Internal Qubic’s controversial network takeover

Monero, a leading cryptocurrency focused on privacy, faces one of the most serious security challenges in its history.

Qubic, a project led by IOTA co-founder Sergey Ivancheglo, says it currently manages more than 51% of the network’s hashrate. In blockchains secured by work proof algorithms, this is the same method used in Bitcoin, with that level of control that allows attackers to rewrite transaction history, block transactions, and carry out double attacks.

In a blog post, Quibic described the acquisition as an “experiment” that is “a strategic and sometimes fighting application of game theory.”

Developers, miners and security experts are now debating whether decentralising networks is as robust as many believe.

What is a 51% attack?

In the Proof of Work Blockchain, miners compete to add new transaction blocks to the chain. If one group controls more than half of the total computing power, it can overtake all other participants.

That level of control opens the door to a variety of functions that can undermine trust in the network. These include reorganization of chains, commonly abbreviated as “Reorg.” This involves replacing previously confirmed blocks with new ones. It also covers twice as much spending. This means sending the same token twice.

Perhaps the most influential part of the 51% attack is censoring transactions.

These attacks are not theoretical. Ethereum Classic was a hit several times in 2020, costing millions. Bitcoin Gold faced similar incidents in 2018 and 2020. Small tokens like Verge are targeted and become unstable.

Why is Monero still at risk?

Monero uses the RandomX algorithm to prevent mining using application-specific integrated circuits (ASICs) and instead promotes CPU mining. This design is intended to decentralize the network. That’s why Qubic’s rapid rise is so important. It claims it has grown from below 2% of Monero’s hashrate in May to over 25% by late July, and now it has exceeded the 51% threshold.

Qubic runs a “Proof of Useful Job” system that turns Monero Mining Rewards into USDT and uses those funds to purchase and burn their own Qubic tokens. The mechanism is anomalous, combining mining strategies with token supply sinks. And it steadily increased Qubic’s control over Monero’s hash power.

“It is estimated that it will cost $75 million per day to maintain this attack,” ledger CTO Charles Gillemet said.

Bitmex Research added:

I did it. Monero’s XMR is currently down 6% at $252 in the last 24 hours, exacerbating the 13.5% decline over the past seven days.

What does this mean for Monero?

In a blog post, Qubic said the acquisition is not about defeating Monero, but about demonstrating that economic incentives and coordinated mining strategies can effectively control larger protocols over larger protocols.

According to Qubic, the experiment was to test whether mining resources could be beneficially diverted from the target network to the economic loop of another protocol.

At its peak, Qubic claims that its Monero Mining had a three-fold advantage over traditional Monero Mining. The restructuring of the community-approved reward system encouraged payments to those effective people and separated miners from other Monero pools.

The initial push for Qubic’s majority control was filled with a sustained distributed dispersal rejection (DDOS) attack that destroyed peripheral services for over a week, but failed to abolish its core network.

These DDOS attacks continued on Tuesday, with Ivanchegro revealing that “Monero Maxis is returning favor” at X.

QUBIC claims it has stopped taking over the consensus so far, citing concerns about its potential impact on XMR prices.

Are other blockchains vulnerable to attacks?

Bitcoin hashrates are very high, making 51% of attacks prohibitively expensive. However, the proof coin of gradual work is more vulnerable. The cost of obtaining a majority hash power in Monero, Ethereum Classic or Bitcoin Gold is much lower.

The privacy-focused coin faces additional challenges. Their censorship-resistant nature means that when one party controls the network it is extremely privacy-injured, designed to protect it.