Merged Mining

Merged mining is the practice of mining two or more cryptocurrencies at the same time without splitting or reducing overall mining performance. A miner uses the same computational work to help secure multiple proof-of-work blockchains at once, through a mechanism known as Auxiliary Proof of Work (AuxPoW).

The core idea behind AuxPoW is that the work performed on one blockchain can also count as valid work on another. The chain that supplies the proof of work is called the parent blockchain, while the chain that accepts it as valid is called the auxiliary blockchain. Both chains share the same underlying consensus algorithm family, which is what makes the shared work possible.

For merged mining to function, all of the involved cryptocurrencies must use the same mining algorithm. For example, Bitcoin uses SHA-256, so in principle any other coin that also uses the SHA-256 hash function can be mined alongside Bitcoin, provided the technical implementation is set up correctly. Historically, Namecoin was one of the first projects to be merge-mined with Bitcoin, and chains such as Dogecoin and Litecoin have used a similar approach with the Scrypt algorithm.

The parent blockchain is barely affected, since it does not need any technical modification to be merge-mined. The auxiliary blockchain, on the other hand, has to be programmed to receive and accept the work submitted by the parent chain. Adding or removing support for merged mining on the auxiliary chain typically requires a hard fork.

In theory, merged mining can be a useful way for a smaller, lower-hash blockchain to strengthen its security by borrowing the hashing power of a larger chain such as Bitcoin. If enough miners adopt it, this could potentially reduce the likelihood of 51% attacks against the smaller network.

However, many developers argue that merged mining can create a false sense of security. A relatively large mining pool that is not dominant on the parent chain could still reach a majority of the hashing power on the much smaller auxiliary chain. A common counterargument is that if the auxiliary chain offers a strong enough reward, it may attract more miners over time, which could reduce centralization and improve security.

Another concern is that merged mining may weaken the economic stakes involved. Because miners can apply their hashing power to the smaller chain without risking their block rewards on the parent chain, they may have fewer financial reasons to behave honestly on the auxiliary chain.

Learn more: What Is Cryptocurrency Mining and How Does It Work?