pairs on Uniswap , and then continue to use tokens to initialize a new SushiSwap liquidity pool. When the migration ended, SushiSwap had accumulated approximately $800 million in tokens, accounting for approximately 55% of Uniswap’s liquidity at the time, while UniSwap’s TVL plummeted by approximately $400 million.

Looking back on the whole incident, SushiSwap forked Uniswap’s architecture and introduced a new reward mechanism to create an image that is “based on Uniswap but higher than Uniswap”. Incentivized users have transferred funds to SushiSwap. Although Uniswap finally survived and launched its own token UNI, SushiSwap was still successful, that is, it completed the accumulation of a large amount of liquidity in a short period of time through a blood-sucking strategy and became one of the top DEXs.

LooksRare ? OpenSea

Early last year, a vampire attack also occurred in the NFT market, launched by LooksRare against OpenSea.

Weaknesses of OpenSea

OpenSea is a comprehensive NFT trading platform. Users can buy and sell various forms of NFT such as encrypted art, game props, virtual real estate, domain names, and financial products on OpenSea. The platform supports NFTs in ERC-721 and ERC-1155 formats. The platform's secondary transaction fee is 2.5%, and the primary placement (Mint) can be up to 10%.

As an oligopoly in the NFT trading platform, OpenSea has the majority of the market share and has also received negative comments from many users, including the inconsistency of payment methods (users need to frequently convert ETH and WETH to complete different transactions). form of purchase), excessive handling fees, etc. The main problem comes from the fact that OpenSea's organizational structure is too centralized and relies heavily on traditional capital. It is not decentralized enough and is not Web 3.0 enough.

LooksRare’s innovation

LooksRare, launched in January 2022, is also an NFT trading platform. It draws on the experience of OpenSea and makes some innovations, including:

• Allows hybrid payment functions for ETH and WETH. On the LooksRare platform, both can be used to bid and pay;
• Series quotes are supported. This design optimizes the experience of some buyers who only value the theme of the NFT series and do not care about the specific details of each order, because they do not need to place orders one by one;
• The most important thing is the upgrade of the charging and incentive mechanisms. . LooksRare charges a 2% fee on all transactions and distributes these fee revenues to stakers of LooksRare’s native tokens. The platform expressed its hope to challenge OpenSea’s dominance in the NFT track by allocating handling fees to the community.

Does this operation look familiar? This is the core idea of the vampire strategy: target the weaknesses of a head project, and then prescribe the right medicine to better attract and control users.

The "blood-sucking" process

LooksRare's specific blood-sucking process is simpler and more crude.

It identifies the major NFT traders on OpenSea through system screening (the cumulative trading volume on OpenSea within half a year has reached more than 3ETH), and then directly lists the short positions of these major traders in its own native token LOOKS airdrop. List - However, if these large investors want to receive LOOKS, they must first trade 1 NFT on LooksRare.

This blood-sucking method directly converted many OpenSea users into LooksRare traders, making LooksRare's market value jump to US$1 billion, and the LOOKS price also rose to around $7, up to $7.1.

Summary

For the project side, the vampire attack is nothing more than a blow to the bottom of the cauldron, which also brings negative impact to the market. Volatility risk; but from the perspective of the entire crypto market, this kind of sharp confrontation between projects can also be a good thing - it makes projects become entangled with each other. In this regard, vampire attacks not only bring the possibility of improving user experience, but also help alleviate the market centralization risk of oligopoly projects monopolizing users and market share.