Monero Faces 51% Attack Threat From Qubic

Imagine sitting down for a quiet coffee, only to hear whispers about a major privacy coin, Monero, facing its toughest test yet. That’s the feeling around the crypto water cooler this week. A project called Qubic, led by IOTA co-founder Sergey Ivancheglo, says it now controls more than half of Monero’s computing power. That’s a big number, a very big number.

• A project called Qubic claims to control over 51% of Monero’s computing power, a significant development for the privacy coin.
• This level of control could allow for potential manipulation of the Monero network, raising concerns about its decentralization and core promises.
• Qubic states their intention was an “experiment” to demonstrate the power of economic incentives and coordinated mining strategies, rather than to harm Monero.

Qubic, in a blog post, called their move an “experiment.” They framed it as a “strategic, and at times combative, application of game theory.” It sounds like a chess match, but with real money and network stability on the line.

Now, developers, miners, and security experts are all asking the same question. Is Monero’s decentralization as strong as everyone thought? It’s a fair question when one entity claims such dominance.

Understanding the 51% Threshold

Let’s talk about what a 51% attack actually means. In a proof-of-work system, miners use their computers to solve complex puzzles. The first one to solve it gets to add a new block of transactions to the blockchain. If one group controls more than half of the total computing power, they can simply outrun everyone else.

This kind of control opens up a few unsettling possibilities. One is a “chain reorganization,” or “reorg.” This means replacing blocks that were already confirmed with new ones. It’s like changing the past, which is never a good look for a financial ledger.

Then there’s the double-spend. Imagine sending a token to one person, and then, using your majority control, sending the exact same token to another. It’s a digital sleight of hand that can cause chaos.

Perhaps the most concerning aspect for a coin like Monero is censorship. Monero prides itself on privacy and resistance to censorship. If a single entity controls the network, they could prevent certain payments from ever going through. That directly undermines Monero’s core promise.

These aren’t just theoretical threats. We’ve seen them play out before. Ethereum Classic, for example, was hit several times in 2020. Those attacks cost millions. Bitcoin Gold faced similar incidents in 2018 and 2020. Smaller tokens like Verge have also been targeted and destabilized.

Qubic’s Ascent and Monero’s Design

Monero has a unique design to protect itself. It uses something called the RandomX algorithm. This algorithm makes it hard for specialized mining machines, known as ASICs, to operate efficiently. The idea was to encourage regular computer CPUs to mine, keeping the network more decentralized and spread out among many individuals.

That’s why Qubic’s rapid rise is so notable. In May, Qubic held less than 2% of Monero’s total computing power. By late July, that figure had jumped to over 25%. Now, they claim to have crossed the 51% mark. It’s a swift climb, to say the least.

How did they do it? Qubic runs what they call a “useful proof-of-work” system. It’s a clever setup. They take the Monero mining rewards, convert them into USDT (a stablecoin), and then use those funds to buy and burn their own QUBIC tokens. This mechanism, a mix of mining strategy and token economics, steadily increased Qubic’s grip on Monero’s hashpower.

Charles Guillemet, the CTO of Ledger, weighed in on the situation. He said that “sustaining this attack is estimated to cost $75 million per day.” That’s a staggering amount of money. While it might be profitable in some way, he added, “it threatens to destroy confidence in the network almost overnight. Other miners are left with no incentive to continue.” It’s a high-stakes game.

BitMEX research also shared their thoughts. They stated, “Qubic say the end goal is to takeover all the block rewards of Monero, which essentially means full and sustained selfish mining. It is not clear whether they can actually achieve that. If this can be achieved, the value of the coin may fall.”

And fall it did. Monero’s XMR token is currently trading at $252. That’s a 6% drop in the last 24 hours, adding to a 13.5% decline over the past seven days. The market certainly reacted to the news.

The Experiment and What Comes Next

Qubic’s blog post made it clear: they say their takeover was not about breaking Monero. Instead, they aimed to prove a point. They wanted to show that economic incentives, combined with a well-coordinated mining strategy, can give a smaller protocol effective control over a much larger one.

The experiment, as Qubic describes it, was a test. Could mining resources be profitably moved from a target network into another protocol’s economic loop? It’s a fascinating question, if a little unsettling for the target.

Qubic claims that at its peak, their Monero mining was nearly three times more profitable than traditional Monero mining. They restructured their reward system, with community approval, to boost payouts to their validators (those who confirm transactions). This move drew miners away from other Monero pools, consolidating Qubic’s power.

Qubic’s initial push for majority control wasn’t without its challenges. They faced sustained distributed denial-of-service (DDOS) attacks. These attacks disrupted some of their peripheral services for over a week. But they failed to take down Qubic’s core network.

Sergey Ivancheglo, Qubic’s leader, mentioned on X that these DDOS attacks continued. He described them as “Monero Maxis returning the favor.” It seems the crypto world’s rivalries can get quite spirited.

For now, Qubic claims they have held back from fully taking over consensus. They cite concerns about the potential impact on XMR’s price. It’s a delicate balance, proving a point without destroying the very asset you’re experimenting with.

This situation raises a broader question: are other blockchains vulnerable? Bitcoin’s computing power is so vast that a 51% attack would be incredibly expensive. It’s almost impossible to pull off. But mid-tier proof-of-work coins are a different story. The cost to gain majority hashpower on networks like Ethereum Classic or Bitcoin Gold is much lower.

Privacy-focused coins, like Monero, face an additional hurdle. Their very nature is about resisting censorship and maintaining privacy. If one party gains control of the network, it directly undermines the privacy they are built to protect. It’s a bit of a paradox, isn’t it?

This whole episode serves as a stark reminder. The world of decentralized finance is still young. It’s full of clever ideas, but also unexpected challenges. How these networks adapt to such “experiments” will shape their future, and perhaps the future of digital money itself.