Merged mining is a highly effective method of mining multiple cryptocurrencies at the same time without any compromise on the effectiveness. Merged mining plays an important role in providing security and scalability to the cryptocurrency ecosystem. By utilizing the computational power of even larger networks, minor or brand-new blockchains can increase their network stability and reduce the risk of security hazards. The secondary blockchain benefits from this process, with more security and less centralization brought about as a result. Miners can also cash out on both networks. Merged mining has become a popular solution for smaller blockchains that give them access to the security and stability of larger networks building up a symbiotic relationship between them.

How Merged Mining Works?

The key is the Auxillary Proof of Work System (AuxPoW) of merged mining. By using a single algorithm for Proof of Work, miners who are engaged on different blockchains can confirm transactions and generate new blocks in more than one blockchain at the same time.

This way as long as the miners are working on the parent blockchain, they will also be attaining security for child blockchains. No other energy or equipment is needed whatsoever. The relationship between parent and child chains is the key. The child benefits from its parent chain’s strong hashing capabilities.

Benefits Of Merged Mining

Merged mining provides a hefty amount of benefits that improve the security and efficiency of cryptocurrencies

• Improved Security: Big networks like Bitcoin BTc or Litecoin LTC provide stronger security to smaller networks which will make them so much stronger and give them more resistance to attacks.
• Increased Hash Rates: Because of the pooling of resources through various chains, merged mining increases overall hash rates which will help to increase the stability of the network. 
• Cost Efficiency: Merged mining can avoid unnecessary costs by their working because of their use of only one mining setup.
• Reduce Energy Consumption: By using existing computing resources for mining multiple networks, there will be less amount of energy waste when compared to single-chain mining.

Challenges Of Merged Mining

•  Potential Centralization: With its enhancements big network might take over the whole process and dominate the smaller networks which will lead to centralization.
• Dependency On Parent Chain Security: Because of the dependency of the child chains on its parent chains, anything that happens to the parent chain will directly affect on child chains also.
• Conflicts Of Interests: There will be chances of disagreement between parent and child chains which will lead to more confusion and instability.

Merged Mining Examples

Several major cryptocurrencies have been choosing to do merged mining which includes big names as well which include both Bitcoin and Litecoin. Here are some of the most famous cryptocurrencies that support merged mining which are mined with Litecoin and Bitcoin

• Dogecoin: This can be mined with Litecoin which uses the same Scrypt hashing algorithm. Dogecoin consumes very little Block time when compared to Bitcoin and even Litecoin.
• Viacoin: Uses the same algorithm as Litecoin which is Scrypt which is known to lower the effectiveness of ASIC mining significantly. 
• Namecoin: Uses the algorithm same as Bitcoin, if you are mining Bitcoin you can also Namecoin without using extra hardware and also without any extra electricity.
• Rootstock: Rootstock uses the network of Bitcoin for its smart contracts platform. They also use the same algorithm which is SHA-256.
• Syscoin: Another blockchain platform that is compatible with Bitcoin. It offers a decentralized platform and a distinct identity in the digital world.

How Merged Mining Benefits Litecoin?

Merged mining makes it easy for every other lower network to function more liberally and without much power of computable resources. Merge mining on Litecoin makes it more secure and a spectacular marketing tool for the smaller tokens. It also provides more cost savings and efficiency in its work. Because the merged mining, it allows the users to utilize their current resources to mine more than cryptocurrencies at the same time. It benefits the hash rate efficiency as it can increase the total hash rate by pooling resources throughout various chains.

One of the cryptocurrencies that took merged mining to protect their blockchain was Dogecoin which is mined with Litecoin. It is still the largest meme coin by market capitalization up to this day. Dogecoin came into the merged mining in 2014 due to its increase in the security of its network after suffering from low mining rewards. It has been mined throughout through Litecoin which uses the Scrypt Hashing algorithm. The Scrypt algorithm is been used to protect the network from any unwanted attackers. It gives more protection to Litecoin during mining from other higher hardware dominations. When compared to the traditional algorithm like SHA-256, which is used in Bitcoin, Scrypt uses fewer resources to its working which limits the waste of resource power.

Scrypt Algorithm 

Scrypt is an algorithm that improves the old algorithms which is a tried and tested algorithm, SHA-256 or Secure Hash Algorithm 256-bit. It was invented as a password-based key derivation function which was specifically made to defend against any unauthorised attacks. To give it a short introduction to its functionality, it was created for ASIC resistance, limiting any other highly intensive miners to come and take their dominant position over any mining network with their highly top-end hardware. To decrypt the password from the algorithm demands a high amount of power on the hardware side and requires a whole lot of memory power to make the most out of it, which makes it more challenging and provides a good amount of security.

Conclusion 

From being always in the lower network position and not being able to come into the prominent networks, merged mining becomes an opportunity for new and smaller blockchains to come forward and merge with other cryptocurrencies. It allows young blockchains to come and grow and also get more security than before also adding a more revenue option to the miners. Even though many of the cryptocurrencies have come to this, many still do not come fully into this concept. With every day improving in its growth way, there is still plenty of room for more improvements and merge mining will be seen more often in the coming times.