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mayo 17, 2024

What is Merged Mining & How it Works?


Merged mining is an innovative method of mining two or more cryptocurrencies simultaneously without compromising the mining performance. Thus, a miner can utilize computational power to mine multiple blockchains. However, all the involved cryptocurrencies must follow the same algorithm to perform merged mining.

Let’s explore merged mining, its techniques, and how it works in detail with this blog.


    What is Merged Mining?

    Merged mining is the process of mining multiple PoW-based cryptocurrencies that share the same hash algorithm simultaneously using the same mining hardware. Thus, miners can earn significant mining rewards by contributing their computational power to multiple blockchains at the same time.

    Satoshi Nakamoto, the anonymous creator of Bitcoin, proposed the merged mining technique way back in 2010. That allowed miners to mine another cryptocurrency along with the primary or parent blockchain, Bitcoin. The other blockchain that works alongside the parent blockchain in merged mining is called an auxiliary blockchain.

    The only condition for merged mining is that the other cryptocurrency should also follow the same mining algorithm as Bitcoin, which is SHA-256.

    How does Merged Mining Work?

    Merged mining means mining multiple cryptocurrencies simultaneously without compromising the mining performance. The technique behind merged mining is using Auxiliary Proof of Work (AuxPoW). For example, the AuxPoW leverages the work done on one blockchain as valid work on another blockchain.

    In simple words, the primary or original blockchain that offers the proof of work is called the parent blockchain, whereas the one that accepts the work as valid is called an auxiliary blockchain.

    However, the prerequisite for merged mining is all the involved cryptocurrencies should follow the same algorithm. For instance, if you want to mine cryptocurrencies along with Bitcoin, those cryptocurrencies should also follow Bitcoin’s SHA-256 algorithm.

    The parent blockchain and auxiliary blockchain work together to mine your preferred cryptocurrencies. However, the parent blockchain will not undergo many modifications, while the auxiliary blockchain should be optimized to accept the work of the primary or parent blockchain.

    The question of whether the merged mining is good or bad is still under debate. Some claim that merged mining increases blockchain security and reduces the possibility of blockchain attacks. However, others say that merged mining doesn’t really enhance blockchain security.

    Things you will need for Merged Mining

    So, you want to participate in merged mining, mining multiple cryptocurrencies simultaneously. What are the things you will need for successful merged mining? Let’s discuss.

    • Suitable ASIC Miner

    Firstly, you will need a suitable Application-Specific Integrated Circuit (ASIC) miner that is finely programmed for the primary cryptocurrency blockchain you intend to mine. For example, if you prefer Bitcoin and other associated cryptocurrencies, you will need an ASIC miner optimized for the SHA-256 algorithm.

    • Suitable Mining Pool

    The mining pool you partner with should support merged mining and your preferred cryptocurrencies. For instance, it should be a mining pool with merged mining services. Thus, if Bitcoin is the primary blockchain, one can mine all the associated cryptocurrencies that follow the SHA-256 algorithm like Bitcoin SV, Bitcoin Cash, etc.

    • Supportive Auxilary Blockchain

    If you need to mine multiple cryptocurrencies, you need an auxiliary blockchain to support the merged mining process. To be precise, you will need AuxPoW support for merged mining. Since all blockchains that share the same hashing algorithm don’t support AuxPoW, you need to double-check that before indulging in merged mining.

    Advantages and Disadvantages of Merged Mining

    Let’s explore the potential advantages and disadvantages of merged mining.

    • Advantages

    1. Increased Efficiency

    Miners can mine multiple cryptocurrencies simultaneously on both the primary and auxiliary blockchains.

    2. Enhanced Mining Rewards

    Miners can earn rewards from both primary and auxiliary blockchain networks, leading to more mining profits.

    • Disadvantages

    1. Complex Design

    Setting up merged mining can be complex and technically demanding. Miners need to have technical expertise to implement merged mining techniques successfully. Additionally, it demands more work than mining on a single blockchain.

    2. Reliance on Parent Blockchain

    The security of the auxiliary chain relies on the hash power of the parent blockchain.

    Advantages and Disadvantages of Merged Mining

    Merged Mining Examples

    Merged mining algorithms predominantly revolved around SHA-256 and Scrypt. However, most of the mining pools don’t offer merged mining services. Thus, miners should thoroughly research the pool’s merged mining services and offered cryptocurrencies.

    Some of the remarkable merged mining are Bitcoin and Namecoin. Litecoin and Dogecoin can also be mined together. However, merged mining demands technical expertise as the design is complex.

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    Merged mining is a unique strategy in the blockchain industry, enabling users to mine multiple cryptocurrencies simultaneously. Thus, miners can enhance their mining profits. However, merged mining demands technical expertise that users should develop by staying informed about the trends and advancements in the blockchain and crypto industry.

    FAQs on Merged Mining?

    • Is merged mining more energy efficient?
    • Merged mining makes the entire Proof of Work (PoW) mechanism more energy efficient as the energy costs can be divided between the two blockchain networks, enhancing the user’s mining profits.

    • What are some of the risks associated with merged mining?
    • When more and more users participate in merged mining on multiple chains, increasing the mining difficulty of auxiliary chains will eventually prevent miners from leveraging auxiliary blockchains.

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