On July 1, Elastos announced the release of its first sidechain, the DID Sidechain. This sidechain is important for many reasons, not the least of which is the importance of DID as an integral part of the entire Elastos ecosystem. However, it is also notable for being the first example of a sidechain that can be merge mined with the Elastos main chain. Merged mining is an important concept within Elastos, as it can be used both to merge mine sidechains with the Elastos main chain and also used to take advantage of the Bitcoin network to merge mine the overarching main chain.
What is merged mining?
Merged mining is where more than one cryptoasset is mined without any additional computing power or effort. It essentially enables a Proof of Work (PoW) network such as Elastos to take advantage of ongoing mining activities of a larger PoW network (such as Bitcoin). As such, a miner creating and validating blocks for the Bitcoin blockchain will simultaneously create and validate blocks for Elastos.
This provides Elastos with increased security. Bitcoin, as the largest and most valuable network, is better protected against attacks (and in particular exploits which rely on brute power such as a 51% attack). By merge mining, Elastos can take advantage of this. Instead of having to take over a minimal amount of hash power, as with other networks, someone wishing to attack the Elastos network would have to have enough hash power to attack the Bitcoin network too. This would cost hundreds of millions of dollars.
It also provides stability. Smaller networks, lacking the mining operations committed to Bitcoin, are susceptible to miners redirecting their mining operations to a different cryptoasset or simply turning off their operations. By using Bitcoin as a parent blockchain, Elastos is less at risk of this threat.
Merged mining also reduces the expense and resource intensive nature of PoW. The environmental impact of Bitcoin’s PoW mining operations are frequently discussed. By merge mining with Bitcoin, Elastos is able to achieve security through PoW without any additional energy or capital being required.
How does merged mining work?
An introductory look at PoW and how it works can be found here but PoW is essentially a mechanism which enables network participants to come to consensus on what the current ledger looks like. Miners use (now specialized) hardware in conjunction with a computer program in order to find the solutions to increasingly difficult mathematical problems, the answer to which is known as the hash.
With merged mining, miners simply duplicate this process. The computer program they run is modified slightly so that a miner can process blocks for both chains at the same time, with the discovered hash securing both blocks. Discovered proofs are submitted to both the Elastos and Bitcoin blockchains simultaneously.
Despite this, the Elastos chain remains wholly independent from Bitcoin. Barring some minor information (such as an extra hash and Bitcoin header), no information from the Bitcoin chain is imported into Elastos. This ensures that Elastos doesn’t become overloaded and slowed down by unnecessary information.
Merged mining and sidechains
To mitigate scaling issues that have plagued other networks, Elastos incorporates a main chain and an unlimited number of sidechains. Sidechains take the pressure of processing all transactions away from the main chain, which is responsible for the circulation of ELA (and nothing else) while DApps run on sidechains. As such, a DApp will not slow down the basic transactions of ELA. To ensure sidechains are as rigorously well defended as the main chain, sidechains synchronize with the main chain in a similar fashion as to how the main chain merge mines with Bitcoin. A more detailed look at these sidechains and how they work can be found here.
It is important to note that sidechains running on Elastos can utilize any consensus algorithm and are not forced to use PoW (like the main chain does). However, a PoW based sidechain is able to take advantage of merged mining and as such secured through the mining of the parent chain. Transactions from the sidechain are packaged up and submitted to the main chain. This is then validated on the main chain, using the merged mining with Bitcoin. Once validated, this is then transmitted back to the sidechain.
Sidechains are validated by elected main chain arbitrators. Arbitrators are elected on the main chain and then rotate around sidechains each time they process a sidechain block. This prevents one or a limited number of arbitrators from processing transactions on the same sidechain. Miners receive the transaction fees for processing these blocks, but do not gain the block rewards that they would from the main chain.
An important point to note, however, is that the main chain and sidechains speed is not linked to the speed of Bitcoin. Whereas Bitcoin can only process one block roughly every ten minutes, the main chain of Elastos is able to process blocks in approximately two minutes and the sidechains can potentially validate faster than that. This is vital, because many DApps will need faster confirmation times than the ten minutes per block of Bitcoin (and given it is recommended the recipient waits six blocks to be sure it is a legitimate transaction, an hour total).
The sidechain whitepaper illustrates how this process works, from the Bitcoin miner all the way through to the sidechains.
As cryptoassets increase in value, the motivation to attack them similarly increases. They are 24/7 targets for a host of well-resourced and highly capable malicious actors worldwide. Bitcoin, by virtue of its size and associated mining operations, is as well protected from 51% and double spend attacks as any network. With merged mining, Elastos is able to co-opt this resilience and protection from its launch. Rather than needing to build up a community of miners, Elastos benefits from a large group of existing miners – including Bitmain, the world’s biggest mining company, Bitcoin pool operator and early investor in Elastos – who will be incentivised to mine ELA and therefore aid in and secure the network.