What are Vampire Attacks in Crypto?

What are Vampire Attacks in Crypto? The phrase “vampire attack” has its roots in a specific type of assault that occurs in wireless sensor networks; in these networks, the attacker drains the energy of a node, making it ineffective or worthless. The crypto community has appropriated the word and is now using it to describe strategies that aim to deplete a competitor’s vital resources or outperform them due to their advantages. Despite the pejorative associations of the word “attack,” a vampire assault is more accurately defined as an aggressive marketing or expansion plan than as overt robbery or evildoing.

What Are Vampire Attacks?

Comparison to Other Attack Types

Compared to the typical black hat or grey hat attacks seen in the DeFi and crypto industries, vampire attacks are light years ahead. Even though they’re known as an “attack,” they’re mostly a kind of healthy competition and entirely within the law. At now, the crypto realm is under assault from a variety of sophisticated threats, in addition to the usual suspects like brute force and phishing.

Here are some of the most prominent:

• Sybil attacks: Sybil attacks involve creating multiple fake identities to manipulate a system. In DeFi, this type of attack can take the form of a phoney liquidity provider or be used to accumulate control over a decentralized autonomous organization (DAO).
• Front-running attacks: Front-running attacks involve exploiting the time delay between when a transaction is sent and when it is processed. In DeFi, miners can extract value (MEV) from transactions before confirmation by sniping profitable transactions or utilizing sandwich methods to steal traders’ profits. Learn more about front running and miner extractable value.
• Insider attacks: Insider attacks involve an individual within the system abusing their access privileges. In DeFi, this attack can take the form of a developer adding a backdoor to a smart contract or an employee buying up/selling spot market tokens before an important announcement or product update.
• 51% attacks: This occurs when an attacker or group of attackers can temporarily gain more than 51% share of a network’s hash rate or validator set and can double-spend funds. This most commonly occurs after a blockchain re-org or fork.

Vampire attacks differ from other assaults in using white tactics to steal resources (such as users, liquidity, or trading volume) from competitor platforms instead of hacking, manipulating, or exploiting.

Usual Targets of Vampire Attacks

In the decentralized application (DApp) arena, vampire attacks are prevalent, but prime targets significantly increase the likelihood that a project would be victimized. A project’s susceptibility to a vampire assault increases depending on user uptake and liquidity. Vampire Attacks in Crypto: Any project utilizing liquidity pools falls under this category, including decentralized exchanges (DEXs), NFT markets, yield farms, etc. Adding these features to a project will make it more vulnerable to attacks:

• High liquidity: Projects with high liquidity are attractive targets for vampire attacks, as they offer a large pool of capital for the attacker to capture.
• Established user base: Projects with an installed user base are also vulnerable, as they have a community that the attacker can tap into.
• High fees: Projects that charge high fees to users are particularly vulnerable, as the attacker can offer lower costs to attract users away from the original project.
• Lack of innovation: Projects that fail to offer users new features or better incentives are prime targets for vampire attacks, as they are more likely to be eclipsed by a fast-moving competing project.

Steps To Carry Out a Vampire Attack

Now that we’ve understood what kind of projects are vulnerable, let’s look at the usual methods and steps a project typically takes before carrying out a vampire attack.

1. Identify the target platform. Offer higher incentives, such as airdrops, to attract users from the target platform. Employ several marketing methods to inform the target community about the new platform and its advantages.
2. Introduce new liquidity pools on the new platform to expand its offering gradually.
3. Use the new platform’s tokens as rewards to incentivize users to move their liquidity.
4. Increase liquidity and trading volume on the new platform.

This tactic may boost liquidity and user acquisition, but it has a reputation for being immoral and could hurt the ecosystem as a whole. Conversely, if competition heats up, it can lead to legacy initiatives that fail to evolve and benefit users in the long run.

Preventing Vampire Attacks

Now that you know the primary tactics used to launch these attacks, let’s look at the strategies and procedures projects employ to protect themselves from or bounce back from them.

Lock-in period

It is possible to request a particular time commitment from potential liquidity suppliers. This stops users from injecting funds into the network to take them out again as soon as they get their rewards, which would limit the protocol’s liquidity. Such actions are typical of new DEXes and are indicative of mercenary conduct.

Token withdrawal restrictions

Voting mechanism

User input into the protocol’s future is possible through a voting mechanism or a fully functional DAO structure. Letting users select protocols that better suit their interests while making the most of the potential for expansion can aid in preventing vampire attacks.

Dynamic rewards

Employing dynamic prizes to encourage liquidity or continuous participation to maximize member loyalty is possible. Platforms can help reduce user churn, attract dedicated users, and retain existing users by providing more substantial incentives for loyalty and devotion.

Token vesting

Vampire Attacks in Crypto: To keep their liquidity longer, platforms can vest incentives to those who give it. Going a step further, services even make customers lose out on benefits if they take out their liquidity before a specific minimum commitment term.

Security audits

By prioritizing security, platforms can build user confidence and gain an edge over untested competitors. These techniques can significantly reduce vampire attack threats while supporting healthy Bitcoin protocol competition.

Prominent Examples of Crypto Vampire Attacks

This is the most apparent vampire attack: dividing a blockchain or protocol, making changes, and presenting it as a competitor. The fork’s goal is to dethrone its predecessor and become the default platform in the future by providing better incentives for users, nodes, developers, investors, partners, and more. While not every vampire attack was successful, here are a few notable ones:

Vampire attacks boost competition among projects (regardless of maturity) and encourage innovation and improvement, which benefits the web3 ecosystem. Many initiatives that use vampire attack techniques have nothing special to offer. Still, some are better than the competition and have succeeded in establishing their worth. People who are only in it for the money usually end up eating each other before they fade into oblivion.