How AuxPow affected Dogecoin mining

Following months of uncertainty, Dogecoin finally enabled merged mining with Litecoin several days ago. To understand what this means, compare mining to a lottery where miners are constantly generating lottery tickets. If their tickets match the winning number they get rewarded. Before merged mining was implemented, Dogecoin mining and Litecoin mining were two separate lotteries that did not accept tickets from each other. Miners could only participate in a single lottery at any given time. When Dogecoin enabled its AuxPow algorithm, the Dogecoin lottery started accepting tickets from both groups of miners. For Litecoin miners, this meant they could generate additional (Dogecoin) revenue without any additional effort. As a result, the Dogecoin network total hashrate has increased tenfold, as most miners in the much larger Litecoin network started mining the former currency as well.

Without a doubt, the move greatly benefits Dogecoin, which is now no longer facing an imminent security threat. The relief also reflected in the coin’s price, as the digital currency saw its market capitalization double compared to just two weeks ago following the change. With both price and hashrate going up, it would be expected that everyone in the Dogecoin community would be happy. But unfortunately, there is one group that does not benefit from the new merged mining: the former dedicated Dogecoin miners.

To understand why this group gets left behind, consider the following network statistics:

Schedule

From September 11 to September 15, the period in which Dogecoin enabled merged mining with Litecoin, the statistics for both coins changed as follows:

Statistics September 11

Statistics September 15

With the help of the previous data, is easy to examine what this means for, for example, a Gridseed Blade ASIC miner in both situations:

Gridseed Miner

Before merged mining was enabled, the miner could be used to mine either $0.99 worth of Litecoin or $1.33 worth of Dogecoin per day. After enabling merged mining, the miner will switch to Litecoin mining and receive Dogecoins as well. This means mining will now yield $0.78 worth of Litecoin and $0.26 worth of Dogecoin per day. For a miner that was already mining Litecoin it is a small improvement, from $0.99 to $1.04 combined. But obviously, the former dedicated Dogecoin miners will actually see their revenue drop as a result as they could mine $1.33 worth of Dogecoin per day. For a Dogecoin miner that just wants to accumulate Dogecoins without selling them, the situation is even worse. The latter miner can only mine one tenth of the Dogecoins that could be mined previously. For these miners, it is a sad development to their time being involved with the world’s happiest currency. But to other involved parties, merged mining has brought them one step closer to the moon.

  • RandomJerk

    FYI, the cap in “market cap” is referring to capitalization, not capacity.

    • Oops, of course, adjusted right away! Thanks 🙂

  • Arian Bijanzadeh.

    Cool tho