AuxPOW Function

AuxPoW allows one blockchain to "mine" a block on behalf of another blockchain, sharing the work and benefiting both. Essentially, miners can use their computational power to mine blocks on multiple chains concurrently through the use of AuxPoW. The idea behind AuxPoW is that the work done on one blockchain can be leveraged as valid work on another chain.

How Does It Work?

The blockchain that provides the proof of work is called the parent blockchain, while the one that accepts it as valid is the auxiliary blockchain. To perform merged mining (which involves AuxPoW), all the involved cryptocurrencies must be using the same algorithm. Notably, the parent blockchain is barely affected as it doesn't have to undergo any kind of technical modification. On the other hand, the auxiliary blockchain needs to be programmed to effectively receive and accept the work of the parent chain. Typically, adding or removing support for merged mining requires a hard fork. In theory, merged mining can be an interesting method for a smaller blockchain to increase its security by leveraging the hashing power of a larger chain (e.g., Bitcoin). However, opinions on its effectiveness vary.

Security Considerations:

Some developers argue that merged mining provides a false sense of security. A relatively big mining pool that is not particularly dominant on Bitcoin could easily reach 51% hashing power on the smaller chain. Others believe that if the reward or incentive is good enough to mine the auxiliary chain, it will attract more miners, thus reducing centralization and increasing security. Additionally, merged mining may decrease security because economic losses are removed from the process. Miners can use their hashing power on the smaller chain without risking their Bitcoin block rewards, potentially reducing their motivation to act honestly on the auxiliary chain.

In summary, AuxPoW is a fascinating mechanism that allows different blockchains to collaborate and enhance their security while sharing mining efforts.