Bitcoin Forum

Can someone pls explain how a mining pool, using shares, solves a block?

A share is just a low-difficulty block. It is not accepted by the Bitcoin network, but it is accepted by the mining pool as proof that the miner was working for them (because the coinbase transaction pays the mining pool's address). The mining pool then pays the miner for their share according to some formula which varies from pool to pool.

Every once in a while, of course, a miner finds a block that meets the actual difficulty of the Bitcoin network. For example, if the share difficulty is a million times less than the true difficulty, this will happen once every million shares (on average). The mining pool broadcasts this block to the network and the mining pool gets paid from the coinbase. Again, the miner gets paid for their share (they do not receive any "bonus" for being the one to have found the lucky block).

Note that in order for a miner to get paid for their shares, the coinbase transaction must pay the mining pool's address, and it is impossible to change this address without invalidating the block (so it's impossible to cheat by that method).

P2pool and (I think) Eligius work slightly differently. Instead of having a single address for the mining pool, there is a list of addresses, one address for each miner who has recently found a share. The reward for finding a share is not a direct payment, but instead the miner gets their address added to the list, so they will be paid when the pool finds a block. But otherwise the same principles apply.

A nice, straight forward answer.  thnx