Crypto glossary
Vampire attack
A vampire attack is when a new DeFi protocol lures liquidity and users away from an established rival by offering better incentives, often token rewards.
The classic case came in 2020, when SushiSwap, a fork of Uniswap's code, offered its SUSHI token to users who staked their Uniswap liquidity provider tokens. After a set period, it withdrew that liquidity from Uniswap and moved it to its own exchange, taking a large share of Uniswap's deposits almost overnight. Uniswap responded with its own token and an airdrop to past users.
Since then, the tactic has been repeated across DeFi and NFTs. Marketplaces have rewarded traders who listed on them instead of incumbents, and lending and restaking protocols have targeted rivals' deposits with points and airdrops. Because DeFi code is open source and liquidity is mobile, users can switch platforms with a few transactions.
Vampire attacks can force incumbents to improve or share value with users, but the liquidity they attract is often mercenary and leaves when rewards end. The token emissions used as bait can dilute holders heavily.
Example
A new DEX offers its token to anyone who migrates liquidity from a market-leading rival. Within a week it holds billions in deposits, but half of them leave once the reward rate is cut.