Monero, the cryptocurrency built for privacy, is facing one of its toughest security tests. A project called Qubic, led by Sergey Ivancheglo, a co-founder of IOTA, claims it now controls over half of Monero’s network mining power. This level of control, in what’s known as a proof-of-work system, gives them a powerful hand. They could potentially change transaction records, stop payments from going through, or even spend the same money twice.
This rapid shift has certainly raised eyebrows. Back in May, Qubic held less than 2% of Monero’s mining power, also called hashrate. By late July, that figure jumped to over 25%. Then, in August, Qubic announced it had passed the 51% mark. This sudden dominance had an immediate impact on the market. Monero’s coin, XMR, saw its value drop 6% in just 24 hours. Over the week, it fell by a total of 13.5%.
What a 51% Attack Means
Imagine a digital ledger where computers compete to add new pages of transactions. This is how proof-of-work networks operate. If one person or a single group gains control of more than half of all the computing power, they can effectively outpace everyone else. This lets them reorganize the ledger, replacing confirmed pages and potentially making double payments.
Such a powerful grip also allows them to block certain transactions. This is a particularly big deal for Monero, which prides itself on keeping transactions private. These kinds of attacks are not just theories. Ethereum Classic dealt with several incidents in 2020. Bitcoin Gold also faced similar events in 2018 and 2020. Even smaller coins like Verge have been hit.
How Qubic Gained Control
Monero uses a special algorithm called RandomX. It was created to make mining fair for regular computer processors and to discourage the use of specialized mining machines known as ASICs. The goal was to keep the network spread out among many miners. However, Qubic found a way to quickly grow its share.
Qubic uses a system they call “useful proof-of-work.” Here’s how it works: the rewards they earn from mining Monero are turned into USDT, a stablecoin. This USDT is then used to buy and burn QUBIC, their own token. This unique model quickly drew in miners who left other groups. They flocked to Qubic, boosting its mining power very fast.
Industry Reactions
Leaders in the crypto world are weighing in on the situation. Charles Guillemet, the Chief Technology Officer at Ledger, estimated that keeping this much control would cost about $75 million every day. He warned that while it might seem profitable, it could quickly destroy trust in the entire network.
Analysts at BitMEX Research also pointed out Qubic’s goal. They believe Qubic wants to claim all of Monero’s block rewards. They call this a sustained “selfish mining” strategy. If Qubic succeeds in this, it could cause the value of XMR to plummet.
The Experiment and Its Message
Qubic explained its actions in a blog post. The project stated that its goal was not to harm Monero. Instead, they wanted to show that a well-planned strategy combined with financial incentives can indeed give someone effective control over a larger network.
Qubic claimed that at its peak, mining Monero through their system was almost three times more profitable than traditional mining methods. This increased profitability was the magnet that attracted so many participants, making their dominance over the hashrate even stronger.
The broader crypto community is now debating the consequences. If a single entity holds the reins of Monero, the promise of privacy could be challenged by transaction censorship. While Bitcoin’s immense mining power makes it largely safe from such attacks, mid-sized networks like Ethereum Classic, Bitcoin Gold, and Monero remain more vulnerable.
Currently, Qubic says it has not fully taken over the network’s consensus. This is to avoid causing a drastic drop in XMR’s price. However, the threat still looms large. Meanwhile, some people who support Monero are reportedly fighting back. They are using cyberattacks, known as denial-of-service attacks, against Qubic.