Kraken Halts Monero Deposits Over 51% Mining Pool Dominance Concerns

Kraken has suspended Monero (XMR) deposits following claims that a single mining pool, Qubic, had briefly captured over 50% of the network’s hashrate, raising concerns about a potential 51% attack. A 51% attack occurs when an entity controls more than half of a blockchain’s computing power, enabling it to manipulate transaction ordering and potentially execute double-spending attacks. The exchange has stated that withdrawals and trading remain unaffected, and deposits will resume once the network is deemed secure [1].

According to reports, Qubic—a layer-1 AI-focused blockchain project that also operates a mining pool—announced it had taken control of more than half of Monero’s mining power, and even reorganized six blocks. This declaration sparked debate within the Monero community, with some developers expressing skepticism and disputing the notion that an actual attack was underway. Despite these denials, the situation has heightened concerns about the vulnerability of smaller proof-of-work blockchains when mining power becomes concentrated in the hands of a single entity [2].

Monero, which ranks as the 29th largest cryptocurrency by market capitalization at approximately $6 billion, is one of the most well-known privacy-focused protocols in the industry. The alleged attack has intensified scrutiny around the long-term sustainability of its proof-of-work model, particularly in the context of mining centralization. The incident has also drawn attention to the risks associated with smaller blockchains, which are more susceptible to such attacks due to limited network participation [3].

The sudden surge in Qubic’s mining dominance followed a period of instability. Earlier in August, the pool fell to seventh place in Monero mining activity after suffering a DDoS attack that reduced its hashrate from 2.6 gigahashes per second to 0.8 GH/s. Sergey Ivancheglo, a blockchain developer linked to the attack, later claimed responsibility. The pool then regained strength, eventually crossing the 50% threshold [4].

Kraken’s decision to halt Monero deposits reflects a cautious approach to protecting users in the face of potential network instability. The exchange has not disclosed a timeline for resuming the feature, nor has it provided further technical details about the nature of the reported attack. The move has added to the uncertainty surrounding Monero’s viability as a privacy-focused asset, particularly for users who rely on its resistance to surveillance [5].

The broader market has responded with mixed signals, with Monero’s price fluctuating in the aftermath of the news. Analysts have noted that the event serves as a reminder of the risks associated with proof-of-work blockchains and has reignited discussions on the merits of alternative consensus mechanisms, such as proof-of-stake, which are designed to reduce the likelihood of mining centralization [6].

While Monero’s developers and supporters have questioned the severity of the situation, the pause on deposits has intensified scrutiny of the network’s security model. The incident has also prompted industry participants to reassess the risks associated with projects that rely on a small number of dominant mining pools [7].

The unfolding situation highlights the ongoing challenges in maintaining decentralization in blockchain ecosystems. As Kraken and other exchanges evaluate their exposure to such risks, the broader crypto community will be watching for further developments from both the exchange and the Monero development team.

Source:

[1] Kraken Suspends Monero Deposits After 51% Attack by ... (https://www.ainvest.com/news/kraken-suspends-monero-deposits-51-attack-qubic-mining-pool-2508/)

[2] Kraken Halts Monero Deposits After Qubic's Disputed 51% ... (https://beincrypto.com/kraken-freezes-monero-deposits-while-traders-drive-price-higher/)

[3] Kraken Pauses Monero Deposits as Qubic Claims 51% ... (https://www.ainvest.com/news/kraken-pauses-monero-deposits-qubic-claims-51-network-control-2508/)

[4] Kraken suspends Monero deposits after 51% attack (https://cryptoslate.com/kraken-suspends-monero-deposits-after-51-attack/)

[5] Kraken Halts Monero Deposits After Reported 51% Attack (https://bravenewcoin.com/partner/top-altcoins-to-buy-after-kraken-halts-monero-deposits)

[6] Kraken halts Monero deposits as Qubic seizes 51% hashrate (https://www.cryptopolitan.com/kraken-halts-monero-deposits/)