Merge-Mining At Powerpool: Maximizing Profitability Across Chains
Out of the many optimizations to achieve a higher profitability for our miners, merge-mining is the most significant. It involves mining a “secondary” chain without the need to reduce your earnings on your “primary” chain.
On the surface this looks impossible, and it was at first, since mining involves hashing a block header that is tied to the chain you are mining on. The block header is composed of:
|Block version number
|256-bit hash of the previous block header
|256-bit hash based on all of the transactions in the block
|Current block timestamp as seconds since 1970-01-01T00:00 UTC
|Current target in compact format
|32-bit number (starts at 0)
The previous block hash of one chain will always be different than the previous block hash of the other chain. This means that mining both chains directly is impossible. However, this all changed when AUX-POW was introduced. AUX-POW was a modification first done on DOGE that made block hashes from other chains valid on the DOGE chain as long as they contained the DOGE chain parameters and DOGE transactions in the bytes of arbitrary data of the “primary” chain.
This made for instance, LTC shares valid for the LTC chain that reference the doge chain parameters and transactions, valid on the DOGE network as well. Meaning that if a submitted share is of high enough difficulty to qualify as a valid DOGE block, it can be submitted as a block candidate to the DOGE network and get credited for the full DOGE block reward. Effectively mining both chains at 0 cost for the miner, pools can then distribute the doge rewards as extra earnings for mining efforts..
We at PowerPool pay doge rewards at the immediate theoretical profitability, so the if profitability increases due to the difficulty dropping for the secondary chain or the price increasing, you enjoy the profitability boost immediately.