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Mining is an intensive process that requires heavy computational power and can prove expensive when done repeatedly across multiple blockchains. Merged mining comes into play as a means to accomplish multiple mines without additional computational power.
What is Merged Mining?
Merged mining is when miners use the same amount of computational power they would to mine one blockchain to validate work on two or more chains.
This type of mining can only be done using proof of work coins where blockchains share the same algorithm. To better understand, take Dogecoin, which uses the Scrypt algorithm to secure its network; every coin that uses this Scrypt can be merged alongside Dogecoin.
Merged mining is achieved through a special protocol called Auxiliary Proof of Work (AuxPoW), which allows other chains (auxiliary chains) to access the valid work on a parent chain and thus validate themselves, giving the miner rewards from multiple blockchains.
How Does Merged Mining Work?
To help you get a better understanding of Merged mining, we’ll break it down step by step:
Tools Needed for Merged Mining
Hardware
Like in regular mining, you first need hardware that can effectively carry the required power of the main blockchain. For example, if you were to mine Ethereum, you would need a system with a minimum RAM of 8 or 16GB and at least an Nvidia Geforce GTX 1070 graphics card with 6GB RAM to mine efficiently.
Merged Mining Supported Pool
If you’re part of a mining pool, you need to ensure that the pool supports merge mining; several mining pools that use certain algorithms allow their users to merge mine with several cryptocurrencies.
Merged Mining Supported Blockchain
While two cryptocurrencies may share the same hashing algorithms, they might not support Auxiliary Proof of Work.
Merged mining requires changes to the auxiliary blockchain’s protocol, which might not be what the developers envisioned for the chain.
Additionally, the protocols of the two blockchains involved may not be compatible.
The Process of Merged Mining Explained
In merge mining, there is always a larger, more established blockchain that acts as the “parent blockchain” and smaller low-has chains that benefit from the merge.
During the process, a “hard fork” occurs, splitting the auxiliary blockchain into two separate chains; this can result in changes to the protocol’s rules, transaction format, governance structures and so on, which allows this chain to effectively accept valid work of the parent chain.
So, when a miner chooses a cryptographic puzzle to solve on the main chain, they add an additional field to the hashing process involved in block solving.
This field is related to the auxiliary blockchain and does not affect the parent blockchain, as it is the auxiliary blockchain that must be programmed to accept work done on the parent blockchain.
So, as the miner finds a solution for a block on the main chain, they synchronously mine for the auxiliary chain as well, creating blocks for both networks using the same computational power and earning rewards from both chains.
What’s interesting to note is that although both chains share the same mining process, each blockchain remains independent. The blocks and transactions for each blockchain are separate and don’t affect each other’s operations.
Understanding the Difficulty Difference that Determines Submitted Blocks.
Now, you need to understand that the difficulty of cryptographic puzzles that a miner is required to solve across a larger and smaller blockchain varies.
This is why merge mining accounts for these differences and considers certain variables. Here are scenarios in which blocks will be submitted to the chain.
- If a solution is found for the larger block(the one with higher difficulty), the smaller block will naturally be referenced in the data as an additional field, added to the block, and submitted to both Blockchain networks.
- If a solution satisfies the smaller chain’s difficulty level but not the larger chain, the data is only submitted to the smaller blockchain and is not added to the larger chain.
- If the solution offered is lower than the difficulty of both chains, then no data will be submitted to either blockchain.
Importance of Merged Mining
Merge mining improves collaboration between different blockchain networks. It allows smaller projects to tap into the power of larger networks and become more resilient against potential network attacks or disruptions, which increases the security of the network and investors’ confidence in the blockchain project.
This process also attracts miners to participate in smaller blockchain projects, as they can easily earn more rewards. This leads to increased community engagement and boosts the project’s growth.
Advantages of Merged Mining
Mining this way offers significant advantages for blockchain networks. Let’s take a look at some of the benefits of merge mining:
Increased Security
Merge mining is a great way for smaller new blockchains to use the hashing power of bigger chains like Bitcoin. This shared mining increases the security of the auxiliary chain by making it more difficult for attackers to execute 51% of attacks or manipulate the blockchain.
Efficient Use of Computational Power
Miners can efficiently mine multiple blockchains using the same computational resources through this process. This reduces the need for more computational power that would’ve been required to mine these chains separately.
Increased Miner Rewards
By sharing valid work with lesser blockchains, miners can earn rewards from multiple blockchains without using additional computing power.
Energy Efficient
Mining cryptocurrencies using Proof of Work uses a lot of electricity due to the intensive computational tasks carried out. However, with merged mining, the energy costs of mining are shared across the participating chains, making PoW more energy efficient.
Disadvantages of Merged Mining
While merge mining offers many benefits, it also has drawbacks you should consider before going into it. They are:
Chain Dominance
Merge mining is great for new and smaller blockchains as they enjoy exposure and security from larger blockchains. However, this often results in the dominant chains getting more mining power, leading to centralization concerns as smaller chains may struggle to attract sufficient mining support to secure their networks effectively.
Network Congestion
When there are periods of high mining, this process can contribute to increased network congestion and impact transaction processing times and network performance.
Blockchain Bloat
The additional data from the smaller chains means that on the larger blockchain, more storage space must be allocated for more block sizes. This can affect the scalability of the blockchain network and slow down transaction processing times. It can also affect the efficiency of the network as more data needs to be processed and transmitted across the nodes.
Maintenance
Another thing to note is that this process makes mining complex, requiring miners to manage and maintain the connections across multiple blockchain networks simultaneously. This might lead to technical challenges for those not skilled enough to handle issues associated with merge mining.
Is Merged Mining Profitable?
Merged mining is a profitable avenue for miners who mine major cryptocurrencies. It allows them to easily merge and receive incentives from other chains at the same time, which is like killing two birds with one stone.
By merging mining, miners can reduce the risk of solo mining smaller cryptocurrencies while reaping the benefit of the security and stability of a larger blockchain.
How to Join Merge Mining
If you’re new to mining as a whole or want to set up a merge mining system, here are easy steps you can use to start merge mining:
- First, choose the main cryptocurrency you want to mine and look for compatible cryptocurrencies that use the same algorithm and can be merged and mined alongside it. For example, Bitcoin can be merged and mined with Namecoin, Devcoin, etc.
- Install the necessary mining software, and ensure your software supports merge mining for the cryptocurrencies you’ve selected.
- Next, configure your mining software and connect to mining pools that allow merge mining of your crypto. In the configuration settings, you’ll have to specify the primary and auxiliary coins you will mine simultaneously.
- Adjust your mining software’s configuration file to specify the wallet addresses for each merge-mined cryptocurrency. This will ensure that you receive rewards from each blockchain contribution your mining operation makes.
- Once your mining setup is operational, monitor its performance across the different blockchains. Track the hash rate, shares submitted, and rewards received for each cryptocurrency being merge mined.
- Set up secure wallets for each merge-mined cryptocurrency to receive and manage your mining rewards. Ensure you keep your wallet addresses and private keys safe and backed up.
