Dedicated Cost Principle

The necessary costs associated with mining set a floor for the cost of censorship. A censor must expend greater capital than the necessary expenditures of all other miners combined to maintain the strongest chain, and thereby the censorship regime.

Unnecessary costs incurred by miners contribute nothing to defense against the censor. Such costs constitute true waste, representing nothing more than a given miner’s inefficiency. For example, it does not contribute to security if a miner with misconfigured machines expends a great deal of energy while being unable to win a reward due to the misconfiguration. Any cost that is not strictly required for the optimal generation of hash power is not a necessary cost. A misconfiguration cost can be eliminated by fixing the configuration.

There is a theory that proof-of-work can be made more energy efficient by introducing non-dedicated costs to the mining function. One such example is the discovery of prime numbers. The reason to incorporate such costs is that the resulting discoveries have presumed marketable value. If not there would objectively be no value in the incorporation, invalidating the theory.

However, any cost dedicated to the production of independently-marketable value can be offset by selling that byproduct. By analogy, brewers can sell their grain byproducts to farmers. This improves their efficiency by eliminating an unnecessary cost. So to the extent that the resulting byproduct is valuable, it is not a cost.

Yet actual (net) costs must rise to the level of rewards, as a consequence of competition. Therefore the same result would be achieved by basic PoW and independent energy-consuming operations to generate the marketable products. As such the theory is invalid.

Merged mining is typically implemented to resolve the problem of bootstrapping a new past the vulnerable stage of low hash rate. This design fails to recognize that hash rate not dedicated to the new coin does not contribute to its security. As the full cost of the hash rate can be recouped by selling it on one chain, there is no cost to censor the other merge-mined chain(s).