Events

Mr. Xinyu Zang
Ph.D. Candidate in Business Administration
Warrington College of Business
University of Florida, Gainesville

We examine the impact of vampire attack, a unique platform entry strategy in the blockchain ecosystem, on the operational performance of the incumbent platform. During the vampire attack period, the entrant attacker clones the targeted incumbent’s business model and drains liquidity from the incumbent to its cloned platform by providing tokenized incentives to the incumbent’s liquidity providers. Prior studies offer little insight into the impact of vampire attack strategy because of its uniqueness in platform cloning, tokenized incentives, and targeted attacks. We implement a quasi-experimental design by leveraging the vampire attack launched by Sushiswap (the attacker) against Uniswap (the incumbent). Specifically, we employ the fixed-effect difference-in-differences estimator, the fixed-effect counterfactual estimator, and the matrix completion counterfactual estimator for the identification. We examine both the deposit-side and exchange-side impact of the vampire attack on the operational performance of the liquidity pools on Uniswap. Surprisingly, the vampire attack has no significant effect on the liquidity provision on the deposit side. Even more surprisingly, the vampire attack significantly increases the incumbent’s trading volume on the exchange side. We further uncover the underlying reasons contributing to these intriguing results and reveal the differential impact of the vampire attack on the market for new and existing users. Our study refutes misleading information in extensive news and media reports regarding the overstated adverse impact of the vampire attack on the incumbent and highlights the importance of tokenized incentives.