Everything You Need To Know About Merged Mining
The Bitcoin blockchain is the oldest and most widely known blockchain technology globally. Bitcoin holders can exchange value digitally through the peer-to-peer exchange process. Other coins introduced in the market are competing for popularity with Bitcoin.
New blockchain technology can leverage the Bitcoin mining power to attract more miners. The leveraging process is referred to as merged mining.
Namecoin (NAME), the first altcoin forked from Bitcoin, was the first cryptocurrency to utilize merged mining. The merge allowed miners to discover and add the NAME hash to the Bitcoin blockchain. The NAME protocol was altered to be compatible with the Bitcoin block with a NAME block hash as valid proof of work.
To understand this, you first need to know something about merged mining.
What is Merged Mining
Merged mining is a mining technique that combines the mining of two or more separate blocks to create a new block without compromising the mining performance of the involved blockchains.
Ideally, a miner can use the hashing power to mine blocks from blockchains through Auxiliary Proof of Work (AuxPoW).
Merged or combined mining is a cryptographic operation where the miner submits proof of work and hash rate to multiple blockchain networks simultaneously. This process allows the exploitation of the same computing power previously used to mine on one blockchain to be simultaneously employed to mine on another.
How does merged mining work
Combined mining allows the miner to use the same mining equipment and computing power to generate new blocks in multiple networks simultaneously. The process facilitates the mining of two blocks in multiple blocks.
Merged mining is similar to traditional mining, except for facilitating engagement in different blockchains. The mining produces a block compatible with the blockchains involved—for example, merge mining on Bitcoin and Dogecoin chains. In this case, the block mined on the Bitcoin chain is adjusted to be compatible with both networks since Dogecoin is the auxiliary network and accepts AuxPoW.
The miner can now receive regards from both networks. However, if the miner discovered the block on the Dogecoin chain, which has a lower difficulty level than Bitcoin, it would not suit the chain since Bitcoin does not recognize the AuxPoW protocol. Therefore, the miner can only receive the reward generated in the Dogecoin network.
Contextually, when combined mining is implemented, there has to be a primary network, also called the parent blockchain, and an auxiliary network, also known as the auxiliary blockchain. The parent blockchain is the network where the miner performs the entire process of mining and calculating. In contrast, the auxiliary network accepts these processes as proof of work for block mining.
The merged mining concept often gives rise to the belief that the miner requires greater computing power to be successful in multiple chains; the mining model keeps the mining equipment productivity the same. In any case, merged mining helps prevent double spending on a chain and ensures a steady discovery of the blocks.
Likewise, for combined mining to be practical, users must only exploit blockchains that run on the same mining algorithm. Therefore, some cryptocurrency combinations cannot be together because they use different algorithms based on blockchains.
Instead of merged mining compromising the computing power of the equipment, the process offers a sort of “two-for-one” arrangement. Instead of competing for resources, they use the same resources, but the solution for the mining fees and block reward differs.
Miners can compete to claim block rewards from multiple blockchains without dividing their total mining capacity between the involved networks.
Examples of cryptocurrency pairs that facilitate merged mining include:
- Bitcoin and Elastos ecosystem
- Bitcoin and Nillion’s NMC(Namecoin) technology
- Bitcoin and Syscoin (SYS)
- Bitcoin and VCASH
- DigiByte blockchain and Dogecoin
- Litecoin (LTC) and Dogecoin
- Monero Classic (XMC) and Bytecoin (BNC)
Advantages of Merged Mining
Theoretically, merged mining helps low-hash, small blockchains exploit the hashing power of the parent blockchain to boost their security. The leveraging and increased blockchain integrity reduce the blockchains’ susceptibility to 51% attacks, provided enough miners are using the merged technology. A network can only be attacked if one entity controls 51%+1 of the total hashing power.
The smaller pools attract more miners, increasing the security and network activity on the blockchains. More miners translate to greater hashing power; the bigger the miners’ network, the stronger the network integrity and protection against attacks.
Merged mining helps miners to exploit their resources to mine as many blocks as possible. Mining blocks from multiple chains for the price of one energy/electricity problem helps the miners conserve resources while getting the same hashing power to all the involved networks. An increased reward for the same work nullifies the need to switch between two networks.
Disadvantages of Merged Mining
In some instances, merged mining exposes networks to the possibility of network centralization, which goes against one of the core pillars of cryptocurrency and blockchains, decentralization. For example, a small mining pool merging with the Bitcoin blockchain can easily go below the 51% security mark. The only way a small blockchain can stay safe is to incentivize its miners handsomely to retain them.
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