Algae ID.

Looks like a fungus. This is pretty common on submerged wood. Pull the wood out and give it a good scrubbing. It should disappear after a few weeks and several scrubbings.

Any new piece you get will likely do the same thing. Just wait it out. This has happened to me 7 or 8 times now when I do a new setup.
 
I don't think it is black beard algae. I had something similar on a piece of wood I tried adding to a tank. It grew that fuzz and after around two weeks I just took it out. It smelled awful so I assumed it was just the outer layer of the wood decaying or something. In my experience it rubbed off easily but grew back quickly.
 
Well, I still don't think this is the fungus or the bacterial growth. It looks different then that, and when I took it out last year, it was growing BBA on it, and in the same exact spots this one has growth.
 
I am still not certain from the photo if this is brush algae or a fungus. If it is white, or light gray, it is fungus. If it has colour, from dark gray to green it is brush algae. I have had both.

Algae will appear no matter what you do to the wood, replacing it, etc. It is harmless and really not worth the fuss.

But if this is fungus, it can be serious. This sort of fungus comes from within the wood. There are many species of fungus, and without examination by a microbiologist it is impossible to tell the species. Some are harmless, others will kill fish. I have had the latter. Some say they get rid of it by boiling and baking; this is not always the case, perhaps depending upon the fungus species.

Byron.
 
I've had this stuff on my driftwood occasionally, but it comes and goes. Don't quote me on this but I think that a species of pest snail I have in my tank eats it, their population booms when it comes back. It could just be overfeeding though.
 
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