Enso Finance Plans “Vampire Attack” Targeting DeFi Index Protocols

Key Takeaways

  • Enso Finance, a new DeFi index and social trading platform, has announced its mainnet launch due on Dec. 9.
  • The launch will involve bootstrapping liquidity through a simultaneous vampire attack on six competing protocols.
  • Users migrating liquidity to the platform will be rewarded with NFTs and Enso’s native tokens.

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Enso Finance, a new index and social strategy creation platform, has announced its plans to bootstrap liquidity for its platform by launching a simultaneous “vampire attack” on six DeFi index protocols.

Enso Finance to Bootstrap Liquidity via “Vampire Attack”

Enso Finance is about to target six of DeFi’s leading index protocols.

In a Wednesday press release, the new DeFi index and social trading platform announced its mainnet launch due to launch on Dec. 9.

Enso plans to bootstrap liquidity through a controversial strategy dubbed a vampire attack, which involves enticing users to migrate liquidity from competing protocols by offering higher rewards or incentives for use.

Specifically, Enso plans to take aim at six DeFi index protocols: Index Coop, TokenSets, dHedge, PowerPool, PieDAO, and Indexed Finance. Each of the six protocols offers crypto indices or products that aggregate and track the performance of a basket of assets. They collectively hold about $900 million in total value locked. 

Starting Dec. 9, users will be able to transfer their index tokens from the six protocols over to Enso’s platform to begin earning various rewards. Enso will compensate users’ gas fee expenses for the migration and further reward them with NFTs containing “hidden gems” and Enso’s native tokens.

Commenting on the decision to bootstrap the project through a vampire attack, Enso co-founder Connor Howe said:

“Liquidity is the fuel that powers DeFi and it is the essence of Enso’s platform. We want to show the community just how innovative we are, and there’s no better way of doing so than incentivizing existing users to migrate. This is the first time anyone’s attempting to attack six protocols at once, so we’re very anxious to get started!”

The vampire attack liquidity bootstrapping strategy was pioneered by the decentralized exchange Sushi, when last year it successfully forked the code and drained roughly $1.5 billion worth of liquidity from the most prominent decentralized exchange in the space, Uniswap.

Now, Enso is planning to pull a similar move, only to six protocols simultaneously instead of one. In order to entice users to actually migrate their liquidity from its competitors, Enso would likely have to offer significantly higher rewards than these projects already do.

According to the press release, besides merely migrating liquidity from other protocols, users will also be able to create their own yield farming and investing strategies and supply fresh capital to the protocol.

Disclosure: At the time of writing, the author of this feature owned ETH and several other cryptocurrencies.

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Vampire Attack or Innovation? Basketdao Storms the DeFi Index Scene

Key Takeaways

  • BasketDAO’s main innovation is to replace DeFi tokens with their interest-bearing equivalents from Aave or Compound.
  • BDPI is already the second DeFi index token in terms of market cap.
  • With its governance token BASK, BasketDAO is incentivizing the migration of DPI holders.

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BasketDAO has announced its new DeFi index: BDPI.

By taking the same underlying assets and converting them to their yield-bearing equivalent, BasketDAO is offering better a better return than DeFi Pulse’s DPI. Innovation or vampire attack?

One DeFi Index to Rule Them All

At this point, DeFi Pulse’s DPI is a household name. Any DeFi user has seen DeFi Pulse’s analytics and has considered investing through their index DPI, representing many DeFi “blue chip” tokens. Still, competition has been mounting.

BasketDAO is trying to chip away at DPI’s dominance in the DeFi index game.

To do so, they will take the same assets with the same portfolio structure but convert these assets to their yield-bearing equivalent on lending protocols. Instead of SNX, for example, BasketDAO’s BDPI will have Aave’s interest-bearing SNX token, aSNX.

To encourage migration from DPI to BDPI, BasketDAO will offer its governance token BASK. BasketDAO declared that BASK is a governance token that will accrue value from the interest-bearing tokens in BDPI.

BasketDAO’s BDPI has already managed to reach a total value locked of $41 million, ranking it second behind Index Coop’s DPI in the list of DeFi indexes (Set Protocol is the website on which you can purchase DPI or other indexes).

DeFi Indexes by Total Value Locked. Data from Defi Llama.
DeFi Indexes by Total Value Locked. Data from Defi Llama.

Due to DeFi’s transparent nature, any project can build on top of any other project’s work. Sometimes, a new protocol is built on top of an older one because it has a different aim or target audience. This is the case with Cream Finance; built on top of Compound but targeted at a different audience. Often the cooperation goes smoothly.

There are cases, though, where the new protocol copies the older one and adds new incentives without truly innovating. This is what Sushiswap was accused of at its inception. To push users to migrate from Uniswap to its clone, Sushiswap offered its governance token as an incentive. This is referred to as a vampire attack.

In the case of BDPI, the line between innovation and vampire attack is hard to call.

On the one hand, BDPI is copying many elements of DPI’s product. On the other, the idea of replacing the DeFi tokens with interest-bearing ones is an important innovation that benefits users and guarantees higher returns. There is little reason for DPI holders to not migrate to BDPI – especially considering the liquidity mining rewards in the protocol’s governance token BASK.

Current price of $BASK, currently at a $6 million market cap. Data from CoinGecko.
The current price of $BASK, currently at a $6 million market cap. Data from CoinGecko.

Crypto Briefing asked Indexed.finance team member Lito Coen, another DeFi index project with $30 million total value locked, whether BasketDAO was likely to continue redirecting funds from DPI.

“We’ll see if BasketDAO can differentiate themselves over the long-term. DPI’s big strength is not the portfolio structure they use but their marketing skills and brand. This can’t be forked,” said Coen.

Disclaimer: The author held BTC, ETH, NDX, and several other cryptocurrencies at writing.

This news was brought to you by ANKR, our preferred DeFi Partner.

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