XMR Under Siege: The Qubic Campaign to Control Monero

The leading privacy coin, Monero (XMR +0.18%), is currently facing a hashrate takeover attempt, and the community has come out against the move. 

The attempt is being made by Qubic, a mining pool and cryptocurrency network led by Sergey Ivancheglo, also known as Come-from-Beyond (CFB). The founder of Qubic is also behind several other blockchain projects, including IOTA (MIOTA -2.09%) and NXT (NXT +0%).

These efforts helped Qubic climb to the top of the Monero mining pool rankings only to fall to seventh place earlier this week, according to data provided by MiningPoolStats. Over the last few days, it tried making its ascent to the top yet again, but hasn’t been able to stand against the community support, consistently going down the ranks. Currently, it is sitting at 42nd place.

Of the last 1000 blocks, Qubic accounts for the 4th highest at 14.1% after Supportxmr (30.5%), Nanopool (20.1%), and Hashvault (17.5%).

After the community noticed the Qubit pool attempting to take over the Monero network, Qubic’s hashrate fell, sending it lower. Meanwhile, thousands of miners comprising the ‘supportxmr’ pool are gradually accounting for an increasing amount of the network hash rate.

Supportxmr pool, as the name suggests, is the Monero community coming together in response to Qubic’s threat to the network, helping it gain the majority of Monero’s mining capacity.

The threat is an “economic” campaign, currently being run by Ivancheglo to have Qubic dominate the Monero network’s hashrate, which has prompted community resistance and backlash. Its supporters are voicing their concerns over the centralization risks. 

So, let’s take a look at all that’s going on in the Monero (XMR) space.

Qubic’s AI-Driven Mining Strategy to Control XMR & Reward QUBIC

It was late last month that Qubic, a decentralized compute and AI Layer 1 protocol, unveiled that it is incentivizing CPU mining of Monero (XMR) through its own network. 

The network also introduced a unique burn-buyback mechanism, under which any XMR that it mines would be utilized to fund its own token buybacks and burns to support the growth of the Qubic ecosystem. 

The blog post titled “QUBIC Mining Evolution: From CPU Roots to GPU Dominance and Back Again,” was released on June 30, in which, Qubic shared that it was launched with the purpose of reinventing mining, where instead of wasting energy on “meaningless” hash calculations, they aim to use that power to train an on-chain AI.

For that, they introduced Useful Proof of Work (uPoW), a new model for miners whereby they participate in the training of AIGarth, its AI core. The team noted that while their project began with CPU mining, which excels at complex and data-intensive computations and helps decentralize mining, soon GPU mining took over as AIGarth got more sophisticated. 

But in what it calls a “strategic twist,” Qubic was re-incentivizing CPU mining with a smart, real-world integration, i.e., Monero (XMR) mining.

The way it works is that it utilizes the idle time between AI training cycles to mine XMR, which is “inherently CPU-optimized.” So, Qubic validator pools automatically mine the privacy-focused coin.

But rather than sending the mined XMR to the miner, Qubic sells those coins on the open market and then uses those sale proceeds to buy its own QUBIC tokens on exchanges before burning them.

QUBIC is a $305 million market cap coin, which, as of writing, is trading at $0.000002505. It has a circulating supply of 121 trillion tokens and a maximum supply of 200 trillion QUBIC coins.

By burning QUBIC tokens, it aims to reduce its circulating supply and boost scarcity. This practice, it noted, “aligns real-world compute with economic value inside the protocol.”

Ivancheglo’s crypto project incentivizes miners to mine XMR by rewarding them with increased QUBIC rewards proportional to their contribution during idle time. To promote this shift, the project updated its mining algorithm to favor CPU performance and attract more CPU miners into the ecosystem. The post stated:

“This isn’t just a clever workaround, it’s a live Proof of Concept for Useful Proof of Work. QUBIC miners now perform real-world tasks (Monero mining) that generate real market value, which in turn strengthens the QUBIC economy.” 

Earlier in the same month, the project had announced that it had mined XMR. Calling it a major technical milestone, Qubic noted at the time that it marked a successful demonstration of its uPoW concept, leveraging XMR and Tari merge mining to drive its token economy and transform mining profitability.

It was originally launched through Nanopool, but Qubic’s mining operation reportedly surpassed the capacity of the pool, so it turned to mining on its own, and since mid-May, it has been making an increasing contribution to Monero’s global hashrate.

Then, just this week, Qubic released another blog post in which it talked about custom mining and outsourced computations.

In that announcement, the project noted that they began with XMR to test the waters because a dive into the high-stakes, competitive PoW crypto mining arena “validates” their technology as well as “draws attention from the industry.” According to Qubic:

“Skeptics once called this outsourcing impossible; now, they’re watching closely as it unfolds.” 

On the practical side of things, the growth of AIGarth needs a robust mix of hardware, particularly CPUs, which now make up 50% of Qubic’s mining power, up from just 10% before it integrated the Monero custom mining, “thanks to the allure of higher profitability.”

According to the project, on July 28, at its peak, Qubic was contributing more than 40% of Monero’s total hashrate. This, it also noted, gives it power to have control over the Monero network.

“This growing influence positions Qubic to potentially advocate for tweaks in Monero’s rules, encouraging even more miners to migrate and bolster the ecosystem,” stated the post.

Qubic knows all the noise and controversy it is creating, with its custom mining stealing the spotlight, but it says the “endgame is empowering real institutions to innovate with AI in a secure, distributed way.”

Can Monero’s Decentralization Withstand the Economic Attack?

While Qubic had already detailed its plans, founder Ivancheglo also admitted on social media that his network is indeed staging a takeover of the Monero network.

The idea is to attract Monero miners to Qubic with payouts richer than ordinary pools to capture more than 51% of the network hash. This would give Qubic control over the network and the ability to do as they like, including delaying transaction confirmations and censoring them.

“I was curious why Monero miners behave so illogically, sticking to mining $XMR directly instead of mining via Qubic, which gives significantly higher profit,” Ivancheglo said in a post on X (formerly Twitter) last Thursday.

The conclusion he came to was that XMR miners, “botnet masters,” who don’t want to lose their anonymity, which they would when they register on the pseudonymous Qubic pool. “And then I thought: “Breaking anonymity is just a matter of how much one is willing to pay…”’ he added.

In response to an XMR user, saying that he doesn’t want to “dump xmr to buy your shitcoin and pump your bags to dump on noobs like you did with your previous coins,”  Ivancheglo said once “all your blocks start being orphaned,” then one has to join Qubic, while continuing to maintain that he does not want to destroy Monero. “It makes no sense in my plan,” he said.

As for the Monero community forking him and his project out, he points out that being an anonymous coin, there is no technical possibility for that, and that Qubic can always “switch to stealth mode. Will the Monero community sacrifice decentralization?”

This Monday, he shared that new miners are increasingly joining the Qubic pool, and soon they will dominate the Monero network.

Ivancheglo took to X to share that once Qubic gains control of most of the network’s hashrate, they would reject the blocks mined by others, rendering XRM mining only effective or profitable on the Qubic pool.

To gain that control, the Qubic mining pool will not report its hashrate publicly in the coming days. This measure was meant to be taken once they had achieved control of most of Monero’s network hashrate, but will now be implemented soon in order to make it harder to determine just how much of Monero is Qubic controlling.

According to Ivancheglo, his intent with all this is to help the Monero community find a countermeasure to the attack that he is making on the network. The idea apparently has been to prepare the industry as “one day we all may face a non-benevolent attack.”

But the community doesn’t care about that. As Dan Dadybayo, a researcher at Unstoppable Wallet, noted on X, “intent doesn’t matter,” and the risk of centralization and censorship potential is damaging to the network.

Dadybayo explained that by taking control of 51% of the Monero hashrate, Qubic could orphan blocks, delay confirmations, completely reject transactions, censor competition, and force changes to the protocol, things already suggested by Ivancheglo and Qubic.

The next month has actually been flagged by the Qubic founder to be of elevated risk, urging exchanges to raise XMR deposit confirmations and calling it a precaution during their “test.”

According to him, Monero really doesn’t have any good defense against his attack, “except just waiting,” as “Qubic isn’t planning to mine $XMR indefinitely, we have more appealing targets.” As for switching to Proof-of-Stake (PoS) consensus mechanism, Ivancheglo shared his opinion that “this is not a viable option.”

The only worst-case scenario he sees of this 51% attack is “a brief $XMR price decline.”

In a separate post, Ivancheglo noted that his presumed location is being circulated and discussed on the Monero subreddit. “I hope the head bounty won’t be collected in $XMR to avoid creating incentive to drop its price to 0,” he said. 

XMR is the 35th largest cryptocurrency by market cap of $5.8 billion while having a circulating supply of just under 18.45 million tokens.

At the time of writing, XMR is trading at $316.60, up over 99% in the past year while still being down 42.2% from its all-time high (ATH) of $542.33 that was hit almost eight years ago.

The coin actually has been steadily rising in value since Feb. 2024, when it was around $100, but it really started gaining momentum in April. The price of XMR went on to hit a value as high as $420 in late May in an outlier move. 

On-chain sleuth ZachXBT noted at the time that it could be due to hackers laundering $330 million in stolen Bitcoin via Monero. The culprits swapped 3,520 BTC to XMR through multiple exchanges.

How Monero Was Designed to Resist Centralization

Qubic’s attempted takeover of Monero has put the privacy-focused XMR in the limelight at a time when people are facing increasing government and corporate censorship in an era of hyper-digitization and ubiquitous transaction data, where financial privacy has become extremely valuable.

In such an environment, privacy coins are more important than ever, but they continue to face increasing levels of scrutiny.  

Last year, we saw governments cracking down on the use of coin-mixing services, with developers behind Tornado Cash and Samouri Wallet dragged to court. 

Now, the European Union (EU) is planning to impose wide-ranging Anti-Money Laundering (AML) rules that will prohibit privacy tokens as well as anonymous digital asset accounts starting in 2027. The new rules will forbid exchanges and financial and credit institutions from handling coins like Monero. 

This is because privacy coins present unique challenges from the compliance perspective. Their privacy features make it difficult to verify the source of funds, thus complicating KYC/AML procedures.

The privacy features of Monero have also made it a popular choice for illicit purposes. Hackers are actually turning regular browsers into XMR mining machines. They have actually infected over 3,500 websites with stealthy cryptomining scripts that hijack the browsers of visitors to generate Monero without their knowledge.

Developed more than a decade ago, privacy coins have long been a point of contention for regulators due to their design.

Created to enhance anonymity, privacy coins utilize cryptographic techniques to hide transaction details like amount, address, and balances, and make them difficult to trace. Different privacy coins use different techniques to achieve anonymity. In the case of Monero, that includes ring signatures, stealth addresses, and ring confidential transactions (RingCT).

A ring signature is a type of digital signature that is performed by a member of a group of users, each of whom has keys, without making it possible to determine which of the keys was used for the signature. When it comes to Monero, the ring signature ensures that transaction outputs are untraceable. 

RingCT, meanwhile, is how Monero keeps transaction amounts hidden. Then there are stealth addresses, which are for inherent privacy as they allow as well as require the sender to create random one-time addresses for every transaction. So, when one creates a Monero account, they get a public address to receive payments and a private view key to exhibit any incoming transactions, while a private spend key is for sending payments.

All of these methods make Monero private by default. As a result, the private, decentralized cryptocurrency helps one keep their finances confidential and secure.

This open-source community project has no centralized authority that runs it, either; rather, it is built by volunteers. The foundation of Monero is the CryptoNote protocol, which fuels various decentralized currencies.

Moreover, Monero uses an ASIC-resistant PoW algorithm called Randomx, which is optimized for CPUs. ASICs are special computers created to do only one job, making them very efficient for mining, but at the same time very expensive. This presents the centralization risk, which is prevented by Monero by being ASIC-resistant.

Unlike Bitcoin (BTC -0.24%), its network has a dynamic block size and fees. With no hard limit on block size, it can increase or decrease based on demand, though it is capped. There is no fixed emission rate here either. Its tail emission is set at 0.3 XMR per minute or 0.6 XMR per block.

While being CPU-based makes Monero mining accessible, it offers lower returns, and that has allowed Qubic to attempt a 51% attack on the network and gain control over it.

Latest Monero (XMR) Stock News and Developments

What the Future Holds for Monero

So, as the Qubit attack unfolds, Monero is facing an existential threat. Already dealing with rising regulatory crackdowns, Monero now has to protect itself against this new economic form of attack. The leading privacy coin, with its ASIC-resistance and decentralized ethos, was built as a fortress against centralization, yet it now finds itself under siege. Here, the resistance through community-driven pools like SupportXMR stands out for serving as a testament to the resilience of decentralized movements.

Now, it’s to be seen just how this saga evolves and how it affects the industry’s best remaining hope of a privacy coin and its future!

Click here to learn how to buy Monero (XMR).