Monero Under Siege: Kraken Halts Deposits

Digital asset exchange Kraken has temporarily halted deposits of Monero (XMR). This action follows a confirmed
security breach
affecting the Monero network, observed on August 12th. The vulnerability was exploited by the Qubic mining pool,
which reportedly gained control of a significant portion of Monero’s computational power, exceeding 50% and peaking
at 2.6GH/s.

This level of control allegedly enabled Qubic to execute a
blockchain reorganization
reaching six blocks deep within Monero’s ledger. This effectively altered transaction history, leading to the
orphaning of approximately 60 blocks. This incident underscores the susceptibility of moderately-sized
Proof-of-Work blockchains, such as Monero, to potential manipulation when a single entity amasses a majority of the
network’s hashing power.

Kraken Takes ‘Security Precaution’ Regarding Monero

Monero, a cryptocurrency focused on privacy, is engineered to facilitate secure, anonymous, and untraceable digital
transactions. In contrast to more transparent blockchains such as Bitcoin and Ethereum, Monero employs mechanisms
that obscure the identities of senders and receivers, as well as the transaction amounts. This feature is favored
by individuals who prioritize financial confidentiality and autonomy.

Since its launch in April 2014, Monero has encountered previous security challenges, including a network flooding
attack in March 2024 that caused congestion. However, the recent 51% attack represents the most significant
compromise of Monero’s consensus protocol to date. This situation has amplified concerns within the Monero
community regarding the concentration of mining power and the overall resilience of the network. Kraken
announced
the decision as follows:

“Out of an abundance of caution, we have temporarily suspended Monero (XMR) deposits. This action is a direct
result of observing that a single mining pool has exceeded 50% of the network’s total hash rate. Such a
concentration of mining power introduces a potential threat to the stability and security of the network.

We are closely monitoring the situation and will reinstate deposits as soon as we are confident that it is safe to
do so. Trading and withdrawals of XMR remain fully functional and unaffected.”

Monero’s Perceived Weakness Due to Lack of Official Communication

The price of Monero has decreased by as much as 14% following this incident. This event has renewed concerns
regarding the centralization of mining in cryptocurrencies that emphasize privacy, as well as the potential market
ramifications of such attacks.

While security experts are actively debating the full extent to which the reorganization constitutes a definitive 51%
attack (with some suggesting it was more of a stress test on Monero’s decentralized nature rather than a solely
malicious undertaking), the absence of official communication from the Monero project has been noted. As
Unstoppable Wallet
commented:

“To be honest, we kind of deserve this…”

“Zero unified pushback, no official statements, outdated website, passive devs.”

“Meanwhile Qubic, despite not actually hitting 51%, are winning the info war simply by being loud.”

“Monero community looks weak.”

“It’s both pathetic.”

As cryptocurrency exchanges like Kraken implement protective measures, the wider cryptocurrency community will need to
reevaluate the resilience strategies applicable to networks that have relatively small mining communities. Regulatory
bodies are also highlighting the heightened risks associated with privacy-focused coins in centralized trading
platforms.

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