While we covered the basics of how crypto mining works, this next installment covers what is merged mining. As you know, there are various different ways that crypto can be mined, with a number of different options, like GPU mining, ASICs, web browser mining or cloud mining. The concept has been growing in popularity over recent years so to broaden your crypto knowledge we thought it makes for the perfect next step in learning about crypto mining.
What Is Merged Mining?
Merged mining is when two coins that use the same mining algorithms are mined at the same time. A miner can use the same computational power to mine blocks on various blockchains through what is called Auxiliary Proof of Work (AuxPoW). This allows the miner to increase the hash rate and security of two blockchains simultaneously, as well as reap the rewards of minings two coins at once. The process also does not call for any additional computing power, which is an added bonus in terms of electricity usage and profits.
Two notable merged mining pairs are Bitcoin and Namecoin as well as Litecoin and Dogecoin, with each pair containing a “parent” blockchain and an “auxillary” one. Looking at the Bitcoin network it uses the SHA-256 algorithm, so essentially any other blockchain that uses the same algorithm (and technical protocols) can be mined simultaneously.
One thing that miners need to take into consideration however is the difficulty levels of the two coins. For instance, in the case of Bitcoin and Namecoin, Namecoin has a much lower difficulty requirement so a miner has a few options. Either they mine at Bitcoin’s difficulty and earn the rewards for both coins, or they mine at Namecoin’s difficulty level (or in between the two levels) and earn just Namecoin’s rewards.
With few additional costs, miners can reap the rewards of two mining opportunities at once, and contribute to the overall security of the network by protecting it from a 51% attack. It’s a useful feature to incorporate when creating new projects, however this is mostly beneficial to miners, and less so to investors.
Regular Merged Mining And Blind Merged Mining
Taking it one step further, there are two types of merged mining.
Regular merged mining is done by Bitcoin miners who are incentivised to check the validity on both blockchains and are rewarded with the currency of each chain. Blind merged mining however allows anyone to conduct the mining while a third party then pays the miners in Bitcoin transaction fees. This type of mining only checks the validity of the parent blockchain (in this case Bitcoin) and rewards are in BTC.
Currently, the regular merged mining is the most widely conducted, with the blind option used few and far between (despite presenting better security options).
Crypto Mining Vs Crypto Trading
The concept of merged mining emerged in 2014, however was slow to spread. Nowadays, over 90% of Bitcoin hash rates indicate that they are engaged in what is merged mining. Crypto trading and crypto mining are two very different ball games, if you are interested in engaging in crypto mining this year we encourage you to check out this overview of the top coins to mine this year. If you’re interested in trading, consider buying crypto through the wonderfully streamlined and highly convenient Oobit platform where purchases can be made with credit and debit cards or bank transfer.