In a recent report published by Binance Research on July 12, they state that it may be possible for Dogecoin (DOGE) to outweigh Litecoin (LTC) mining bonuses by 2040 report believes that merge mining could ultimately become a solution for maintaining network security over the long term.
Dogecoin and Litecoin supplement
There are various networks in the cryptocurrency market that use the same hashing function called scrypt. Litecoin was created in 2011 and Dogecoin in 2013 as a fork of Litecoin. Next month, Litecoin rewards will be cut in half, which will be detrimental to miners if the price of Litecoin stays stable or falls.
One of the activities that could help Litecoin stay competitive in terms of mining rewards is merged mining. Since both use the same hashing algorithm, it is possible to mine Litecoin or Dogecoin with the same mining machines. Without sacrificing mining performance, miners could use their computing power to mine multiple chains at once. This is known as the Auxiliary Proof of Work (AuxPoW).
The report explains that the most popular merged mining coin is Dogecoin. This digital currency has a hash rate that follows the hash rate of Litecoins with a surprisingly high correlation. The correlation coefficient between these two networks is 0.95.
Binance Research explains that merged mining could play a crucial role in how child chains help reduce mining rewards from parent chains like Bitcoin (BTC) and Litecoin. For example, Litecoin will receive a decreasing mining premium, which miners could be offset by mining a second network like Dogecoin. This means that by merging mining, older blockchains like Litecoin and Bitcoin can remain sustainable and legitimate.
In the future, the rewards for Dogecoin could outweigh the rewards for Litecoin. This would happen if the prices of these two digital currencies stayed the same. However, with a lower supply of Litecoin, the price is also likely to go up, which means that Litecoin miners will remain more profitable than Dogecoin miners.
The report reads as follows:
For example, let’s say prices are constant, with Dogecoin being USD 0.0035 and Litecoin being USD 121. At current prices in USD, Dogecoin mining rewards would outweigh Litecoin mining rewards by 2039-2040. “
At the time of writing, Litecoin is the fourth largest digital currency in the market after Bitcoin, Ethereum (ETH) and XRP. According to CoinMarketCap, Litecoin has a market capitalization of $ 6.55 billion and a price per coin of $ 104.
Dogecoin is the 30th largest virtual currency with a price per coin of $ 0.00316 and a market capitalization of $ 380 million.
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