[16] Vampire Attacks in Web 3
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🐇 Going further into the Web 3 rabbit hole, we are going to cover Vampire Attacks today, a growth tactic that’s fairly unique in Web 3.
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Often times, we hear that transparency and openness is one of the key features of Web 3.
Whether it’s the smart contract you publish on a blockchain like Ethereum, or your community discourse sitting in Discord, or your users’ complaints openly published on Twitter… the idea is that with transparency and openness, users and communities have more power to voice their opinions, potentially govern (or psuedo-govern), and drive the direction of the projects they choose to be part of.
Discords / Twitters being open and accessible are not uniquely Web 3, but they do add to the overall picture of the transparent and open culture in Web 3.
Publishing your Smart Contract on blockchain and having information readily available for others to consume, analyze and even build on top of is a uniquely Web 3 thing.
There is, of course, a lot of utility that comes from transparency and openness. An average user or member of your community can see on-chain what activity and transactions are taking place on the project’s platform.
It becomes a lot harder for projects to hide things.
In a way, transparency and openness are like “governance” mechanisms in and of themselves… keeping the bar high for project teams because your users and community can see what’s going on.
Like most things in Web 3, there is always more than what meets the eye. 👀 👀 👀
Vampire Attacks 🧛♀️ 🧛
A new growth tactic has popped up in Web 3 over the last few years.
It is called a Vampire Attack.
Here is how they generally work:
New Project Co. is building a similar (or same) product to a leading competitor (let’s call them Existing Project Co.)
New Project Co. can easily view and see a bunch of data of Existing Project Co. on the blockchain. Particularly which wallet addresses have interacted or transacted on Existing Project Co.’s platform or product.
New Project Co. identifies the list of users it wants to fork over from Existing Project Co.’s platform to New Project Co.’s platform.
New Project Co. carries out the Vampire Attack by airdropping targeted users tokens in New Project Co. with the goal of incentivizing the users to switch to New Project Co.’s platform. Related to this, New Project Co. has to communicate and generate content that communicates this offering to users (this includes sharing the message on social channels and also writing good documentation outlining all of this, so on and so forth).
And this is not theoretical… earlier this year, a platform called LooksRare built an NFT marketplace and carried out a Vampire Attack on OpenSea. Here is a good explainer / deep dive on what happened, but it’ll largely look like the above flow.
What is more interesting to look at is why did this happen or rather why could this happen?
OpenSea is often touted as the largest and most successful NFT marketplace / platform. But users are often frustrated with the lack of customer support and attention when issues arise. Users feel like they’ve helped prop up OpenSea because they’ve spent so much money on OpenSea (where OpenSea takes a 2.5% fee of each transaction).
So some users are upset that OpenSea, after making a bunch of money, cannot even scale up basic customer support. This, among other points of feedback, caused tension between OpenSea and some parts of its user base.
Details aside, the point is that you have a platform that is building on top of open systems (blockchain) and some users are dissatisfied with the support and service of the platform.
Then LooksRare saw this as an opportunity: a bunch of dissatisfied users on a competing platform can be enticed to switch over to a new platform. LooksRare launched a similar NFT marketplace, but went further by powering their platform with their own token. And to bootstrap growth, they airdropped a bunch of tokens to existing users of OpenSea. LooksRare also created an incentive system whereby you can stake your LooksRare tokens to generate additional LooksRare tokens and the more you trade on the LooksRare platform, the more you would earn in LooksRare token.
Again details aside, the point here is that a new platform was able to entice a bunch of users from a leading platform to try their product, and was able to do so systematically due to the open information available on Ethereum to carry out a Vampire Attack.
Vampire Attacks are hard to do in Web 2… you cannot easily copy the code or get access to user lists or data… all of which is necessary to design a better competing platform to entice users to jump ship from the existing platform.
In Web 3, because everything is more open and transparent, it’s easier to carry out a Vampire Attack.
This begs the question: is a Vampire Attack a one-way ticket to success and building a lasting competing platform?
A Vampire Attack is NOT guaranteed success 📈📉
A Vampire Attack instantly gives New Project Co. token distribution, where a bunch of users now hold tokens.
The downside is that this is a bit of a spray-and-pray distribution approach… you end up getting a mixed bag of users. Just like in any business (Web 2 or Web 3), there are good users and there are bad users.
In this case, if you airdrop a bunch of tokens to the users of your competition to get them to join your platform, you might end up getting users who don’t care about your product or platform and therefore aren’t going to be long-term supporters of your platform.
So naturally for these users, all they see is that they got a bunch of tokens for a platform they don’t care to support… which means their incentive is just to take the “free money” off the table and sell the tokens you just airdropped them. This, of course, creates selling pressure on the new project / platform.
Now it can also work the other way, where fed-up users now have an exit path to a better platform with better economics (i.e. New Project Co.’s platform).
Which way this lands will depend on a few things:
Did New Project Co. design their cryptoeconomics to incentivize holding and/or utility in the token? If users don’t have an incentive to hold your token, then guess what… assume they’ll sell your token.
Is New Project Co.’s product incrementally better than the competing product they just Vampire Attacked? A token or good cryptoeonomics cannot, and does not, solve for a terrible product.
Is New Project Co. solving user problems that existed in the old competing platform? Airdrops and economics only entice users to the top of the funnel, so users may come for the airdrop, but they stay for the utility.
While a Vampire Attack is NOT a guaranteed (sustained and long-term) success for New Project Co., the Vampire Attack does give New Project Co. a chance to fork the competing project’s user base.
But the stakes (pun intended) are also high, so the spotlight is now on New Project Co. to deliver on their promises… execution… execution… execution…
After all, when users have choice, they can easily return to the old platform.
So What?
In a world of Vampire Attacks…
The optimist in me thinks this raises the bar for building quality products and keeps the project teams and builders on their toes. 😅 🥵
In other words, if you neglect what your users want for too long, this may create the space for another entrant to Vampire Attack you.
In Web 2, once a platform has gotten to scale, users’ voices are often lost because power has shifted to the platform.
In Web 3, Vampire Attacks and similar tactics may end up being a natural check on platforms and projects… particularly the ones that have gotten tremendous scale in a short amount of time and feel like they can begin to ignore their users.
So what?
Don’t ignore your users. Listen to them and work with them. 🙏 🙏 🙏