Merged mining, also known as auxiliary proof-of-work (AuxPoW), is a cryptocurrency concept that empowers miners to concurrently mine multiple cryptocurrencies without the need for additional computational power. It facilitates the simultaneous mining of two or more cryptocurrencies with compatible mining algorithms, fostering shared mining processes. This collaborative approach enhances security, efficiency, and network engagement for smaller or less prominent blockchains.

In merged mining, miners can solve the cryptographic puzzle required for block validation on one blockchain while simultaneously submitting the solution to multiple blockchains. This allows miners to receive rewards in the form of cryptocurrencies from multiple chains for the same computational effort. By efficiently utilizing mining resources across different chains, merged mining reduces overall energy consumption and bolsters network security.

For merged mining to function, participating blockchains must employ compatible mining algorithms, ensuring the use of the same or similar proof-of-work (PoW) algorithms. When miners discover a solution for a block on one blockchain, they include a specific "proof of work" for every other chain they are merged mining with. This proof of work serves as evidence that the miner has dedicated a substantial amount of computational power to solve the cryptographic puzzle of the block.

Merged mining offers significant benefits to smaller blockchains by providing additional security. As miners simultaneously mine both smaller and larger or more popular chains, the smaller chain gains protection against potential 51% attacks. Moreover, merged mining enables smaller chains to leverage the hashing power of larger chains, improving their chances of discovering blocks and adding transactions to their respective blockchains.