After attacking Monero, who is the "famous" Qubic targeting DOGE?

Author: Aki Wu Talks Blockchain

This article does not constitute any investment advice. Readers should strictly comply with the laws and regulations of their jurisdiction and refrain from participating in illegal financial activities.

In mid-August, the Monero (XMR) network encountered a 51% hash power attack led by Sergey Ivancheglo, a former co-founder of IOTA, from the Qubic project. Qubic controlled over 50% of Monero's total hash power, meaning it had the capability to reorganize blocks, censor transactions, and potentially implement double spending. This incident has sparked widespread attention and discussion in the crypto industry, particularly regarding whether the network security of Monero, as a privacy coin, would be threatened. In response, the crypto exchange Kraken announced a suspension of Monero deposits as a precautionary safety measure, with plans to resume deposit functionality once network security is confirmed. This week, according to Cointelegraph, the Qubic community has voted to decide that the next target of attack will be Dogecoin (DOGE), which has a market capitalization of over $35 billion.

1. Qubic Project and Monero: Useful Proof of Work and RandomX

Monero, as a leading privacy cryptocurrency, has been known for its unique technological features. In terms of consensus mechanism, Monero adopted the RandomX proof-of-work algorithm at the end of 2019. RandomX, which has undergone multiple community upgrades, is a PoW algorithm specifically optimized for CPUs, aimed at maximizing resistance to ASIC mining monopolies, thereby encouraging ordinary processors to participate in mining and maintaining the decentralization of the network. Aside from the consensus mechanism, privacy is another cornerstone of Monero. Since its launch in 2014, Monero has achieved comprehensive anonymity of transaction senders, receivers, and amounts through technologies such as ring signatures, stealth addresses, and RingCT. Each transaction obfuscates the real inputs, making blockchain analysis nearly impossible to trace the flow of funds. This makes Monero one of the most influential projects among so-called "anonymous coins."

The Qubic project, as the core participant in this event, was founded and led by former IOTA co-founder Sergey Ivancheglo (@Come-from-Beyond). Qubic itself is a Layer-1 Blockchain, originally intended to build a decentralized artificial intelligence model hosting platform. Its consensus design emphasizes the concept of "Useful Proof-of-Work" (uPoW), which differs from traditional PoW that purely does hash calculations. Qubic aims to use mining power for tasks of actual value, such as AI model training, thus avoiding wasting electricity on simple hash collisions. The Qubic chain adopts an innovative Quorum consensus mechanism, claiming to operate in node memory with a processing capacity of up to 15 million transactions per second.

Qubic proposed a radical "mining is token value" scheme: its miners do not directly mine block rewards on the Qubic chain, but are guided to mine on external PoW networks like Monero, then convert the rewards into utility tokens for the Qubic ecosystem. The specific operational mechanism is as follows: Qubic miners use CPU computing power to join the Monero network for mining, earning XMR block rewards; then, through smart contracts or platform services, automatically exchange XMR earnings for equivalent stablecoin USDT, and use these funds to repurchase Qubic tokens (QUBIC) on the market and burn them. This process essentially transforms external mining revenue into continuous repurchase pressure for the QUBIC token, thus creating token deflation and enhancing the scarcity of QUBIC. Meanwhile, the Qubic community has optimized the incentive mechanism through governance voting — initially, 100% of mining rewards were used for repurchase and destruction, but later it was decided to change to 50% of the rewards for repurchase and burning, while the other 50% is directly distributed as an additional bonus to Qubic validators/miners to enhance their immediate earnings. This adjustment further increased the yield for miners mining through Qubic, greatly enhancing its appeal to Monero miners.

Through the aforementioned "useful proof of work + token burn" model, Qubic has created a unique mining economic closed loop: the Monero network becomes the computing power output for Qubic's pool of "useful work", with XMR rewards continuously transforming into buying pressure and burning power for QUBIC; conversely, the rising value of QUBIC tokens provides miners participating in this mechanism with returns far exceeding those from directly mining XMR. Statistics show that at its peak, the profitability of mining Monero through Qubic channels reached nearly 3 times that of direct solo mining. This high return has lured a large number of Monero miners to "switch sides" and join the Qubic pool.

2. Detailed Explanation of the Attack Process: Hashrate Manipulation, Block Reorganization, and Transaction Impact

The 51% hash power attack on the Monero network by Qubic was not achieved overnight, but rather after months of buildup and multi-stage games. According to Coindesk, the Qubic mining pool was almost obscure in May 2023, with its hash power accounting for less than 2%. However, starting from late June, as Qubic launched the Monero mining incentive program (i.e., the aforementioned uPoW mechanism), its hash power share began to soar.

By the end of July, the Qubic mining pool had once risen to over 25% of the total network hash rate, even topping the Monero network hash rate leaderboard for several days. This unusual growth raised alarms in the Monero community. Starting from late July, discussions questioning the intentions of Qubic have been ongoing in community forums and social media, with the first phase of open and covert conflicts unfolding between late July and early August. At that time, the Monero community characterized Qubic's actions as an "economic attack" and called on miners and enthusiasts to take countermeasures. Reports indicated that by the end of July, the hash rate of the Qubic mining pool suddenly dropped significantly from first place to seventh place in the entire network, due to various counteractions launched by the community: including miners proactively switching to other mining pools / transitioning to the decentralized P2Pool, as well as DDoS attacks against Qubic's infrastructure. During this approximately 6-hour-long DDoS offensive and defensive battle, the Qubic mining pool's hash rate plummeted from about 2.6 GH/s to only 0.8 GH/s.

The second phase peaked on August 11. Qubic later announced that they launched the final 'selfish mining' strategy on this day, achieving 51% control of the Monero network's hash power. So-called selfish mining refers to when a mining pool temporarily conceals mined blocks while holding an advantage in hash power, allowing competing miners to continue mining on the old chain. When Qubic accumulated a certain number of hidden blocks, they suddenly released their own long chain, causing many existing blocks to be collectively isolated as orphan blocks. According to information disclosed by Qubic, they secretly mined multiple times around August 11 and successfully orchestrated a deep block reorganization. There was a reorganization on the Monero chain that went as deep as 6 blocks, resulting in about 60 blocks being discarded as orphan blocks. This unprecedented deep reorganization in the history of Monero indicates that attackers can leverage their hash power advantage to overturn multiple recent block records. According to community monitoring data, during a window period (block height 3475729 to 3475850, a total of 122 blocks), the Qubic mining pool exclusively mined 63 of those blocks, exceeding 51% of the total, which means Qubic can alter the on-chain history, initiate double-spending attacks, and censor any transaction. In response, Ivancheglo himself had previously warned that from a certain point onward, Monero users should expect an increase in orphan blocks and should wait for at least 13 confirmations before considering a transaction stable.

3. Community Self-Rescue and Industry Disputes

After the incident, the Monero community and practitioners in the cryptocurrency industry expressed their opinions on this matter:

The Monero community has shown a strong sense of crisis and resistance, from developers to ordinary miners. Many Monero supporters have accused Qubic's actions on social media of "overstepping" the spirit of decentralization. Some even made radical and threatening comments on forums. Although this is an extreme case, it reflects the community's anger and distrust towards this "experiment." The core developers and technical personnel of Monero quickly began discussions to assess the impact on the network. According to Cointelegraph, Luke Parker, the head of development at SeraiDEX exchange, stated that a single six-block reorganization does not mean the attack was completely successful—it may just be that the attacker was "luckily fortunate" to win a series of blocks. He believes that to determine whether a 51% attack has truly occurred, it is necessary to observe whether there are unrestricted deep reorganizations and whether other miners are completely suppressed over a longer period. In other words, whether Qubic can maintain an absolute hash power advantage in the long term remains to be seen. It is estimated that the cost to sustain this attack could reach up to 75 million dollars per day.

Qubic insists that this action is a "strategic experiment" aimed at helping the Monero community rehearse potential malicious attack scenarios in the future. Qubic states that it does not intend to harm Monero but rather seeks to reveal the impact of economic incentives on consensus security through game-theoretic means. However, most observers are skeptical of this claim. Dan Dadybayo, a researcher at Unstoppable Wallet, stated, "Intent does not matter; centralization itself is a risk." He pointed out that even if Qubic claims goodwill, a centralized mining pool controlling the hash power inherently weakens the network's ability to resist censorship and attacks. Some in the community suspect that Qubic's actions are more about self-profit or gaining fame. They note that the price of the QUBIC token rose against the trend during the incident, suspecting Ivancheglo used the Monero network as a "test subject" to demonstrate the power of his project model, thereby boosting the market recognition of Qubic. This viewpoint believes that Qubic's so-called help for Monero in "stress testing" is merely a pretext, and its essence is still a self-serving hash power hijacking act.

According to Bitcoinist, after Qubic fully occupies Monero's hash power, about 432 XMR mined daily (valued at about $118,000 at the time) will have half of the funds, approximately $59,000, used to purchase QUBIC and destroy it, equivalent to burning about $1.656 million monthly. Such a strong influx of funds undoubtedly boosted the price of the QUBIC token. In fact, the market once viewed Monero and Qubic as a "seesaw" where as Monero faced selling pressure and declined, QUBIC was favored by speculators due to proving the "success" of its model. This also confirms the community's skepticism about Qubic's motives—regardless of its original intention, this action objectively brought exposure and value enhancement to the QUBIC token.

On the weekend after the event, a large number of originally dispersed CPU miners responded to the call to join the decentralized mining pool P2Pool or other small mining pools to dilute Qubic's hash rate share. According to Coinspeaker, by mid-August, the overall hash rate distribution of Monero had significantly improved, the participation in P2Pool had increased, and Qubic mining pool's hash rate share had dropped to a safe level. This somewhat undermined Qubic's offensive: as of August 17, Qubic no longer held the majority hash rate, and the Monero network returned to a normal state of multi-party participation, resulting in a rebound in XMR prices. @smartsdegen criticized Kraken's decision to suspend trading and deposits, implying that its reaction overemphasized the panic, as the network had not truly experienced asset theft or attacks. Although Kraken's actions may have objectively amplified market volatility, it is also understandable from a risk control perspective; exchanges do need to responsibly protect user assets and proactively avoid the risk of double spending.

4. The Double-Edged Sword of Regulation and Economic Incentives

Monero, as the leading privacy coin, has always been under the close watch of regulatory agencies. The occurrence of this 51% attack event has further sparked discussions about regulatory risks. Monero claims to be ASIC resistant, yet a small team managed to achieve control over the hashing power through economic means, undoubtedly confirming the vulnerability of medium-sized PoW networks. Regulatory agencies may question the security guarantees for investors in these anonymous coins based on this, and even impose further restrictions on trading such high-risk assets under the guise of "investor protection." The attack on Monero is essentially an infiltration of the anonymous coin network by anonymous groups; this incident may reinforce regulators' distrust of privacy coins, believing that these networks are more easily manipulated by unknown forces. In particular, if regulatory authorities classify Qubic's actions as malicious attacks or market manipulation, future legal measures against privacy coins may become stricter, such as prohibiting the centralization of mining pools or requiring operators to register under real names, etc.

The event also fully demonstrates that economic incentives are a double-edged sword. In the past, people believed that a 51% attack required a huge investment in funds and equipment, which rarely occurred in reality. However, Qubic leveraged a clever economic model to activate the computing power of a network like Monero, which has a market value of 6 billion dollars, with a relatively small capital (the market value of QUBIC tokens is only about 300 million dollars). This indicates that as long as an attractive incentive mechanism is designed, it may drive a large number of miners to voluntarily cooperate in attacks without requiring the attackers to purchase massive amounts of hardware. If someone issues a token and uses part of the financing to reward miners to jointly mine another chain, and then controls the computing power of that chain, it will lead to "competitive evolution between protocols". This is fundamentally different from past purely technical attacks, being more deceptive and disruptive. The Qubic incident directly suggests that other major PoW coins may face similar risks. It has been proven that after Monero was thwarted, Qubic quickly turned its attention to Dogecoin, and in late August, the Qubic community voted to decide that the next attack target would be the higher-valued Dogecoin.

5. Conclusion

The story of Qubic vs Monero is a microcosm of the continuous evolution of the cryptocurrency industry. It illustrates that the blockchain space is never short of "surprises" and "ambushes," with each significant event pushing the industry toward maturity. For Monero itself, although this turmoil was thrilling, fortunately, the network ultimately weathered the storm without the worst-case scenarios of stolen transactions or a permanent chain split. The Monero community demonstrated a high level of cohesion and adaptability, with miners, developers, and users working together to fend off external hash power invasions. After experiencing a sharp decline, the XMR price quickly rebounded, indicating that the market still has confidence in Monero's fundamentals. In the future, we may see accelerated innovations in consensus mechanisms, the emergence of more robust improved algorithms against economic incentive attacks; we may witness a restructuring of the relationship between miners and the community, with governance mechanisms becoming more complete and transparent; and we may also observe public chains moving from isolationism toward greater collaboration to collectively fend off cross-chain threats. In this incident, a small community (Qubic) with only a few hundred followers was able to challenge a large network (Monero) with tens of thousands of users, which itself highlights the unpredictability and drama of the decentralized world.