Crypto glossary
Merged mining
Merged mining lets miners secure two proof-of-work chains that share a hashing algorithm at once, earning rewards on both without extra computation.
With merged mining, a miner builds a block for a parent chain, such as Litecoin, and embeds a reference to a block of an auxiliary chain, such as Dogecoin, in it. Each hash attempt then counts for both chains: if it meets the auxiliary chain's lower difficulty, it can be submitted there as proof of work. The technique, known as auxiliary proof of work, was first used by Namecoin with Bitcoin in 2011.
The main benefit goes to the smaller chain, which borrows the security of a much larger pool of hashrate. Dogecoin has been merged-mined with Litecoin since 2014, which helped protect it from attacks after its own hashrate dwindled. Bitcoin sidechains such as Rootstock also rely on miners who opt in to merged mining.
Security is only as strong as the share of parent-chain miners who actually participate. If few do, the auxiliary chain can still be attacked cheaply, and a dominant pool that merge-mines can exert outsized control over the smaller network. Miners must also run extra software, so many only join through pools that handle it for them.
Example
A Litecoin pool includes a Dogecoin block reference in every block it works on; over a day it finds 10 Litecoin blocks and hundreds of Dogecoin blocks with exactly the same hardware and power.