Vampire Attacks in Web3 and DeFi: Explained

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Vampires have captivated people’s imaginations for centuries, but in the world of DeFi, Vampire attacks have a different meaning altogether. Vampire attacks occur when an attacker drains the energy of a network node or a DeFi protocol, causing significant damage to the entire network. In this article, we’ll explore what Vampire attacks are, their methods, and how to prevent them.

Vampire attacks are different from other types of cyber attacks prevalent in the web3 & DeFi world. While other attacks involve hacking, manipulating, or exploiting the system in other ways, Vampire attacks in the web3 world are a kind of hostile competition by a rival company with aggressive marketing tactics. Regular exploits in the Web3 world might involve front-running attacks, brute forcing, and insider attacks, manipulating, or exploiting the existing ecosystem in various ways. In the case of vampire attacks, there is a drainage of energy in the form of liquidity or users and investors from the target platform.

Projects that heavily rely on user adoption and liquidity, such as DEXs, yield farming platforms, and liquidity pools, are vulnerable to vampire attacks. Attackers can carry out a vampire attack by identifying the target platform, offering higher incentives, introducing new liquidity pools, using new platform tokens as rewards, and increasing liquidity and trading volume. However, this strategy is often viewed as unethical and can harm the overall health of the DeFi ecosystem. In the long run, copycat projects do not survive if they do not differentiate and innovate beyond the existing reward mechanisms.

Projects that are usually susceptible to Vampire attacks are those that rely heavily on user adoption and liquidity. These include decentralized exchanges (DEXs), yield farming platforms, liquidity pools, and other similar projects. Specifically, projects that are vulnerable to Vampire attacks typically have high liquidity, an established user base, high fees, and lack innovation.

— Logan King (founder BlockBaroners.com)

5 Steps to becoming a Vampire

Let’s say you want to carry out a vampire attack against a pre-established project. How do you go about it?

1. Identify the target platform: The first step in carrying out a Vampire attack is to identify the target platform, which is typically a decentralized exchange (DEX), yield farming platform, or liquidity pool.
2. Offer higher incentives: The attacker then offers higher incentives, such as lower fees or better rewards, to attract users from the target platform to the new platform.
3. Introduce new liquidity pools: The attacker introduces new liquidity pools on the new platform to entice users to move their liquidity from the target platform.
4. Use new platform’s tokens as rewards: The attacker uses the new platform’s tokens as rewards to incentivize users to move their liquidity. This can create a positive feedback loop where more users move their liquidity to the new platform, further increasing liquidity and trading volume.
5. Increase liquidity and trading volume: The final step is to increase liquidity and trading volume on the new platform, which can be achieved by offering even better rewards or incentives to users.

However, while this strategy can be effective in attracting users and increasing liquidity, it’s often viewed as unethical and can harm the overall health of the DeFi ecosystem. In the long run, copycat projects do not survive if they do not differentiate and innovate beyond the reward mechanisms already put in place.

PS: Don’t be a vampire attacker. Nobody likes vampires anymore.

Stakes, Garlic and Common Sense — Rules to keep Vampirism at Bay

To prevent Vampire attacks, there are simple measures that have almost been standardized in the web3 world. One such measure is a lock-in period that can be enforced on liquidity providers. During this lock-in period, users cannot withdraw their liquidity from the platform, making it difficult for copycat projects to attract users away from the original platform. Another measure is to offer better incentives, such as lower fees or higher returns, to liquidity providers who remain on the original platform. This makes it more attractive for users to stay on the original platform rather than move to a new platform.

In conclusion, Vampire attacks are a real threat to the DeFi ecosystem, and it is essential to understand what they are and how they are executed to prevent them from causing significant damage. Projects that are vulnerable to Vampire attacks should take necessary precautions, such as enforcing lock-in periods and offering better incentives to liquidity providers, to prevent copycat projects from stealing their users and liquidity. By doing so, the DeFi ecosystem can continue to grow and thrive, providing decentralized financial services to people around the world.

Here are the key takeaways:

1. Vampire attacks are a specific type of attack in which an attacker drains the energy of a network node or a DeFi protocol, causing significant damage to the entire network.
2. Vampire attacks in DeFi occur when a new project or protocol offers more incentives or rewards to users than the original project, resulting in mass user migration and abandonment of the original.
3. Vampire attacks are different from other types of cyber attacks prevalent in the web3 and DeFi world, such as Sybil attacks, front-running attacks, and insider attacks.
4. Projects that rely heavily on user adoption and liquidity, such as decentralized exchanges (DEXs), yield farming platforms, liquidity pools, and other similar projects, are usually susceptible to Vampire attacks.
5. To prevent Vampire attacks, simple measures such as lock-in periods that prevent users from withdrawing their liquidity and offering better incentives to liquidity providers can be enforced.
6. Copycat projects that do not differentiate and innovate beyond the reward mechanisms already put in place cannot survive in the long run.

By understanding and implementing the prevention techniques mentioned in this article, projects can protect themselves from Vampire attacks and continue to grow and thrive in the DeFi ecosystem.