SushiSwap challenges Uniswap, are you familiar with the latest "vampire mining attack"?

SushiSwap, a clone of Uniswap, has risen rapidly, attracting over 200 million in funds within two days. The liquidity mining project of SushiSwap, which draws liquidity from other platforms, has sparked discussions in the community about "vampire mining attacks." What exactly is a vampire mining attack, and what are the advanced attack methods?

SushiSwap Craze

Ever since 1inch copied Uniswap's code to create their own automated market maker platform, mooniswap, people have been concerned that the absence of liquidity mining on Uniswap could lead to a "Uniswap fork craze," prompting liquidity providers on the original platform to withdraw funds, thereby negatively impacting Uniswap.

However, as mooniswap lacked incentives in its token mechanism, it did not attract many liquidity providers. Another clone, SushiSwap, has garnered attention. Since the launch of liquidity mining on SushiSwap, the Total Value Locked (TVL) on the Uniswap platform increased by $270 million in just two days (initially by staking Uniswap LP tokens on SushiSwap to earn SUSHI tokens).

Currently, the SUSHI token is priced at around $1.8, with no real utility value, only governance rights. However, once Uniswap's liquidity migrates to SushiSwap, SUSHI token holders will be able to share in 0.05% of the platform's trading fee revenue.

SushiSwap, a mining project that draws liquidity from other platforms, has recently coined a specific term for this practice called "vampire mining."

Vampire Mining Attack

The concept of a "vampire mining attack" was proposed by Swiss cryptocurrency analyst Martin Krung in a recent article. It suggests that all protocols relying on liquidity are inevitably susceptible to "vampire mining attacks." Just as SushiSwap strategized against Uniswap, with liquidity mining on SushiSwap but not on Uniswap, most liquidity providers will choose to transfer liquidity to SushiSwap for higher returns (assuming similar contract risks), ultimately causing Uniswap to decline due to drained liquidity.

Building upon this foundation, Krung describes a more advanced form of vampire mining attack in his article. Assuming platforms A and B are both automated market maker (AMM) platforms (A being the original and B being a clone), and both platforms have their own tokens supported by decentralized lending platforms.

Initially, before the launch, platform B raises a starting fund, deposits it as collateral on the lending platform, borrows A tokens, sells them on the market, and buys its own B tokens. Subsequently, it uses its B tokens as collateral to borrow A tokens, sell them, and continue buying its B tokens, repeating this process. Leveraging can also be utilized to amplify the effects.

Eventually, A tokens will plummet due to the selling pressure, while B tokens will rise from continuous buying. In pursuit of maximum profit, liquidity providers on platform A will shift to platform B, leading to the decline of A platform and the victory of B platform.

However, this advanced attack method involves several assumptions and is challenging to implement. Whether Uniswap will be replaced by SushiSwap or is merely assisting Uniswap will be revealed after the initial two-week period.