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In what could be considered a controversial bootstrapping strategy, Enso Finance has announced that it’s launching a month-long vampire attack that could drain nearly $1 billion from six competing DeFi protocols.
A vampire attack sources liquidity by siphoning it from one (or several) competing projects. The vampire analogy ends there—the initial attack doesn’t actually change the nature of the project that was targeted.
Enso, a platform that allows users to combine investing strategies into “metastrategies” and follow others, launched earlier this year. It will target six protocols with an accumulated $941.5 million total value locked as of Tuesday afternoon, according to data from DeFi Llama.
Set Protocol and Index Coop, which allow users to create their own indexes, account for more than $400 million each in total value locked (TVL), a metric that approximates the amount of money flowing through any given DeFi protocol. dHedge, a decentralized hedge fund, and PowerPool, an automated DeFi token portfolio manager, account for $21 million and $18 million, respectively. PieDAO, a platform for building DeFi ETFs, has $13.8 million, and Indexed, a protocol for passive portfolio management, has $11.7 million in TVL.
Enso itself has set out to provide all of those features and will gamify the migration process with a virtual arcade that reimburses users's gas fees (transaction costs on the Ethereum network) as they migrate liquidity during the 4-week vampire attack. Liquidity providers who migrate will also be rewarded with NFTs—unique collectible tokens—and Enso native tokens once the attack is complete.
DeFi is a catch-all term for financial tools built on a blockchain. Unlike traditional finance, DeFi projects for lending, borrowing, and investing in assets are not controlled by a central organization like a bank. According to DeFi Llama, the TVL in such projects has reached $259 billion across blockchain networks, including Ethereum, Solana, Avalanche and others.
The decentralized and community-driven nature of the market has led to some head-turning launch strategies. In fact, the Enso Finance team was going to call its go-to-market strategy a liquidity migration, but decided a vampire attack would draw more attention—even if some of it is negative.
“I actually think it’s very positive. Because it’s what traditional players do. [UK mobile service providers] Swisscom or BT incentivize customers to change plans all the time,” Enso cofounder Connor Howe told Decrypt. “Sure, it might sound bad, it might sound a bit aggressive, but sometimes you have to take a risk. We chose the word ‘vampire attack’ instead of liquidity migration because it’s more powerful and people understand what it is.”
One of the most well-known vampire attacks occurred last year, when an anonymous developer known as Chef Nomi forked the open source code for crypto exchange Uniswap and launched SushiSwap, a clone that was able to drain nearly $1 billion from its predecessor over the course of a week.
The strategy was seen as controversial, to say the least, especially when Chef Nomi withdrew $14 million from the $SUSHI liquidity pool and caused its price to plummet 73%. It even stoked talks of legal action against the developer, before Chef Nomi transferred control of the exchange to FTX CEO Sam Bankman-Fried and later returned the funds he had withdrawn.
Although Enso is very intentionally calling its liquidity migration a “vampire attack” to get attention, it’s not a perfect comparison. For starters, Howe says he and his team have written their own code instead of cloning any one of the projects they’re targeting.
The project raised $5 million during a private funding round co-led by Polychain Capital and Dfinity Beacon Fund in April, saying it would use the capital to build its community and platform.
“Crypto Twitter has a lot of people talking about price actions. And I personally want people to start putting their money where their mouth is,” Howe said. “I want them to create a strategy and show the community that they have actually bought and how much they’ve invested themselves. And then they can have people follow it or they can prove what they’re saying is true.”