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According to a recent report by Binance Research, the effect of block reward halvings for both Bitcoin and Litecoin mining could be alleviated by merged mining.
Charlie Lee recently said during an interview that he expects the effect of Litecoin’s August 5 halving to be worse than what most of the community is expecting. But, according to binance Research, merged mining may mitigate many of the expected negatives by retaining the incentives for miners.
Merged mining refers to using Auxiliary Proof of Work (AuxPoW) to enable smaller blockchains to do the work of one blockchain. So far there have been three major examples of merged mining, including Namecoin merging with Bitcoin, Dogecoin with Litecoin, and Myriadcoin with both Litecoin and Bitcoin.
According to its latest report, Binance Research has concluded that merged mining may “potentially provide an opportunity to increase incentives for miners.” Additionally, other smaller blockchains could move to AuxPoW to support a higher level of security while at the same time reducing the need for a separate mining set.
Binance Research also touched on the potential shortcomings of merged mining from the project team’s perspective as well as the miner’s perspective. Miners may decide against supporting child blockchains due to the costs associated relative to the potential rewards.
As for the mining team, the risks include potential new attack vectors in addition to dependency on the parent blockchain.