What is Merged Mining ?
Merged mining is the process of mining two or more blockchains at the same time using the same computational work.
Also called Auxiliary Proof of Work (AuxPoW), it lets miners validate blocks on a primary blockchain while simultaneously securing one or more auxiliary blockchains—without any extra energy or hash power.
This improves network efficiency and adds security to smaller chains.
How Merged Mining Works?
Rather than dedicating computing resources to a single blockchain, merged mining lets miners reuse the same Proof of Work (PoW) to mine on multiple networks simultaneously. This is made possible through the use of AuxPoW, which allows one blockchain to accept the PoW from another.
For example, a miner working on Bitcoin (the parent chain) can at the same time validate blocks for an auxiliary chain like Namecoin, as long as both use compatible hashing algorithms.
Primary Blockchain: The primary blockchain (Parent Chain) performs standard PoW calculations.
Auxiliary Blockchain: The auxiliary blockchain (Child Chain) validates the PoW submitted by the parent chain without requiring additional work.
Because no extra energy is required, this method is both cost-effective and energy-efficient, making it a valuable innovation for boosting security and adoption across multiple networks.
Benefits of Merged Mining
Increased Security: It allows these smaller blockchains to leverage the robust hash power of more dominant networks. This heightened security helps prevent 51% attacks, where malicious entities attempt to seize control over a network.
Economic Efficiency: By enabling the use of a single hashing process to mine multiple cryptocurrencies, merged mining reduces the resource burden on miners. It also allows them to earn additional block rewards from auxiliary chains, further boosting profitability.
Network Growth: Encouraging miners to join, merged mining helps in expanding the network effect. As more miners participate, the network becomes more stable and capable of processing a higher number of transactions per second.
Challenges of Merged Mining
Although merged mining offers notable rewards, it’s not without challenges:
Technical Complexity: Implementing and managing merged mining requires a higher level of technical expertise. Coordinating between different blockchains and ensuring compatibility can be complex.
Consensus Risks: There are risks associated with differing consensus updates. If one blockchain undergoes a significant change, it may affect the seamless operation of merged mining.
Potential Centralization: As merged mining thrives by utilizing powerful networks, there is a slight risk of centralization, where a few large miners carry most of the influence.
Most Popular Examples of Merged Mining
Several renowned blockchain networks utilize merged mining to fortify their networks:
Bitcoin and Namecoin: Namecoin was one of the first to implement merged mining with Bitcoin, using Bitcoin's hash power to enhance its security.
Dogecoin and Litecoin: Dogecoin adopted merged mining with Litecoin, allowing both cryptocurrencies to benefit from increased hashing power and broader miner participation.
