Monero Faces Network Reorg as Community Split over Qubic’s Role – Crypto News

Monero’s (XMR) network faced unusual activity this week after smaller-cap blockchain project Qubic revealed a brief takeover of Monero’s mining power. The move has sparked debate over what actually happened and what it means for the privacy coin.

In an Aug. 12 announcement on its blog, Qubic declared that after “a month-long, high-stakes technical confrontation” it had “reached 51% of Monero’s hashrate dominance, successfully reorganizing the blockchain.”

In other words, the team behind Qubic admitted, and even advertised, that it was on the verge of performing a 51% attack on the privacy coin network. The Qubic team said in the post that it had decided “not to take over the protocol’s consensus for the moment because of internal discussions on whether that would hurt Monero’s price.”

While the community was still guessing about whether or not Qubic lied about its achievement, the price of XMR dropped about 11% between Aug. 11-12, trading near the $250-$260 range since then. The asset is down about 11% on a weekly frame.

Monero is the 42nd largest crypto asset by market capitalization, and is the largest privacy-focused blockchains.

Qubic is a Layer 1 blockchain and ranks 230th among crypto assets on CoinGecko, with a market cap of $367 million.

Meanwhile, Qubic’s native token QUBIC rallied this week and is up nearly 30% over the past seven days, per data from CoinGecko. The asset is down today, however, losing over 7% over the past 24 hours.

Ethan Vera, chief operating officer at Luxor Technology, said that the incident shows challenges for proof-of-work networks. He told The Defiant that this consensus algorithm “doesn’t necessarily work for all the other blockchains,” noting that Bitcoin remains the most secure blockchain because it has the largest, specialized mining infrastructure.

“It’s critical to have a high level of specialized compute and large energy and infrastructure footprint to protect from attacks, including at a Nation-state level,” Vera said.

Denial and Doubt

The crypto community had been noticing unusual activity on the Monero network since late July, when reports surfaced that Qubic had been attempting to capture Monero’s hashrate since mid-May, increasing its share from just a few percent to nearly 30% within weeks.

At the time, core contributors to Monero appeared skeptical about Qubic’s capabilities. One of them, Ricardo Spagni, clarified in late July in an X reply that the network “is not under attack,” repeating this denial in subsequent replies to multiple warnings.

After Qubic published their announcement about the “experiment” this week, Spagni maintained his stance, writing in an X reply:

Analysts at BitMEX Research suggested in an X post on Aug. 12 that there was “no evidence this was a double spend attack,” and that the reorganization was small, involving just six blocks.

Once Qubic revealed their progress, BitMEX Research said it is not likely that Qubic actually controls over 51% of the Monero network’s hashrate, though they noted that if Qubic were to capture all of Monero’s block rewards, the value of the coin “may fall.”

Chain Reaction

As speculation about a 51% attack grew this week, several crypto exchanges paused XMR withdrawals. Centralized crypto exchanges MEXC, HTX, WhiteBit, and swapping services ChangeNOW and FixedFloat all reportedly suspended withdrawals of XMR indefinitely, as of an Aug. 11 X post.

ChangeNOW CSO Pauline Shangett confirmed to The Defiant that the service did indeed halt withdrawals, due to concerns over Qubic’s on-chain activity.

A Whitebit spokesperson also told The Defiant that when reorganization activity started on the Monero network on Monday, the exchange paused XMR deposits and withdrawals “as a precaution.” Withdrawals have since resumed, the exchange added.

The Whitebit spokesperson also distinguished between a 51% attack and a block reorganization, telling The Defiant, “The recent six-block reorganization on the Monero network does not necessarily indicate a sustained 51% attack. Such events can occur naturally when a miner or mining group with significant hash power experiences a period of unusual luck.”

The exchange’s spokesperson elaborated:

The Defiant contacted the other exchanges for comment, as well as the Qubic, BitMEX Research, and Monero teams, but hadn’t received responses from them by press time.

Per Qubic’s Tuesday blog post, the block reorganization was to prove that economic incentives can influence miner behavior.

Peter Todd, a cryptographer and Bitcoin Core developer now widely known for his appearance in a recent HBO documentary about Bitcoin’s creator, suggested in an Aug. 12 X post that a likely goal of the reorganization is to “reduce the income of other miners to encourage even more hash power to move to their pool. Or give up entirely.”