Bitcoin: increasingly popular merge mining

Recent research by Bitmex reveals that merge mining is becoming increasingly popular on the Bitcoin blockchain.

Until 2016 this was almost absent practice, but in 2017, with the introduction of Segwit, it literally exploded.

Taking as a reference the average per thousand blocks of the number of zero value outputs in the coinbase transaction, it was almost zero until 2016, while during 2017 it rose to 1 after the introduction of Segwit.

In 2018, mainly due to the RSK blockchain, this value rose to 1.5, while from June 2019 there was another surge that has now led it to well above 2.

What is merge mining on the Bitcoin blockchain?

Merge mining refers to the act of mining two or more cryptocurrency at the same time, i.e. using one’s own computing power to mine blocks on multiple chains, using the Auxiliary Proof of Work (AuxPoW).

The basic concept is to use the work done on one blockchain to validate blocks on other chains as well: the blockchain that provides proof of work is called the parent blockchain, while the one that accepts it as valid is the auxiliary blockchain.

Bitcoin uses the SHA-256 mining algorithm, making it possible to use merged mining on any other blockchain using this same algorithm.

For example, it is used for minor blockchains in order to increase their safety, thanks to the strength of Bitcoin’s hashing.

The Bitmex team of analysts reveals that they were surprised to discover how popular merge mining has become among Bitcoin miners in recent years, and in particular the miners‘ methodology of using not just one scheme, but more systems and more pieces of software, raising the risk of problems.

These transactions sometimes contain commitment hashes even for four or five other alternative blockchains, and given the high level of adoption among Bitcoin miners, the BitMEX team believes this may cause safety issues, such as complex or resource-intensive merge mining schemes that miners may be forced to execute in order to remain competitive.

However, they also reveal that they have found no evidence that merge mining is actually causing problems at Bitcoin for the time being, although they suggest monitoring the situation closely.

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