Merged Mining

What is Merged Mining?

Merged mining, sometimes called combined mining, refers to the process of mining multiple proof-of-work (PoW) cryptocurrencies simultaneously using the same hardware and hash algorithm.

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First proposed in 2010 by Bitcoin’s anonymous creator, Satoshi Nakamoto, merged mining allows miners to enhance revenue by earning rewards from two or more blockchains in which one or more support merge mining with a main blockchain, such as Bitcoin

Merged mining is also sometimes called Auxiliary Proof of Work (AuxPoW). 

The AuxPoW protocol allows blockchain networks with lower hash rates to access additional computational power through miners that generate hashes for multiple networks concurrently. The miner earns a mining reward if a match is found for any of the networks.

How Does Merged Mining Work?

Merged mining works by sending hashes to two or more blockchain networks simultaneously. 

Let’s break that down to explain the process in more detail. 

Proof of Work Hashing

First, hashing refers to encrypting an input using an algorithm. The output is a fixed-length string of seemingly random (but not random) numbers and letters. The same input will always create the same output.

For example, Bitcoin uses the double SHA-256 algorithm to create hashes.

UTF-8 Input Double SHA-256 Output
a 5df6e0e2761359d30a8275058e299fcc0381534545f55cf43e41983f5d4c9456
b 39361160903c6695c6804b7157c7bd10013e9ba89b1f954243bc8e3990b08db9
c 6632753d6ca30fea890f37fc150eaed8d068acf596acb2251b8fafd72db977d3

Bitcoin and other PoW blockchain networks use hashing at several steps during the process of building a block. 

Mining involves generating the correct hash to find or “mine” a new block to hold pending transactions.

Merge Mining: Main Blockchain and Auxiliary Blockchain

Merge mining involves using an additional field for both the main and auxiliary blockchain when generating hashes. 

The main blockchain is also sometimes referred to as the parent blockchain or master blockchain.

However, the main blockchain ignores the additional data (the auxiliary block hash, shown below).

Main Blockchain and Auxiliary Blockchain

For example, a Bitcoin miner could simultaneously mine Bitcoin while also mining Namecoin or Syscoin, all of which use the double SHA-256 algorithm. 

If the miner finds a block for any of the supported networks, the miner earns a block reward for that network.

Merge mining does not require additional hardware or additional energy. The AuxPow protocol simply looks for solved hashes on any of the networks supported by the pool or mining software. 

The computational work from miners contributes to the total hash rates of all the blockchains the miner is merge-mining, making each more secure.

Difficulty Differences and Submitted Blocks

Auxillary networks typically have lower difficulty compared to main networks, although this isn’t always the case. Merged mining accounts for this disparity on either end. 

The block is submitted to the chain for which it meets the required difficulty.

  • If the miner finds the correct hash at the main network’s difficulty level, a block for the main network is assembled and sent to the main network. Extra information in the “Coinbase” is ignored.
  • If the miner finds the correct hash for the auxiliary network, a block for the auxiliary network is assembled and sent to the auxiliary network. However, this block contains additional information relevant to the main blockchain’s block. This additional information is only used to prove the work was done.
  • It is possible to earn a block reward on both chains simultaneously if the miner solves the hash at the higher difficulty level of the two blockchains.
  • The blockchains remain independent, with only the mining process itself merged.

Merged mining can make mining more efficient. There are, however, some prerequisites.

What is Needed for Merge Mining?

Your mining hardware should be suitable for the main blockchain. For example, to mine Bitcoin, you’ll likely need an Application-Specific Integrated Circuit (ASIC) or multiple graphics cards, such as the NVIDIA GeForce RTX series. 

Assuming you have suitable hardware for the main blockchain you want to mine, the requirements thereafter are simple yet essential. 

  • Supported Pool: If you’re using a mining pool, the pool needs to support merge mining for the cryptocurrencies you want to mine. For example, The Mining-Dutch Merged Mining pool supports several cryptocurrencies when hashing with the Scrypt algorithm. Litecoin is the main blockchain, but miners can merge mine Dogecoin, Dingocoin, Worldcoin, Earthcoin, and other supported blockchains that use Scrypt.
  • Supported Blockchain: To use merge mining, the auxiliary blockchain must support it. Typically, AuxPoW support requires a hard fork, in which the chain splits into a before and after. Not all blockchains that share a hashing algorithm support AuxPoW.

Is Merged Mining Slower?

Because mining for multiple blockchains happens simultaneously, using the same hashes, merged mining does not slow the mining process. However, merge mining may be more data-intensive, possibly requiring an upgrade of data lines.

History of Merged Mining

Merged mining as a notion dates back to 2010 when Satoshi proposed merged mining for Bitcoin and BitDNS, noting one of merged mining’s advantages: the ability to attract miners to smaller networks.

By 2011, Namecoin, Bitcoin’s first fork, had made the theory of combined mining a reality. Namecoin block 19,200 marked the beginning of merge mining. 

Several other SHA-256-based blockchains followed suit.

However, the idea caught fire with Dogecoin, a Scrypt-based blockchain, which forked to support merge mining with Litecoin in 2014. Today, Dogecoin has a larger market cap than Litecoin, the main blockchain. 

Several other Scrypt-based coins also support merged mining with Litecoin. Scrypt miners can earn rewards from up to eight blockchains with one mining rig.

Pros and Cons of Merged Mining

Pros Cons
  • Merged mining allows additional mining rewards at no additional cost.
  • Newer blockchains can use merged mining to attract miners and bootstrap hash rates to secure the network.
  • Merged mining makes PoW as a whole, more energy efficient because energy costs are effectively split between networks.
  • Mining pools can represent a disproportionate share or hash rate on smaller auxiliary blockchains, possibly risking a 51% attack.
  • Merged mining can increase the difficulty of auxiliary chains as more miners mine multiple chains, potentially making AuxPow chains less attractive to miners.

Examples of Merged Mining

Merge mining hashing algorithms primarily center on Scrypt and SHA-256. However, not all pools support merge mining, and supported coins may vary amongst merged mining pools.

Below are some examples of cryptocurrencies that support merge mining, as well as the parent blockchains for each.

Algorithm Main Blockchain Merged Mining Cryptocurrencies
Scrypt Litecoin Dogecoin, Dingocoin, Worldcoin, Earthcoin, Newyorkcoin, Myriadcoin, Viacoin
SHA–256 Bitcoin Lyncoin, Terracoin, Syscoin, Namecoin, Xaya, Emercoin, Myriadcoin, Rootstock
X11 Dash Unitus

FAQs:

What coins can be merge-mined?

What is merged mining in the Quai network?

What is the key benefit of merged mining over traditional mining, as explained in the article on merged mining on the Quai blog?

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Eric Huffman

Eric Huffman has a diverse background ranging from business management to insurance and personal finance. In recent years, Eric's interest in finance topics and in making personal finance accessible led to a focus on cryptocurrency topics. Eric specializes in crypto, blockchain, and finance guides that make these important topics easier to understand. Publications include Milk Road, Benzinga, CryptoNews.com, Motor Trend, CoverWallet, and others. Always learning, Eric holds several certifications related to crypto and finance, including certificates from the Blockchain Council, Duke University, and SUNY. When he's not writing, you might find Eric teaching karate or exploring the woods.