Cyber Capital Founder: The Monero "51% Attack Incident" Foreshadows the Decline of Bitcoin PoW

Written by: Justin Bons, Founder of Cyber Capital

Compiled by: Chopper, Foresight News

Qubic could have altered the transaction history of Monero (XMR) and implemented a double-spending attack. It turns out that a PoS (Proof of Stake) chain with a market cap of 300 million dollars can "take over" a PoW (Proof of Work) chain with a market cap of 6 billion dollars, showing how significant the advantages of PoS are.

Such attacks will continue, heralding the decline of Bitcoin, as PoW has reached a dead end.

Complete course of events

It all started in May when Qubit validators optimized their yields by using idle computing resources to mine XMR, which then accounted for 2% of the XMR hash rate. This move proved effective, and by June, Qubic officially decided to fully integrate XMR to fund its ecosystem, leading to a rapid expansion of its mining pool, which accounted for 10% of the XMR hash rate. Subsequently, Qubic began offering additional token incentives for its mining pool, attracting more existing XMR miners to join, as the rewards offered by Qubic were three times that of standard XMR mining pools.

Only after all this is completed did Qubic publicly announce its intention to "take over" the XMR network!

According to Qubic, as of late July, its hash rate has approached an absolute majority, accounting for 38% of the XMR hash rate. Qubic touts this move as a "demonstration of strength" rather than a malicious attack, referring to it as a "technical demonstration" of decentralized AGI computation...

Starting from August 5, DDoS attacks targeting Qubic began to appear, slowing down its hash rate accumulation speed, but this counterattack was insufficient; on August 11, the "selfish mining" attack was initiated, and by August 12, the Qubic mining pool had reached an "absolute majority" of XMR hash rate through this method.

To prove their control over the network, they claimed to have completed a reorganization of 6 blocks, during which over 60 blocks were isolated. Some researchers have questioned this claim, but it is clear that they have gained an absolute majority of the hash rate within a cycle of 100 blocks. This is enough to allow Qubic to tamper with the history of XMR, destroying the immutability, censorship resistance, and credibility that XMR should have had during this time.

This also enables it to carry out double spending attacks, potentially defrauding individuals, protocols, and institutions of significant amounts of money. This is precisely the reason why most mainstream exchanges have suspended XMR deposits and withdrawals: if Qubic chooses to exploit this vulnerability, exchanges will face the risk of being defrauded. The mere fact that "such attacks could have been carried out during this time" is already bad enough.

As of today, the price of XMR has significantly dropped, and the hash rate has also decreased by over 30%... This confirms the vicious cycle that occurs when a PoW system collapses.

Qubic positions itself as an "ally" of XMR, claiming to only "express a viewpoint" and has no intention to attack XMR again... But the fact that it "can present this viewpoint" is already lethal enough.

Lessons learned

A PoS chain with a market value of 300 million dollars can take over a PoW chain with a market value of 6 billion dollars solely through token incentives. This fact speaks volumes, proving the inherent disadvantages of PoW and providing a unique forward-looking perspective on the future of Bitcoin.

Using the token economy of a small PoS chain to fund a 51% attack on a large PoW chain is something I had never thought of before. The incentive of just "free marketing" may be enough to support such a large-scale operation; otherwise, I probably would not have paid attention to Qubic, and now it has gained a lot of attention.

All PoW chains are vulnerable to such attacks, as their security budget is indeed much lower compared to PoS chains.

The introduction of political narratives has undoubtedly complicated the situation further, as some may view the attackers as allies, further weakening the defensive strength...

It is worth noting that the security ratio of XMR (the ratio of market value to security budget) is actually slightly better than that of BTC:

XMR: 55 million USD (block reward) × 0.51 (attack threshold) = 28 million USD (security budget) ÷ 6 billion USD (market cap) = 0.5% (annual security ratio)

BTC: 19 billion USD × 0.51 = 9.7 billion USD ÷ 22 trillion USD = 0.4%!

As a reference, here are the security budget calculations for the three major PoS chains:

ETH: (542 billion + 970 million + 3.33 billion) × 0.29 × 0.33 = 52.2 billion USD (10%)

SOL: (101 billion + 1.15 billion + 5.26 billion) × 0.68 × 0.33 = 24.1 billion USD (23%)

ADA: (29 billion + 0.1 billion + 700 million) × 0.60 × 0.51 = 9.1 billion USD (31.3%)

The security advantages of PoS are astonishing: taking ETH as an example, its market value is only 1/4 of BTC, yet its security budget is 5 times that of BTC, and its inflation rate is even lower.

Another interesting discovery is that XMR actually has tail inflation... This suggests that even if tail inflation increases during a future BTC crisis, it may not be sufficient to independently resist a sustained "51% attack."

All of this exacerbates the conflicts of interest, factional splits, and incentive chaos when a PoW chain encounters a "51% attack." We can at least conclude that if BTC faces such a situation, the situation will be more chaotic and uncontrollable than expected.

Worse results

Strictly speaking, this is not a "51% attack"; the Qubic hash rate accounts for less than 51%, with different data sources indicating approximately between 28% and 38%. Moreover, since no theft or censorship was implemented, it does not fully meet the definition of an "attack", but is more like a "demonstration".

There is controversy regarding the statement about "6 block reorganizations", with some researchers claiming that their nodes did not observe this situation; ordinary blockchain explorers are also unable to query such information. Since the Cyber Capital research team did not run a Monero node at that time, I will refrain from commenting on this until more information clarifies the contradictions.

However, Qubic has gained over 51% of the block production power within 100 block cycles through the "selfish mining" technology, a fact even acknowledged by Qubic's critics. In my opinion, this is already bad enough, representing another form of attack: gaining control without exercising it, which cannot deny the existence of control...

Therefore, I do not intend to downplay the seriousness of the event by arguing over overly refined technical details, as this would only allow us to escape reality.

Who is the next target?

The Qubic community has voted to decide that the next target is Dogecoin! This strategy also applies to chains with ASIC mining, as the majority of Qubic's hash rate is obtained by "attracting" existing miners through token incentives.

This means that Qubic could attack DOGE, and even LTC (through merged mining). It is expected that they will not publicly disclose their intentions in advance but rather wait until they are close to obtaining an absolute majority hash rate before announcing it, just like they did with XMR.

Of course, this strategy is not exclusive to Qubic, and in the future, other chains may imitate it and attack other small PoW chains.

Solution

Most XMR community members may not accept my proposal: transitioning to PoS. The conclusion is already evident: PoS is objectively superior in terms of security, decentralization, fairness, and economic rationality. There is no reason to reject this new technological reality: evolve or perish.

Conclusion

Among all PoW chains, XMR should be the least susceptible to this attack. The XMR community consists of dedicated cypherpunks and privacy advocates, most of whom have commendable intentions — they are fighting for the freedom of all of us, especially the right to privacy.

I hope they can recover from this and that transitioning to PoS will undoubtedly be stronger. Accepting radical change under extreme pressure is the best embodiment of anti-fragility: just like diamonds, they are forged under high pressure.