Merged mining is the process of simultaneously mining two or more cryptocurrencies. In order for merged mining to be possible, the cryptocurrencies that are being mined simultaneously must use the same consensus protocol and hash function (for example SHA-256 or Scrypt). 

Merged mining allows smaller cryptocurrencies to benefit from the security of larger cryptocurrencies. Miners who engage in merged mining can submit Proof-of-Work performed on the “parent” blockchain to validate blocks on a “child” blockchain as well. 

We should clarify that merged mining is sometimes referred to as Auxiliary Proof-of-Work (AuxPoW). The “child” blockchain can also be referred to as the auxiliary blockchain. 

Merged mining explained

In the example of Bitcoin, merged mining allows miners to use their computational work from the Bitcoin network (which acts as the parent blockchain in this case) to simultaneously validate transactions on a child blockhain. This process lets miners maximize their efforts by securing both networks while mining.

In exchange for their contributions, miners receive additional rewards in the form of coins from the child, which helps offset their operational costs. This system not only enhances mining efficiency but also supports the security and viability of smaller blockchain networks, making them less vulnerable to 51% attacks and other exploits.

Merged mining presents a clear benefit for miners in terms of cost-efficiency, as it allows them to mine more than one cryptocurrency without the need to invest in additional hardware or modify their existing setups. This process involves using the same mining resources to validate transactions on multiple blockchain networks simultaneously. 

As a result, miners can enhance their potential earnings by receiving additional rewards from the auxiliary blockchain they help to secure. This makes merged mining a particularly advantageous strategy, offering a dual benefit of reduced costs and increased revenue opportunities, creating a win-win situation for the miners involved.

The first example of merged mining dates back to 2011, when it was implemented by Namecoin. In this scenario, Namecoin is the child blockchain and Bitcoin is the parent blockchain. Bitcoin miners who engage in merge mining can also earn NMC rewards in addition to BTC. 

Merged mining examples – Which cryptocurrencies use merged mining?

Now, let’s take a look at some examples of cryptocurrencies that rely on merged mining to secure their blockchains.

Dogecoin (merge mined with Litecoin)

Dogecoin is the first meme coin to ever launch, and remains the largest meme coin by market capitalization to this day. Dogecoin adopted merged mining in 2014 through a hard fork to increase the security of its network after low mining rewards made miners less likely to want to secure the chain. Dogecoin is mined alongside Litecoin, a popular cryptocurrency that also uses the Scrypt hashing algorithm. 

Rootstock (merge mined with Bitcoin)

Rootstock or RSK is a smart contracts platform that relies on the Bitcoin network for its security. Rootstock is merge mined alongside Bitcoin, which is possible since both blockchains utzilize the SHA-256 hashing algorithm. 

This allows Rootstock to benefit from Bitcoin’s massive hashing power and enhance its security. Bitcoin miners don’t need to provide any additional computational work to also help secure Rootstock, which means that the network doesn’t struggle with attracting enough miners to ensure security. Rootstock pays its mining rewards in Bitcoin which is sourced from the transaction fees paid by users on the Rootstock network. 

Elastos (merge mined with Bitcoin)

Elastos is a blockchain that is merge mined along with Bitcoin. The Elastos project implemented merged mining in 2018 as one of the three ways in which the Elastos platform achieves consensus. Miners who successfully mine a block on the Bitcoin blockchain have the capability to incorporate a reference to a valid block on the Elastos main chain. This linking of blocks enables the Elastos network to benefit from the security features of the Bitcoin blockchain. 

The bottom line

Merged mining is a fascinating innovation that allows smaller blockchains to benefit from the security of large and well-established blockchains. It enables miners to earn rewards on more than one blockchain simultaneously, making mining more economically viable and therefore further strengthening the security of blockchain networks. 

If you’re interested to learn more about the topic of cryptocurrency mining, make sure to explore our list of the best ASIC miners.