What is Merged Mining?

Merged mining is the process of simultaneously mining two or more crypto assets. Besides, during the process of merged mining, overall mining performance stays unaffected.

Auxiliary Proof-of-Work (AuxPoW) is a consensus mechanism used in merged mining. It allows a miner to leverage their processing resources to mine blocks on numerous blockchains at the same time. AuxPoW is based on the premise that one chain can take advantage of work done on another chain.

The parent blockchain is the one that supplies the Proof-of-Work. The auxiliary blockchain, on the other hand, is the one that acknowledges it as valid.

To accomplish merged mining, the same algorithm must be used by all involved assets. Ethereum, for example, employs KECCAK-256. This means that nearly any other asset that uses KECCAK-256 can be mined alongside Ethereum. Of course, the technical implementations must be done correctly.

It should be noted that the parent blockchain is not really affected during merged mining. This is the case because it doesn’t require any technical changes. However, the auxiliary blockchain is affected. It must be built to properly receive and accept the parent chain's work. Besides, note that a hard fork is usually required to add or remove merged mining support.

Theoretically, merged mining could be a way for a small blockchain to boost its security. The chain would do that by leveraging Ethereum's (or any other larger blockchain's) hash power. Besides, if a sufficient amount of miners agree to use merged mining, the likelihood of 51% attacks would be reduced.

Though many developers claim that a false sense of security is evoked by merged mining. According to them, this is the case due to the fact that a large mining pool, which is not so popular on, for example, Ethereum, might achieve 51% hashing power on a smaller chain very easily. 

However, to contradict this idea it's argued that more miners can be attracted if the reward for mining an auxiliary chain is sufficient. This would result in lowered centralization and increased security.

Aside from that, other people argue that merged mining reduces security. This happens because it eliminates economic losses from the process. Bitcoin miners, for example, can avoid jeopardizing their block rewards while employing their computing power on a smaller chain. Thus, miners on the smaller chain have fewer reasons to act fairly because they don't risk losing their rewards.