What Is a VAMPIRE ATTACK? SUSHISWAP Saga Explained

so what is a vampire attack and how is sushi swap able to use a vampire attack to attract over 1 billion dollars of liquidity in less than a week you'll find answers to these questions in this video before we start if you're interested in decentralized finance make sure you subscribe to this channel also if you're new to defy you may want to watch my other videos on liquidity pools and yield farming first as they cover a lot of basic concepts mentioned in this video i'll link them in the description box below first of all let's see how it all started on the 28th of august in the midst of new d5 projects popping up pretty much every day a new project called sushi swap launched the project quickly gained more and more traction in the defy community as it aimed at directly competing with uni swap by forking the project and siphoning out liquidity with a process later called a vampire attack the main goal of the project was to create a community-governed automated market maker and fairly distribute its token sushi the concept of a vampire attack although quite simple is quite ingenious in its nature as it creates very strong incentives for liquidity providers to migrate their liquidity to a new platform let's see what a vampire attack is all about the first step of a vampire attack is to incentivize liquidity providers of another platform to stake their lp tokens which represent supplied liquidity to a new platform in sushi's case uniswap's liquidity providers were incentivized to stake their lp tokens on sushi swap so they could receive extra rewards paid in the sushi token sushi swap started with a quite aggressive admission schedule for the sushi token 1000 sushi per ethereum block distributed to uni-swap's liquidity providers across multiple different pools such as snx eat land eath wi-fi is link is the idea of involving multiple strong defy communities had already been successfully used by yam and was reused by sushi swap once enough liquidity has been attracted to a protocol the next step of a vampire attack is to migrate state lp tokens to a new platform by doing this a new platform can use the migrated liquidity for their own automated market maker stealing not only the liquidity but also trading volume and the users of the first platform the liquidity is basically sucked out of the first platform and moved into the second platform hence the name vampire attack when it came to sushi this is where sushi's masterchef contract came into play the masterchef contract once triggered was able to migrate lp tokens from uniswap to sushi swap basically stealing uniswap's liquidity once liquidity had been migrated it could be instantly used for trading on sushi swap to encourage liquidity providers to participate in the migration some extra incentives were planned first of all the sushi liquidity mining program would continue after the migration but with a decreased emission 100 sushi per block on top of that people who decided to stake their sushi tokens instead of selling them would be getting a chunk of trading fees from sushi swap at the end of a successful vampire attack a new protocol should in theory capture a significant amount of the original project's liquidity users and trading volume this is basically how the vampire attack was planned in practice there were quite a few unforeseen events happening along the way let's see how the sushi swap launch actually played out sushi swap led by an anonymous creator chef nomi started attracting a lot of capital straight after the launch liquidity providers attracted by high apys of between 200 and 1000 percent started moving more and more of their uni swaps lp tokens into sushi swap a few hours after lp tokens taking was enabled sushi swap reached 150 million dollars in locked value the initial problem of chef nomi having an admin key to the migration contract was quickly resolved by transferring his admin power to a time lock contract adding a 48 hour delay to trigger any admin functions although sushi swap contracts were launched and audited the project attracted several audits from a few notable security companies chef nomi also decided to start governance of sushi where sushi eath lp tokens could be used for voting the yield farming craze continued on the 1st of september finals announced the listing of sushi swap and this resulted in the price of sushi going as high as 15 dollars a couple of days later and we were talking about 1 billion dollars in locked value on top of that a couple of security audits were completed with no critical or high severity issues found on the 4th of september one of the biggest holders of sushi sambang van fried spf the ceo of ftx and almeda research came out with a future proposal for migrating part of sushi swap to a new trading platform serum built on the solana blockchain in the meantime the community voted for an early migration from uniswap to sushi swap to incentivize liquidity providers with high token distribution for a few extra days after the migration the next big unexpected event came from chef nomi himself who sold his entire sushi steak worth around 14 million dollars for eth on the 5th of september this was possible because although sushi swap didn't have a pre-mine or an initial team allocation it had a death fund where 10 percent of all the distributed tokens were allocated and which chef nomi had access to after the initial attempt to justify his decision as something good for the project the community lost trust in chef nomi who later decided to leave the project this led to yet another unexpected event where chef nomi basically transferred the control of the project to sbf who decided to be a savior of sushi and provide even more incentives to the liquidity providers to stay for the migration with an extra 1 million of sushi tokens on top of that sbf initialized a transfer of the admin key to a multi-sig address the migration of liquidity to the sushi swap platform was carried out by sbf on the 9th of september from the peak of 1.2 billion dollars of locked value around 840 million dollars was left for the migration everything went smoothly with all the remaining liquidity moved to sushi swap allowing trading of the tokens supported by the migration because of the early migration there were still a few more days left with a high emission schedule of 1000 sushi per block this will later drop to 100 per block or even 50 per block if voted in by the community it remains to be seen if the liquidity stays on sushi swap after the high reward period is over was that the end of unexpected events not really time for yet another plot twist on the 11th of august two days after the migration chef nomi came back returning 14 million dollars worth of it to the death fund and apologizing to the community sushi swap is clearly one of the most polarizing projects in the defy space i believe that experiments like this are much needed in our nascent industry and they will strengthen the whole ecosystem and make it more resilient in the future so what is your opinion on sushi swap do you think it will keep some of the liquidity after the high reward period is over becoming one of the standard amms in the space comment down below also if you enjoyed this video hit the like button subscribe to my channel and check out cinematics on patreon to join our private community of defy scholars thanks for watching

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