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Don’t forget about merged mining

In 2010, Satoshi Nakamoto introduced a concept that could still fundamentally alter the trajectory of not just Bitcoin, but all of crypto — merged mining. 

Merged mining was an effort to allow Bitcoin to extend its reach beyond its single-chain nature and provide numerous benefits that could not otherwise be achieved. Yet amid the noise and fervor of modern-day Bitcoin maximalism, this groundbreaking idea often remains unjustly maligned, or simply overlooked. 

It’s now time for the entire Bitcoin community to recognize that Satoshi’s design transcends the confines of a single chain.

The basics of merged mining

Merged mining and its consensus mechanism, auxiliary proof-of-work, allows a miner to mine on multiple blockchains at the same time, using the same computational power. 

Every four years, the Bitcoin halving reduces the block reward for miners: Merged mining is one obvious solution to ease the financial pressures that miners face each halving.

By engaging in merged mining, miners can diversify their income streams without needing to invest in additional hardware or split their computational resources. There is a negligible cost to merge mine — all that’s needed is simply running an extra full node (theoretically, a light client could also work).

Yet, the true significance of merged mining extends far beyond any more immediate financial benefits. Satoshi envisioned merged mining as a means to prevent hash rate fragmentation in a clever way: By encouraging miners to mine on Bitcoin first, and then validate other chains, merged mining ensures that Bitcoin retains a dominant share of the total hash rate. This prevents the dilution of computational power across numerous chains, which could otherwise compromise the security and stability of all the networks involved.

The subtext here is that merged mining in and of itself encourages and enables experimentation.  

Sidechains can now be used to test new features, protocols and use cases without risking the stability of the Bitcoin layer-1. This approach fosters innovation while maintaining the integrity of Bitcoin’s core — it’s a collaborative approach that allows blockchains to share security and resources rather than compete destructively.

Present-day post-halving realities

The advent of Ordinals and Runes after the most recent halvings has further illustrated Bitcoin’s potential to transcend its original capabilities.

Ordinals and Runes enable the inscription of arbitrary data on the Bitcoin ledger, opening new avenues for experimentation and utility. The main value proposition of advancements such as Ordinals and Runes is that they exist on Bitcoin (the largest and most decentralized digital ledger), where they reap the benefits of being secured by PoW. This is a huge evolution, as Ordinals can now be the basis for the next generation of NFTs that are no longer stored on centralized servers. 

Read more from our opinion section: There is real value in RWAs

However, the increased activity brought by both Ordinals and Runes has driven up transaction fees, highlighting the urgent need for scalable layer-2 solutions to maintain low fees and high transaction speeds.

Merged mining, in combination with layer-2 solutions, offers the most comprehensive solution to these challenges. By enabling more users to utilize Bitcoin secured by PoW with lower fees and faster transactions, merged mining supports a sustainable influx of use cases and revenue flows into the Bitcoin ecosystem, beyond mere speculation. 

As these technologies continue to gain traction, robust security remains paramount. Merged mining ensures that Bitcoin’s substantial hash rate can be leveraged to secure additional functionalities without diluting the network’s overall computational power. This approach paves the way for a more resilient and versatile Bitcoin, capable of supporting innovative applications while maintaining its core principles of security and decentralization.

Maximizing Bitcoin’s potential

Bitcoin maximalism should be about harnessing the maximum potential of Bitcoin. While some maximalists may view any deviation from Bitcoin’s core function with suspicion, it’s essential to recognize and admit to the immense economic and technological benefits that innovations like merged mining bring to the network.

Merged mining is not just a security improvement, but a way to align layer-2s with Bitcoin to create a synergetic relationship — rather than layer-2s leeching off Bitcoin. This ensures we will scale and advance Bitcoin the right way. 

Relying solely on advantages like having a bitcoin ETF is insufficient, especially as other protocols like Ethereum now have the same. To maintain Bitcoin’s leadership, we must advance on both the technical and product levels. And rather than resisting layer-2 solutions, we should embrace merged mining as a way to align these innovations with Bitcoin, ensuring ongoing advancements without compromising the network’s integrity. 

Alexei Zamyatin is a co-founder of BOB, a first-of-its-kind hybrid Layer-2 powered by Bitcoin and Ethereum. He has been a Bitcoin and interoperability research contributor since 2015 and is most known for his work on trustless cross-chain bridges and L2s. Alexei holds a PhD in computer science from Imperial College London.

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