Merged Mining

Definition

Merged mining, formally known as Auxiliary Proof of Work (AuxPoW), is a technique that allows the computational work performed for mining one cryptocurrency (the "parent" chain) to be simultaneously applied to mining one or more additional cryptocurrencies (the "auxiliary" chains). The miner submits the same Proof of Work to multiple chains, earning rewards on all of them without any extra Hashrate expenditure.

Technical Explanation

Merged mining works by embedding a hash of the auxiliary chain's block data within the parent chain's block. The process works as follows:

1. The miner creates block templates for both the parent chain (e.g., Litecoin) and the auxiliary chain (e.g., Dogecoin)
2. A hash of the auxiliary chain's block header is included in the parent chain's coinbase transaction (or another designated field)
3. The miner performs normal Proof of Work on the parent chain's block header
4. If the resulting hash meets the parent chain's Mining Difficulty target, the parent block is submitted normally
5. If the hash meets the auxiliary chain's difficulty target (which may be different from the parent's), the proof is submitted to the auxiliary chain along with the Merkle proof linking it to the parent block
6. Because the auxiliary chain's difficulty is typically lower, many auxiliary blocks are found for every parent block

History and Background

The concept of merged mining was described by Satoshi Nakamoto in a 2010 BitcoinTalk forum post, though it was not implemented in Bitcoin itself. The first major merged mining implementation was Namecoin, which began merged mining with Bitcoin in 2011. The most prominent merged mining pair today is Litecoin and Dogecoin, which have been merge-mined since 2014.

Merged mining was adopted by Dogecoin in 2014 as a security measure—at the time, Dogecoin's standalone hashrate was low enough that it was vulnerable to 51% attacks. By leveraging Litecoin's much larger mining infrastructure, Dogecoin dramatically improved its security without requiring its own miners to invest in additional hardware.

How It Works

Key requirements and characteristics:

• Same algorithm: Both chains must use the same hashing algorithm (e.g., both Scrypt for LTC/DOGE)
• No extra computation: The miner does the same work as mining the parent chain alone
• Independent difficulty: Each chain has its own Mining Difficulty level
• Pool support: The Mining Pool must specifically support merged mining (not all pools do)
• Multiple auxiliaries: A parent chain can support merged mining with multiple auxiliary chains simultaneously

From the miner's perspective, merged mining is essentially "free money"—the same electricity and hardware that mine the parent chain also earn rewards on the auxiliary chain. The only overhead is the additional software configuration and network bandwidth to communicate with both chains.

Relevance to Mining and Data Centers

Merged mining increases the revenue potential of mining hardware without increasing power consumption, making it a key optimization for professional mining operations. Hosting facilities like RAX that support Scrypt mining hardware enable operators to earn both Litecoin and Dogecoin rewards simultaneously. This dual-revenue stream improves the return on investment for both the hardware and the hosting costs, making Scrypt mining deployments more attractive compared to running just one chain.

Related Terms

• Litecoin — The most common merged mining parent chain
• Dogecoin — The most common merged mining auxiliary chain
• Proof of Work — The consensus mechanism enabling merged mining
• Hashrate — The computational power shared across chains
• Mining Pool — Pools must support merged mining explicitly