Recently, the cryptocurrency exchange Kraken made headlines by temporarily halting deposits for Monero (XMR) amidst a concerning situation involving the blockchain. This action aligns with ongoing challenges facing the Monero network, known for its emphasis on privacy and security.
At the core of this issue is the phenomenon known as a 51% attack. This occurs when a single entity or group of miners controls more than half of the total hashing power of a blockchain network. Just days ago, on August 12, a project called Qubic, spearheaded by IOTA co-founder Sergey Ivancheglo, announced that it had secured control over the majority of Monero’s hashing power.
Furthermore, reports from Qubic’s mining pool indicated that the attack was executed using a specific consensus mechanism known as useful proof-of-work (uPoW). As detailed by Bitrabo, the Qubic team has been reallocating half of its mining profits in XMR into USDT to purchase QUBIC tokens, which are then sent to a burn address.
The Rationale Behind Kraken’s Suspension of Monero Deposits
On August 15, Kraken updated its users regarding the decision to pause Monero deposits following the discovery of a single pool controlling a significant amount of the blockchain’s hashing capacity.
The exchange emphasized:
This concentration of mining power poses potential threats to the network’s security. We will closely monitor developments and will reinstate deposit functionality once conditions are deemed safe. However, trading and withdrawals for XMR continue without restriction.
Subsequent to Qubic’s announcement, discussions on social media platform X indicated that a six-block reorganization on the Monero blockchain had occurred, implying substantial control over a critical hash rate. This situation raises concerns, especially considering that when a single entity controls a majority of a blockchain’s hashing power, it can disrupt the fundamental principles of decentralization.
Moreover, Qubic’s grasp of over 51% of the hash rate raises serious concerns about the potential for transaction censorship, risks of double spending, and possible block reorganizations, which could undermine the trust and integrity that blockchain technology aims to uphold.
Current Status of XMR Prices
The market response to the threat posed by the 51% attack has been notable but measured. Initially, XMR saw a decline of over 10% as news spread, followed by an additional drop of 5% in the days that followed. However, the Monero token appears to be on a recovery trajectory.
As of now, XMR is trading at approximately $265, representing a growth of around 12% within the last 24 hours. Meanwhile, data from CoinGecko indicates that the altcoin has only fallen by about 4% over the past week.
