Bitcoin started the cryptocurrency revolution. Bitcoin was first introduced in 2009 after Satoshi Nakamoto published a paper about the new digital currency the previous year. Being an open source protocol, many alternate cryptocurrencies followed bitcoin. These alternate currencies are better known as Altcoins.
In spite of the presence of many altcoins, Bitcoin still leads them all. Bitcoin is the leader among them in terms of both market capitalization and network size. Even the hashing power used for bitcoin mining is greater than any of the cryptocurrencies till date. Mining involves the contribution of processing power to sustain the bitcoin network. Miners supply the necessary processing power to solve the cryptographic equations to find new blocks and confirm the validity of transactions over the platform at the same time.
Mining in one form or the other is used by all cryptocurrencies. Most of these cryptocurrencies also share various similarities with bitcoin as well, especially the blockchain aspect. Some of them, however, may use a different encryption protocol. If multiple cryptocurrencies are using the same encryption protocol and share similarities, they can possibly be mined together as well.
The process of mining multiple cryptocurrencies is called merged mining. The concept of merged mining is not something new. The creator of bitcoin himself was responsible for it. Merged mining allows the existence of blocks of an altcoin inside that of bitcoin. Meaning, the mining process/calculations processed by the miner can be reused for different altcoins and bitcoin itself. The same mining set up can mine multiple altcoins by using the same hardware and even the calculations processed for one cryptocurrency can be used for other merge mined cryptocurrencies too. In other words, the same Proof of Work can be used for multiple cryptocurrencies during merged mining.
How does Merged Mining help?
Merged mining can be used to maintain multiple cryptocurrency networks in a more economical fashion. With merged mining the Bitcoin network many not benefit much but the altcoins will be able to get more mining power from those involved in bitcoin mining,
The hashing power required to mine bitcoin is too high, making use of the same to mine altcoin will lead to a super-economical way of mining them. Also, merged mining can supplement the gains from bitcoin mining – allowing the miners to make a bit more than what they otherwise make by just mining bitcoin. Also merged mining is one way of anchoring. In order to timestamp any entry by recording it on a blockchain.
The security and stability offered by bitcoin are way higher than any other cryptocurrency platform. Combining security, scalability of mining and other factors, we can definitely expect merged mining to play an important role in the development of custom cryptocurrency based blockchain applications for various purposes other than monetary transactions.
Ref: One Chain to Rule them All
