Ghash.io very close to 51% of bitcoin pool

1. While a 51% pool operator could double spend, none of the participants can do that. The social incentives against a pool operator exploiting this power are very strong, however, because double spends are basically impossible to hide and would destroy the value Bitcoin - which is pretty much against the operator of a mining pool who is likely to hold significant amounts of Bitcoin herself.

2. There is a second possible exploit that is not so well known, which is that a >50% pool can capture all mining rewards. They can do so by never accepting a block mined by somebody else, and instead always mining on their private chain. This pool-specific chain will always ultimately become longer.

The loss of confidence associated with such an attack is probably smaller. So I would bet that if the pool operator has evil intentions, that would be the way to go for them.

A lone miner has a very low chance of finding the value, but will get the full 25 BTC. In a pool, a number of miners combine their computational power, and if the pool finds the value they get awarded a fraction of the bounty corresponding to the amount of work they did (the number of possible values they checked). E.g. if A, B and C are in a pool, A verified 140 values, B verified 100, C verified 10 and one of them (who it was isn't supposed to matter) they'll get respectively 14, 10 and 1 BTC. If they had not been in a pool, one of them would have gotten 25 and the others 0. So being in a pool reduces your payout, but increases the chances that you get a regular payout.

I'm handwaving here, and this is how I understand it.

Yes. It is verifying transactions. Making sure that transactions are valid and people aren't double spending or spending money they don't have. As a reward for doing this miners who find blocks generate bitcoins from nowhere, the reward is currently 25 bitcoins for finding a block. It is luck based, you have to find the right hash. You just keep hashing away until you find the right one, I believe.

It's called "mining" because it's a reference to say mining for gold or other items of value. You can look in the right spot, but there's a bit of luck involved.

>How can people share a "computer cluster"/minin pool (that is what you mean right?). Do you mean that one person or company owns such a huge cluster and let's all members share 'virtually' a single 'Bitcoin wallet'?

More or less. They rewards are divided based on how much computing power you put toward finding that block (shares). Once it is found the rewards is divided up proportionally. In reality some pools have slightly different reward schemes, but I'll make it simple here. So, if the reward is 25 bitcoins and I put in 10% of the "effort" to get that 25 bitcoins, I would get 2.5 bitcoins even though I am not the one who found that block, someone else in the pool did. That lives on the pool's wallet. I then go and log into the pool's website and transfer those bitcoins from the pool to my wallet. Some pools have an auto transfer so that when you get to a certain amount it automatically goes to your own wallet. Those coins do me no good at all in the pool's wallet, until they are transferred to my own wallet.

Pools aren't run by companies, not that I've seen. They are mostly run by anonymous operators.

It is long, but I strongly recommend reading

http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-a...

See here for a more technical explanation:

http://en.wikipedia.org/wiki/Bitcoin_protocol

http://en.wikipedia.org/wiki/Iron_law_of_oligarchy

It is a pretty dismal assessment of the likelihood that a democratic institution can avoid becoming oligarchic (spoiler: Michels believed it was inevitably impossible as the institution grew in size and complexity, years later he abandoned his anarchist beliefs and became a fascist in Italy)

There are a few historical counter-examples to the Iron Law of Oligarchy, but I don't follow the details of Bitcoin closely enough to know whether it is resistant to the factors Robert Michels described.