SushiSwap's open strategy: How the vampire attack "steals" liquidity?
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SushiSwap's open strategy: How the vampire attack "steals" liquidity?
This was an open conspiracy—SushiSwap successfully rose to prominence by launching a vampire attack on Uniswap.
Navigating Web3 tides with focused insightsWhen looking back at the 2020 DeFi boom several years from now, Sushiswap will undoubtedly stand out as an iconic presence.
Rapidly rising to over $1 billion in total value locked (TVL), quickly listing on three major exchanges, experiencing a sharp price surge followed by a 90% crash, founder dumping holdings, control transferred to FTX’s CEO, doubling from the bottom, liquidity migration—within just a few days, this DeFi drama unfolded with unpredictable twists and turns, making it impossible to guess what would happen next.
Before anyone realized it, Sushiswap had taken center stage, while Uniswap beside it began roaring in anger—after all, it was supposed to be the one basking in glory as the “unicorn.”
Looking back at Sushiswap’s rise, it could be summarized as a “Yuan Shikai-style victory”—parasitizing Uniswap, siphoning its liquidity, and seizing the fruits of its revolution.
This was an open conspiracy. By launching a vampire attack on Uniswap, Sushiswap successfully ascended.
Uniswap's Weaknesses
Undoubtedly, after two years of dormancy, Uniswap should have been the brightest star of the DeFi boom—the true “unicorn.”
Yet, Sushiswap, emerging out of nowhere by forking Uniswap, locked up $1.4 billion in just one week—capturing 75% of Uniswap’s liquidity—and turned the tables, becoming the biggest winner overnight.
Sushiswap brazenly stole the victory, provoking a furious response from Uniswap founder Hayden Adams:
“Sushi is something that any competent developer could create in a day’s work. It’s just whales playing a ‘whale game,’ trying to profit off the value Uniswap created through hype.”
As Hegel said, “Reality reveals itself as necessity in its unfolding.” Uniswap’s sudden assault naturally proves it has vulnerabilities—its weaknesses gave competitors a chance to overtake it.
First weakness: Blockchain performance.
The first constraint facing Uniswap lies in Ethereum’s performance bottleneck—slow transaction speeds, high fees, and the draconian rule that gas fees are non-refundable even if transfers fail.
According to data from OKLink by OKGroup, on September 2, Ethereum network fees hit a record high, exceeding 40,000 ETH, with recommended gas prices reaching 519.95 Gwei—the highest ever recorded—making transfer fees exceed $40 per transaction.
Users haven’t seen price gains yet, but they’re already drained by gas fees. The crypto community has long suffered under Ethereum’s limitations. Thus, DeFi exchanges built on high-performance blockchains like Serum on Solana and JustSwap on TRON rose to prominence, briefly becoming wealth hotspots.
Second weakness: Functional simplicity.
Uniswap’s core innovation lies in its Automated Market Maker (AMM) mechanism—a strength that can also become a weakness.
Uniswap is too functionally limited—it only satisfies the most basic trading needs, lacking real-time K-line charts and failing to meet users’ demand for limit orders to achieve target profits.
To address this, Unitrade emerged—an order-book exchange built on top of Uniswap’s liquidity.
Third and most fatal weakness: Insufficient incentives.
In plain terms: no token issuance. This is precisely why Sushiswap was able to steal the show.
Uniswap offers only one incentive to liquidity providers: transaction fee rewards. This is unfriendly to liquidity miners who bear risks and support Uniswap’s success, yet cannot gain proportionally more returns as Uniswap grows exponentially.
Moreover, users providing liquidity to AMM pools suffer impermanent loss—the value difference between holding tokens in an AMM pool versus simply holding them in a wallet. This temporary loss occurs whenever the market price of tokens in the AMM deviates significantly in either direction.
Thus, Sushiswap saw its opportunity.
Sushiswap directly copied Uniswap’s design, adopting the same AMM (Automated Market Maker) mechanism, but introduced token incentives.
SUSHI is minted with each Ethereum block, with no supply cap—1,000 SUSHI per block for the first 100,000 blocks, then 100 SUSHI per block thereafter.
Besides governance rights, SUSHI also has characteristics of a platform token. While 0.25% of trading fees go directly to active liquidity miners, another 0.05% is used to buy back SUSHI.
Thus, liquidity providers not only earn fee shares but also receive token rewards.
The initial mining yield, amplified tenfold, attracted a flood of miners.
A clever twist: For the first 100,000 blocks, SUSHI rewards were given to miners who provided liquidity to pools like USDC/ETH and SUSHI/ETH on Uniswap; after 100,000 blocks (about two weeks), Sushiswap migrated these 13 Uniswap pools to its own platform—effectively enabling a successful liquidity raid.
Vampire Attack
Summarizing Sushiswap’s rapid rise, the key factors include:
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Added token incentives, allowing liquidity providers to earn greater returns;
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SUSHI nominally possesses value traits of a platform token—dividends plus buybacks;
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Reused Uniswap’s mechanism, lowering investor learning curves—low barrier, high compatibility.
Additionally, the most critical factor: Sushiswap initially supported Uniswap’s token pools, openly enticing Uniswap users to participate in SUSHI mining before migrating liquidity—essentially sucking blood while clinging onto Uniswap, eroding competitor market share while boosting its own visibility and converting it into its own liquidity—a double win.
Cryptocurrency analyst Martin Krug believes Sushiswap’s approach is exactly a vampire attack.
Simply put, a cryptocurrency vampire attack involves transferring another project’s liquidity to one’s own, stripping competing platforms of liquidity while increasing one’s own value—enabling rapid ascent.
Krug outlines two levels of vampire attacks:
Simple vampire attack: A has no governance token, only B issues $B.
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Copy project A’s open-source smart contracts and frontend system. At this point, A hasn’t issued any token, merely collecting trading fees and redistributing them to liquidity providers.
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Migrate liquidity mining from project A to project B. Use incentive mechanisms to distribute $B tokens to users who follow the migration.
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Project B begins governance, sharing profits with $B holders.
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Eventually, project A gradually loses liquidity and thus platform revenue.
This is exactly what Sushiswap is doing to Uniswap.
Sushiswap openly called on Uniswap’s liquidity providers to transfer their Uniswap V2 LP tokens to Sushiswap’s pools to earn SUSHI rewards.
Driven by profit, Uniswap’s liquidity providers slowly migrated to Sushiswap, effectively draining Uniswap dry.
Beyond this simple form, there’s also a more complex version.
Complex vampire attack: Assume both A and B have governance tokens—short $A, long $B.
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Accumulate capital: Sell $B to fill the project treasury.
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Use half the funds to borrow as much $A as possible from lending markets.
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Use the remaining half to buy $B and deposit it into lending markets to leverage long positions (buying even more $B).
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Migrate liquidity mining from project A to project B. As in the simple version, offer $B as rewards, while project B starts dumping $A to suppress its price—even using part of the funds to borrow more $A for selling—while simultaneously buying $B to inflate its market price.
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Encourage liquidity providers to move from platform A to platform B. As $A rapidly declines, platform A gradually loses liquidity.
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Buy back $A at low prices to repay loans, and recover capital via prior leveraged operations.
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Finally, distribute $USD and $B to $B holders.
Repeat the steps above, leveraging increased impact on the market prices of $A and $B, achieving the goal of shifting users from project A to project B.
A vampire attack can be understood as a simple yet overt “hack”—it can be the strong bullying the weak, or the weak overthrowing the strong.
Liquidity In-Fighting and Counterattacks
Using a trendy term today, this might be described as “liquidity rat race” (neijuan).
In Martin Krug’s view, current DeFi liquidity mining protocols may all face vampire attacks—especially after Sushiswap proved this method effective. Forking projects, parasitizing existing ones, or migrating mining to steal liquidity could become new strategies for many teams, since “stealing” is the fastest path to “wealth.”
For example, Swerve, the recently popular Curve fork.
Data from DeBank shows Swerve reached $418 million in TVL within just three days, while Curve’s TVL stood at $1 billion—with a slight decline in the past week.
In design, Swerve isn’t a full fork—it directly calls Curve’s trading contract. What Swerve adds is essentially a proxy layer, with funds stored on Swerve. This too qualifies as parasitism and bloodsucking.
Facing potential attack risks, Krug urges projects to quickly implement methods to lock in liquidity or reward long-term providers, preventing others from executing migratory mining attacks.
Now, Sushiswap’s founder has handed control to FTX’s Sam Bankman-Fried (SBF), who tweeted that Sushiswap would delay liquidity migration. Once confident the migration code works properly (possibly requiring updates), a 48-hour countdown will begin.
It has proven that miners are loyal only to returns and yields—not to platforms.
Faced with this aggressive liquidity “raid,” Uniswap’s team can only bide its time while accelerating development of V3. According to Twitter leaks, V3 will launch with a native token and enhanced incentives to draw liquidity back—a new battle for liquidity looms.
Yenwen Feng, founder of Perpetual Protocol, tweeted that if he were Hayden Adams (Uniswap’s founder), he’d launch Uniswap V3 with a token and initiate a vampire attack—just as Sushiswap once did to Uniswap.
In the DeFi world, the war for liquidity will never cease. Crypto vampires lurk in the dark, ready to reappear at any moment.
References
1. Vampire Attack/Vampire Mining - an attack on liquidity dependent protocols, Martin Krug
2. "Understanding SushiSwap’s Vampire Attack: Criticized as Similar to Subprime CDOs, How It Drained Uniswap’s Liquidity," Blocktempo
*TechFlow reminds all investors to beware of chasing high prices. The views expressed herein do not constitute investment advice.
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