Everything you need to know about merged mining

Everything you need to know about merged mining - WazirX

Merged mining is mining for more than one cryptocurrency, that works on the same algorithm. The concept was a mining model that came about around 2014 with the Auxiliary proof of work (AuxPoW) protocol. While it was not something contemplated in the original white paper on cryptocurrency by Satoshi Nakamoto, he mentioned it on a Bitcointalk thread a few years later. Merged mining allows a miner to mine in more than one blockchain simultaneously. The cryptocurrencies operate on a shared algorithm basis. 

Merged mining also assists in warding off security concerns like chain attacks. It is now generally done through merged mining pools without additional resource investment by a user. This post discusses merged mining and its nuances.

What exactly is merged mining?

Merged mining, in technical jargon, is also called ‘Auxiliary Proof of Work,’ which is the protocol it is based on. A rather rudimentary understanding of the concept involves using the work done on one primary blockchain in another auxiliary blockchain(s). These blockchains, however, have to be operating on the same hash algorithm as the primary blockchain. The computational work done over the primary network is essentially shared across other auxiliary networks and leveraged accordingly. It does not require additional computational effort to conduct merged mining, just supporting architectural changes in the auxiliary networks to accept the PoW done for the parent blockchain.

The primary blockchain does not require any major modification for merged mining. For the auxiliary blockchain network, however, you will have to use the assistance of something called a ‘hard fork’ to modify it. Forks are usually introduced to add new features to a blockchain. A rudimentary understanding of it- forks introduce a new set of rules for the crypto to follow.

The auxiliary blockchains also have an increased amount of security due to operating on the same hashing power as the primary blockchain. Auxiliary blockchains sometimes also gain more traction as crypto coins owing to being associated with the primary blockchain. Namecoin, for instance, gained some ground after being merge-mined along with Bitcoin. It was also one of the first implementations of merged mining. It was followed by the public merge-mining of Dogecoin with Litecoin in 2014 as well. 

As a result of which, Dogecoin, which was the auxiliary cryptocurrency, witnessed exponential growth in the following weeks. It was a successful enterprise in merge-mining as it also led to Dogecoin’s position being cemented as a popular crypto coin for years to come. The combination mining also led to improvements in its security network over time.

There is a high incentive for merged mining, as the rewards are extra for no additional hours to be put in by the miner. There is, however, extra maintenance work required in maintaining two networks for the miner.

Pros of merged mining:

  1. It allows the same mining equipment to be used to generate new blocks in several different networks simultaneously.
  2. Due to merged mining, the power of the hash in blockchain networks increases. It helps to generate greater computational power for networks and an increase in their level of difficulty, which makes the networks more secure and robust by having a larger computational capacity or, in other words,  hashing. It can become a great advantage for small blockchains with less hashing power and a low level of security. It can also reduce the probability of suffering attacks. Namecoin became secure in the same way.
  3. The same mining equipment used for block mining in several networks increases the profitability and performance of the mining equipment. And therefore mining activities as well.
  4. Miners who execute merged mining get many opportunities to generate new blocks using the same mining algorithm, e.g., SHA-256. It will benefit the miners in receiving rewards for block mining, too.

What is a merged mining pool?

A merged mining pool is created out of combining the resources of a large number of people. The idea behind creating a pool is to increase the probability of finding the solutions to a block. Combining computational resources results in better facilitation of this goal.

With merged mining network complexities in 2021, solo mining is gradually becoming unfeasible for generating any profit. With a merged mining pool, miners also collectively devise rules of the pool for a more constant source of revenue. Some amount of mining fee is charged for the maintenance of the pool, as well as for the services provided. The remaining mining rewards are divided among the participants.

Before selecting a merged mining pool, ensure your blockchain software is compatible with the pool. An overall assessment of the pool’s security, server location, fee, and reputation must also be done before deciding.

The size of the mining pool is also a factor to look for while choosing a suitable mining pool. Small mining pools have fewer miners and low hash rates. Suppose you choose to join a large pool; you have to be aware of the mining difficulty, especially if your equipment isn’t powerful enough. Thus, a balance is required between the size of the pool and your hashing power. If you wish to learn more about cryptocurrency mining pools, you should check out our blog.

Conclusively, merged mining is a process by which the computational work over one network can be harnessed over others. Miners might sometimes create a combination of networks called a merged mining pool. This aids faster mining and provides additional resources. The onus lies on the miners to pick a merged mining pool that suits their needs.

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