Imagine the quiet hum of a digital vault, built for privacy, suddenly pierced by a bold claim. That is a bit like what happened recently in the world of Monero, a cryptocurrency long known for its focus on keeping transactions truly private. A project called Qubic, led by Sergey Ivancheglo, who helped start IOTA, announced it had taken control of more than half of Monero’s global hashrate. This is the computing power dedicated to securing the network.
- A project called Qubic, led by Sergey Ivancheglo, claimed to have taken control of over half of Monero’s global hashrate, potentially enabling a 51% attack. This announcement sparked significant discussion within the cryptocurrency community.
- Qubic’s approach involves “useful proof-of-work” (uPoW), where mining rewards are converted to USDT to burn QUBIC tokens, aiming for deflation and liquidity within its ecosystem. This model has raised questions about its long-term sustainability and impact.
- The event led to a noticeable drop in Monero’s (XMR) price, reflecting negative market sentiment. It also highlighted the ongoing challenges of balancing decentralization with the risk of concentrated control in proof-of-work networks.
If true, this means Qubic could, in theory, rearrange the Monero blockchain, stop certain transactions from going through, or even try to spend the same coins twice. It is what we call a 51% attack. Ivancheglo said this was a “stress test,” a way to help the Monero community prepare for future threats. But as you might guess, this announcement sparked quite a lively discussion among developers and security experts.
A 51% attack happens when one person or a group working together gains control of more than half of the total computing power, or hashrate, on a proof-of-work blockchain. Think of it like a voting system. If you control more than half the votes, you can decide what gets approved and what does not. This kind of attack can cause serious problems for a network.
We have seen this play out before. Ethereum Classic, for instance, faced several such reorganizations in 2020. Those events led to millions of dollars in losses. Bitcoin Gold also dealt with similar assaults in both 2018 and 2020. Even smaller networks, like Verge, have been targeted. These incidents show how having too much hashing power in one place can really shake up a cryptocurrency network.
Monero’s Unique Defenses and Qubic’s Approach
Monero has always prided itself on being resistant to ASIC centralization. ASICs are specialized mining machines that can make it much harder for regular people to mine. Monero uses an algorithm called RandomX, which is designed to be CPU-friendly. This means you can mine it with a standard computer processor, which helps keep the mining power spread out among many participants.
Qubic, however, introduced something called “useful proof-of-work” (uPoW). This model takes the Monero mining rewards, converts the XMR (Monero’s coin) into USDT (a stablecoin), and then uses that money to buy and burn QUBIC tokens. This burning process reduces the supply of QUBIC, making it deflationary. It also acts as a liquidity sink, pulling value into Qubic’s own ecosystem. It is a clever, if perhaps a bit cheeky, way to repurpose mining efforts.
The numbers tell a story of rapid growth. From mid-May to late July, Qubic’s share of the Monero network’s hashrate jumped dramatically. It went from less than 2% to over 25%. At times, Qubic even topped the rankings of mining pools. This kind of sudden surge certainly catches the eye, especially when it involves a privacy-focused chain like Monero.
The Community Reacts and What It Means
The crypto community quickly weighed in. Charles Guillemet, the Chief Technology Officer at Ledger, a well-known hardware wallet company, issued a warning on X. He suggested that Monero “appears to be in the midst of a successful 51% attack.” He pointed to signs of a major chain reorganization. It was a stark assessment from a respected voice.
Monero appears to be in the midst of a successful 51% attack.
There are signs of a major chain reorganization.
This is a critical situation for the privacy-focused cryptocurrency.
Stay safe. #Monero #XMR— Charles Guillemet (@P3b7_) July 26, 2024
Other experts also voiced their concerns. Yu Xian, the founder of SlowMist, a blockchain security firm, expressed doubt about Qubic’s economic model. When someone makes a move this big, the underlying economics always get a close look. Is it sustainable? Does it truly benefit the wider ecosystem, or just the one making the claim?
Qubic’s economics are a bit perplexing.
Their claimed 51% attack on Monero, if true, is a significant event.
But the long-term viability of their uPoW model, converting XMR to USDT to burn QUBIC, raises questions.
Is it truly sustainable, or just a short-term play? #Monero #Qubic— Yu Xian (@evilcos) July 26, 2024
Whether this whole situation is a hostile takeover or simply a very public stress test, the market responded. XMR, Monero’s native coin, saw its price drop. It fell by 6.65% in a single 24-hour period. This compounded a 16% decline over the course of the week. Price action often reflects the market’s immediate sentiment, and in this case, it was clearly negative.
This event brings up some interesting questions for privacy coins and proof-of-work networks generally. How do you balance decentralization with the potential for powerful entities to gain significant control? And when someone claims a “stress test,” how do you differentiate that from a genuine threat? It is a fine line, and the Monero community, I imagine, is now walking it very carefully.
