If you’ve been following the crypto world for a while, you’ve probably heard about crypto mining. CPU mining, GPU mining, ASIC mining, and cloud mining are all common methods. Merged mining is a less well-known method of cryptocurrency mining.
Merged mining is the simultaneous mining of two separate cryptocurrencies utilizing supplementary proof of work (AuxPoW). It allows miners to earn additional coins while using the same hashing method without splitting the hash rate.
What is Merged Mining?
Merged mining is the process of simultaneously mining for multiple blockchain networks. The same mining activity that is used to solve blocks and add transactions to one blockchain can also be utilized to fulfill the same operation for another.
Mining for several blockchains has no effect on the performance of mining equipment. Instead, merged mining provides a sort of “two-for-one” arrangement in which they can compete for block rewards from several networks without having to divide their complete mining capability between the two networks.
How Merged Mining Works
Two blockchains are involved in the merged mining process: the parent blockchain and the auxiliary blockchain. The parent blockchain (Bitcoin) is more established, but the auxiliary blockchain is fresh or small (Namecoin).
To collaborate, the blockchains must use the same hashing algorithm. This means that all cryptocurrencies involved must use the same algorithm.
For example, Bitcoin employs SHA-256, which means that any other coin employing SHA-256 can be mined alongside Bitcoin. Namecoin and Bitcoin are two common merged mining pairings that both employ the SHA-256 hashing method for mining.
Example of How Merged Mining Works
As examples, we’ll look at Bitcoin and Namecoin. The parent blockchain will be Bitcoin, while the auxiliary blockchain will be Namecoin.
The first step is to create a transaction block for each chain. The following step is to begin mining. Both chains will have different levels of difficulty, with the primary chain being the more challenging of the two. Three possible possibilities could occur as you mine.
If you mine a block at the parent chain (Bitcoin’s) difficulty level: you receive two rewards.
- If you mine a block at the auxiliary chain (Namecoin’s) difficulty level: you receive one reward, Namecoin’s mining reward.
- If you mine a block between the parent and auxiliary chain difficulty level: You receive one reward. Same outcome as the second scenario above.
Merged mining does not need additional computing power from the miners, which is one of its greatest advantages.
Some Implementations of Merged Mining
Bitcoin and Namecoin
This is the first merged mining in the crypto industry, and it happened in early 2014. The SHA-256 mining algorithm is used by both coins.
Despite this, Namecoin (NMC) remained the most popular cryptocurrency in terms of capitalization at the time. Despite the merging with the Bitcoin network, Namecoin currently ranks 392 in terms of market valuation. While Bitcoin (BTC) remains the most extensively utilized cryptocurrency on a global scale.
Dogecoin and Litecoin
A few months after the introduction of Dogecoin (DOGE) in 2013, the community decided to switch to AuxPoW, eventually integrating with the Litecoin (LTC) network in September 2014. This connection allowed Dogecoin’s value to skyrocket by more than 180% in just a few minutes.
This combination has also helped Dogecoin (DOGE) to ascend the ranks alongside one of the most well-known and widely utilized cryptocurrencies in the world. Litecoin (LTC) is presently placed seventh in terms of market capitalization among the most popular cryptocurrencies. Similarly, combination mining has allowed Dogecoin to considerably improve its level of security, with significantly more computational power than in its early days.
Bitcoin and Elastos
Although this is likely one of the least-known combos, the Elastos project and its ELA cryptocurrency promise a climb similar to that of Dogecoin (DOGE) when it begins its mining process in conjunction with the largest and most popular of blockchain networks, Bitcoin.
Elastos is the Internet’s first open-source operating system based on blockchain technology. This system was created with the goal of developing a new operating system for the internet that was driven by blockchain technology. It would be a completely safe and decentralized operating system, allowing users to carry out their operations in a dependable and direct manner.
Bitcoin and RSK
RSK is a created platform that enables the safe and simple deployment of smart contracts within the Bitcoin network. Because RSK also supports the SHA-256 algorithm, it is conceivable to combine the Bitcoin network and the RSK platform.
The installation of combined mining, like the other merged mining application cases, allows the use of the same mining equipment in both networks. Reducing the financial and resource expenses associated with purchasing complicated equipment separately.
Similarly, the hashing power of one network can be exploited to boost the security of the other network. Miners will be far more likely to generate a new block if they participate in two separate networks at the same time. Of course, they can also receive the rewards that are granted by both networks.
Advantages of Merged Mining
There are a few advantages that come with merged mining.
In merged mining, as a miner, you are simultaneously searching for proof-of-work on the parent and auxiliary blockchain. If you discover a block hash of the parent chain, you receive two rewards. This is because the block hash from the parent chain is used as confirmation for the auxiliary blockchain.
Increased Security for Auxiliary Blockchain
Auxiliary blockchains are usually small and new blockchain projects. By leveraging the parent blockchain’s hashing power, a smaller blockchain can gain additional hash rates, increasing its security. Besides increased security, auxiliary blockchains can also gain exposure by being associated with more popular blockchains.
Disadvantages of Merged Mining
Some of the disadvantages that come with merged mining include:
A hard fork is necessary
Auxiliary blockchains need some development work to integrate merged mining. When switching from one protocol to merged mining, a hard fork is necessary. When switching from merged mining, another hard fork is required.
More maintenance work
Although merged mining does not require extra computational power, it does require more maintenance work. Mining two blockchains require extra work when compared to mining a single blockchain.
Overall, merged mining has benefits ranging from assisting young blockchain projects to improving network security. While many people question the capabilities of this crypto-mining technology, numerous crypto projects continue to use it, and its popularity grows.