Merged Mining and Extra Rewards
Mining pools often advertise merged mining or extra rewards, but the words can mean very different things depending on the pool. If you do not understand the mechanics, you can switch pools for a benefit that never actually reaches your wallet.
By the end of this article, you will be able to tell the difference between protocol-level merged mining (AuxPoW) and marketing-style bonus rewards. You will also know what to check in pool terms, how payout methods change what you see, and when the extra complexity is worth it for your setup.
Note for South Africa:
- Do not use generic profitability screenshots, use your real Eskom or municipal tariff, plus your real uptime during load shedding.
- Receiving multiple coins from one pool can complicate record-keeping, especially if you later convert small auxiliary coins.
- Tax treatment depends on your facts and intent, keep clean records and refer to SARS guidance for crypto assets SARS crypto assets tax guidance.
At a glance:
- Merged mining (AuxPoW) can let one set of proof-of-work secure more than one chain, but pools still control how, when, and in what coin you get paid.
- Extra rewards can be real auxiliary coins, fee sharing, or temporary promotions, you need to confirm which one it is.
- Payout method matters, PPS, FPPS, PPS+, and PPLNS can change how predictable your main payouts are and where transaction fees show up.
- Before switching pools, verify thresholds, fee treatment, conversion spreads, and whether you must set a separate aux address.
Key takeaways:
- Do not assume extra rewards are free money, they can be real, but they can also be small, delayed, or hard to withdraw.
- Look for precise terms, AuxPoW, which aux chain, payout currency, minimums, schedule, and fees on aux rewards.
- For South Africa, uptime and accounting effort are often bigger decision factors than the headline aux reward.
Merged mining in plain English, what it is and what it is not
Merged mining is a technique where the same proof-of-work can be used to secure a second blockchain, called an auxiliary chain. The parent chain is the one whose proof-of-work is primarily being performed, and the auxiliary chain accepts proof that the work was done in a way it can verify.
For a pool user, the simplest mental model is this, your miner keeps hashing like normal, and the pool may be able to claim additional block rewards on an auxiliary network using that same work. When it is true AuxPoW merged mining, the auxiliary rewards exist because of the protocol rules on that auxiliary chain, not because the pool decided to run a promotion.
What merged mining is not, any generic claim of bonus rewards without naming an auxiliary chain or explaining the mechanism. Pools can offer promotions, referral bonuses, or fee rebates, and those may be valuable, but they are not merged mining.
If you want a technical definition reference, start with the merged mining specification and terminology on the Bitcoin wiki merged mining specification.
If you are new
- Assume every pool is different until you read the pool help pages and terms for the exact coin you mine.
- Start by learning your payout method, PPS and PPLNS behave very differently over a week of mining.
- Track one thing first, what coin arrives, how often, and what the pool calls it on the payout page.
- Do not chase small aux coins until you can reliably access an exchange or swap route for them in South Africa.
If you have done this before
- Check whether the pool pays auxiliary rewards in-kind or auto converts, conversion spreads can silently eat small aux rewards.
- Confirm whether aux rewards share the same minimum payout threshold as the main coin, or have separate thresholds.
- Verify whether aux rewards are affected by your chosen payout method, some pools separate fee and aux components clearly, others do not.
- Look for pool-side failure modes, wrong aux address format, wrong network, or missing tag or memo where applicable.
The technical model, parent chain vs auxiliary chain, AuxPoW, and what gets reused
AuxPoW, short for Auxiliary Proof-of-Work, is a way for an auxiliary chain to accept proof that a miner did work that also serves a parent chain. The parent chain does not need to change its consensus rules to support the auxiliary chain, instead the auxiliary chain defines how to validate that the work was committed to it.
At a high level, the pool constructs data so that the parent chain coinbase transaction commits to auxiliary chain information. The pool then mines the parent chain block header as usual, and if a valid block is found, it can present an AuxPoW proof to the auxiliary chain to claim its reward.
Two real-world, commonly cited examples are Namecoin as an auxiliary chain to Bitcoin, and Dogecoin adopting AuxPoW to be merge mined with Litecoin. For background reading, Namecoin documents the idea of merged mining as a by-product of Bitcoin mining Namecoin merged mining overview, and there is historical reporting on Dogecoin merge mining with Litecoin Dogecoin merge mined with Litecoin.
For pool users, the main practical point is that merged mining is about block construction and proof reuse, not about your miner magically producing more hashrate. If you are already mining the parent chain, the auxiliary chain reward can be an add-on, but you still have operational overhead in monitoring and accounting.
How a share can be valid for one chain but not the other
Pool mining is based on shares, which are proofs of work at lower difficulty than the network target. A share can be valid for pool accounting even when it is not a full network block on the parent chain, and the pool uses those shares to measure your contribution.
Merged mining adds another layer, a found parent chain block may still fail to become an accepted block on the parent chain due to factors like orphaning. Similarly, the auxiliary chain may have its own acceptance and confirmation rules, and it can accept or reject an AuxPoW submission depending on its rules.
That is why you should not treat auxiliary rewards as perfectly smooth. Even when your hashrate is stable, the timing and visibility of aux rewards can be lumpy, and pools may batch or delay payouts until confirmations are sufficient.
If you want a plain-language technical walkthrough, the Bitcoin Stack Exchange explanation is a useful primer how merged mining works.
Quick comparison table, what pool terms usually affect your outcome
Before you go deep into a pool dashboard, it helps to know which knobs usually change what you actually receive. The table below is intentionally practical, it focuses on what shows up in your payout history and wallet.
| Thing you check | What it changes for you | What to look for in pool docs |
|---|---|---|
| Merged mining or AuxPoW support | Whether aux coins can exist at all for your mining work | Named auxiliary chain, AuxPoW wording, payout rules |
| Payout scheme (PPS, FPPS, PPS+, PPLNS) | Predictability and how fees are handled | Definition of what is included in payout |
| Aux payout currency | Whether you receive the aux coin, or conversion into the main coin | In-kind vs converted, any spread or extra fee |
| Minimum payout threshold | Whether small aux amounts ever reach your wallet | Separate thresholds for aux rewards |
| Payout schedule and confirmations | How fast you see rewards, and whether payouts are batched | Daily, instant, manual, and required confirmations |
“Extra rewards” and auxiliary coins, what pools mean by it
When a pool says extra rewards, it might mean auxiliary coins earned through protocol-level merged mining, or it might mean something else entirely. The only way to know is to identify the source of the reward and whether it depends on an auxiliary chain.
In true merged mining, the pool is earning additional block rewards on a specific auxiliary chain that supports AuxPoW. In that case, the pool should be able to tell you exactly which auxiliary coin is involved, and how it is distributed.
In non-merged-mining cases, extra rewards can be a promotion, a fee rebate, or a different product like paid order flow or revenue sharing. Those can still matter, but they can end at any time, and they may come with eligibility rules.
Common forms of extra rewards, and how to tell them apart
- AuxPoW coin payouts: The pool names an auxiliary chain, and the reward exists because the auxiliary chain accepts AuxPoW work. You should see rules about the aux coin, confirmations, and minimums.
- Auto-converted aux rewards: The pool mines the auxiliary coin but pays you in the main coin, usually after conversion. You need clarity on the rate source and fees or spreads.
- Pool promotions: The pool pays a bonus funded by the pool, such as a limited-time rebate. Look for start and end dates, eligibility, and caps.
- Fee sharing models: The pool shares transaction fee revenue or other revenue streams in a way that is branded as a bonus. This can overlap with FPPS or PPS+ explanations, so read carefully.
- Other concepts marketed as extra rewards: Sometimes pools use broad language like MEV, but applicability depends on the chain and mining method. If the pool cannot describe how it is measured and paid, treat it as marketing until proven otherwise.
A good baseline is to separate protocol rewards from pool policy. Protocol rewards come from a chain’s rules, pool policy is how the pool chooses to distribute what it earned.
Payout mechanics that change how extra rewards show up, PPS vs FPPS vs PPS+ vs PPLNS
Even if two pools have the same headline fee, your experience can differ a lot based on payout method. This matters because extra rewards can be dwarfed by payout variance, or hidden inside payout calculations.
PPS pays you for each valid share you submit, which reduces variance for the miner. PPLNS pays based on shares in a window around when the pool finds blocks, which can increase variance and makes uptime more important.
FPPS and PPS+ are variations that relate to transaction fees. In many explanations, FPPS aims to include transaction fees in payouts, while PPS+ often uses PPS for the block subsidy portion and a PPLNS-like method for transaction fees.
For a clear, practical description of these schemes, compare Bitcoin Optech’s pooled mining overview pooled mining payout methods with a large pool’s scheme definitions PPS vs FPPS vs PPS+.
- Why this matters for extra rewards: If your main payout becomes more variable under PPLNS, a small aux reward can look bigger or smaller depending on timing.
- Visibility issue: Some pools show aux rewards as a separate line item, others blend it into a total, making it hard to audit.
- Fee handling: If transaction fees are included or excluded depending on scheme, you might mislabel fee inclusion as an extra reward.
When merged mining and auxiliary rewards actually matter to you
For many miners, merged mining is not a primary profit driver, it is a nice-to-have that can tilt a pool decision when everything else is equal. The biggest time it matters is when the aux coin has meaningful liquidity for you, and the pool pays it in a way you can actually access.
Aux rewards matter more when your hashrate is steady, your uptime is high, and you are already happy with the pool’s payout method and reliability. They matter less when you are constantly restarting due to load shedding, or when the aux payout never reaches the minimum threshold.
Scenarios to think through
- Small hashrate hobbyist: Prioritise low minimum payouts, clear reporting, and easy withdrawals. A tiny aux trickle that never pays out is effectively zero.
- High uptime farm: You can benefit from anything additive, but only if reporting and wallet ops stay manageable. Consider whether you want more coins on your books.
- Switching pools: Do a two-week comparison with the same hashrate, and compare net receipts, not dashboard estimates. Watch for different stale share rates and payout timing.
- High fee periods: If your coin has meaningful transaction fee variability, payout scheme choice can outweigh aux rewards. FPPS or PPS+ differences can be bigger than an aux coin.
- Minimum payout thresholds: If aux rewards have a separate threshold, you might wait months to receive them. That increases counterparty risk to the pool and increases admin overhead.
If you want help choosing between pool stability and reward structure, consider getting a second opinion through our service team via our contact page.
Checklist, what to verify on any pool before you chase auxiliary rewards
Use this checklist before you change a stable setup. The goal is to convert vague marketing phrases into yes or no facts you can track in your payouts.
- Is it actually merged mining? Look for explicit AuxPoW wording and a named auxiliary chain, not just bonus rewards.
- Which chain is the parent, and which is auxiliary? This helps you understand what you are really mining day to day, and which wallet you need to monitor.
- How are aux rewards paid? In the auxiliary coin, in the parent coin, or via auto conversion. If converted, check whether the pool discloses fees or spreads.
- Do you need to set an auxiliary address? Some pools require an aux wallet address setup, and misconfiguration can lead to lost or stuck rewards.
- Are there separate minimum payout thresholds? Confirm minimums for both main and auxiliary rewards, and whether they are adjustable.
- What is the payout schedule? Continuous, daily, or manual, and whether aux rewards follow the same schedule.
- What confirmations are required? Aux coins may require more confirmations, which can delay payout visibility.
- Does the pool take a fee on aux rewards? Some pools apply fees to aux earnings too, confirm whether it is the same as the headline fee.
- How does your payout scheme interact? PPS vs PPLNS changes variance, FPPS vs PPS+ changes fee inclusion. Make sure you are comparing like-for-like.
- What reporting do you get? Can you export CSV, does it separate main and aux rewards, does it show timestamps and TXIDs.
- How will you store and later dispose of the aux coin? If it is illiquid locally, you may end up paying extra conversion costs or leaving dust amounts everywhere.
If you are building or refreshing a mining setup and you want to keep hardware aligned with your pool plan, browse our mining categories like Bitcoin ASIC miners or Litecoin and Dogecoin ASIC miners.
Common mistakes
- Assuming extra rewards means merged mining, without confirming the auxiliary chain and payout rules.
- Switching from a stable pool to chase a small aux coin, then losing more to downtime and variance.
- Missing an aux wallet configuration step, then discovering months later that aux payouts were not credited.
- Ignoring minimum payout thresholds, especially separate aux minimums that make small balances effectively unreachable.
- Comparing pool earnings using only one day of data, instead of enough time to average out variance.
South Africa lens, costs, taxes, and reporting considerations for “extra” coins
In South Africa, the operational reality often dominates, power interruptions, internet stability, and the admin time to keep everything tidy. A pool’s aux reward might be technically free in electricity terms, but it is not free in attention and record-keeping.
On the costs side, work with your real tariff and your real uptime. If you are using backup power, be honest about inverter losses, battery wear, and the fact that you may choose to power down during longer outages.
On tax and reporting, receiving multiple coins from one mining activity can create more line items to track. SARS has published general guidance on crypto assets, and it notes that tax outcomes depend on the facts and whether amounts are revenue or capital in nature crypto assets and tax.
- Keep records per payout: date and time, coin, amount, pool statement, and wallet TXID where available.
- Track conversions separately: if you convert aux coins into a main coin, keep the swap record and fees.
- Do not ignore dust: small aux rewards can still add up over time, and they complicate audits if you cannot reconcile them.
- Think about liquidity: if a coin is hard to sell locally, you may face higher spreads or extra steps, which can erase the benefit.
If you are cleaning up old rigs or cycling hardware to reduce downtime, you can also use our sell your items page to offload equipment responsibly.
Frequently asked questions
Does merged mining increase my electricity use?
If you are already mining the parent chain, AuxPoW style merged mining is generally described as requiring no extra hardware and electricity for the additional auxiliary chain work, because the proof-of-work is reused, as discussed in Namecoin’s FAQ Namecoin FAQ on merged mining. In practice, you may still have indirect costs, like extra monitoring, extra wallets, and more complex accounting.
Will I always get the aux coin when the pool says it offers merged mining?
Not necessarily. You might need to set an aux address, meet a separate minimum payout, or wait for confirmations and batching, and some pools convert the aux coin into another coin before paying you. Always read the pool’s payout rules for that specific coin and region, and test with a small amount first.
Can a block be valid on the parent chain but not on the auxiliary chain, or vice versa?
Yes, the chains remain independent, and acceptance depends on each network’s rules and what the pool submits. That is one reason aux rewards can be spiky or delayed, and why pools may show them separately or only after additional confirmations.
Is merged mining the same as FPPS or PPS+?
No. Merged mining is about earning rewards from an auxiliary chain using reused proof-of-work, while FPPS and PPS+ are payout schemes that describe how a pool pays miners and how transaction fees are treated. A pool can offer merged mining under any payout scheme, so you have to evaluate both separately.
What should I keep for SARS if I receive multiple coins from one pool?
Keep exportable pool statements, wallet transaction records, and a consistent ledger that shows the date you received each coin and what happened when you later swapped or sold it. For the official high-level framing, start with the SARS crypto assets guidance SARS crypto assets tax guidance, and consider professional advice for your personal situation.
Final checklist summary
- Confirm whether extra rewards are real AuxPoW merged mining, or just a pool promotion.
- Verify payout currency, conversion method, thresholds, schedule, and any fees applied to aux rewards.
- Pick a payout scheme that matches your uptime and risk tolerance before you optimise for aux coins.
- In South Africa, treat uptime and record-keeping as first-class costs, especially during load shedding.
This is educational content, not financial advice.
