Merged Mining
Mining multiple cryptocurrencies simultaneously using the same hashrate. No extra computational power needed if the pool supports it.
What is Merged Mining?
Merged mining (also called Auxiliary Proof-of-Work or AuxPoW) allows miners to mine multiple cryptocurrencies simultaneously using the same computational work. The miner's hashrate is applied to the primary chain (Bitcoin) while simultaneously being valid for one or more secondary chains, earning rewards from all chains without any additional power consumption.
How Merged Mining Works
- The mining pool constructs block templates for both Bitcoin and the auxiliary chain
- A hash of the auxiliary chain's block header is embedded in Bitcoin's coinbase transaction
- Miners hash as normal, producing proof-of-work for Bitcoin
- If a hash meets the auxiliary chain's (typically lower) difficulty target, it is also valid for that chain
- The miner earns rewards from both chains using a single hash computation
The key insight is that the auxiliary chain's difficulty is usually much lower than Bitcoin's. This means that many hash attempts that fail to find a Bitcoin block still meet the secondary chain's requirements, generating additional revenue at no extra cost.
Commonly Merged-Mined Coins
The most established merged mining pairs with Bitcoin include:
- Namecoin (NMC): The first cryptocurrency to implement merged mining with Bitcoin (since 2011)
- RSK (RBTC): A Bitcoin sidechain for smart contracts
- Elastos (ELA): A decentralized internet platform
These projects chose merged mining to benefit from Bitcoin's massive hashrate for security while providing miners with additional revenue streams.
Benefits and Limitations
Benefits:
- Additional revenue with zero extra electricity cost
- Strengthens security of smaller blockchains
- No performance impact on Bitcoin mining
Limitations:
- The pool must support merged mining for the specific auxiliary chain
- Additional revenue per miner is typically small
- Adds complexity to pool operations and software
- Not all auxiliary chains have significant value
Should You Care About Merged Mining?
For most miners, merged mining is a nice bonus rather than a deciding factor. If your chosen pool supports it, the extra revenue is essentially free. However, switching pools solely for merged mining rarely makes sense unless the auxiliary chain rewards are substantial relative to pool fee differences.