Merged Mining

Merged mining is a technique that allows bitcoin miners to mine Bitcoin and another blockchain simultaneously with the same hashing function. This method lets miners use their existing hardware and resources to contribute to the security of both Bitcoin and another network at the same time. Merged mining can also increase the security of a smaller chain by leveraging the processing power of a larger chain like Bitcoin, reducing the risk of 51% attacks as more miners adopt merged mining.

When a miner finds a block for Bitcoin, the same proof-of-work can be submitted to another blockchain. If the solution is valid for both, the miner earns rewards from both blockchains. The Liquid Network, which is a sidechain of Bitcoin, utilizes merged mining. This process helps the Liquid Network benefit from the strong security provided by Bitcoin’s large network of miners.

Some developers argue that merged mining provides a false sense of security, as large mining pools could dominate the smaller chain. Additionally, miners can use their hash rate on the smaller chain without risking their Bitcoin rewards. This means they have less of a financial incentive to act honestly or responsibly on the smaller blockchain. Since their primary earnings come from bitcoin mining, they might not care as much about the smaller chain’s integrity, potentially leading to dishonest behavior or neglect of the smaller blockchain’s security.