Bitcoin miners use powerful computers to verify that each person who wishes to spend Bitcoins actually has Bitcoins to spend and isn’t trying to fool the system.
No. Bitcoin miners add transactions to blocks which are then distributed to all the peers to be added to their blockchain. Every full node (even ones that aren't miners) check every transaction and every block to verify that they adhere to the rules of the protocol (such as actualy having bitcoins to spend). The blockchain is simply a decentralized way of determining a consensus of the order of the transactions.
They do this by reviewing the Blockchain – a digital file that documents every Bitcoin transaction ever made.
No. Nodes review the blockchain before relaying a transaction to verify that the transaction is valid. Miners assemble the transactions into an acceptable block by completing a difficult (meaning time consuming) to complete but easy (fast) to verify proof-of-work. This proof-of-work is a required part of the protocol that every node on the system checks. Nodes will not accept a block into their own blockchain from a peer unless it has completed the verifiable proof-of-work.
Miners usually groups together in mining pools so they can combine their mining power and become more efficient.
No. Pools are not more efficient. They are almost always less efficient. What pools do is to decrease volatility in mining rewards.
The power of the miners verification process comes from it’s decentralization.
No. The power of the miners process comes from the ability of a consensus to be formed about the order of transactions.
For example, let’s say there’s a transaction that is going through the block chain.
I assume you mean, "let's say there's a transaction that someone wants added to the blockchain."
Each miners will review this transaction and decide if the sender actually has the bitcoin he wants to send. If the majority of miners rules the transaction is valid it will go through.
No, there is no "majority wins" rule in the bitcoin protocol. Either everybody agrees, or the blockchain forks because someone is running invalid code. Then the person that is running the invalid code is no longer participating in the bitcoin blockchain, and ALL of the remaining participants agree. Bitcoin is not a democracy, it is a consensus system.
Miners (and all other full nodes) review the transactions that they receive and discard any invalid transactions. Then they attempt to build a block with an appropriate proof-of-work. All miners and nodes accept the first block they receive. If two different blocks are broadcast at nearly the same time (perhaps two different miners solve and broadcast their block at nearly the same time), then each node and miner will accept whichever block they receive first and reject the other. The blockchain will split and the network will split with some nodes accepting one block and other nodes accepting the other. Eventually a block is solved that builds on top of one of these two chains. When nodes see the longer chain, they abandon their current shorter chain and accept the longer chain as valid.
But what if someone could get a hold of more than 50% of the network’s mining power and manipulate the system for his own needs. Theoretically speaking, if someone manages to pull off such an attack he can double spend his money – meaning he can pay with the same Bitcoin twice or even more.
Sort of. More specifically, they could reverse transactions so that the earlier spend of the bitcoins no longer exists, and then they could send a new transaction that spends the bitcoins instead. In a true "double spend", both receivers would have spendable bitcoins. In this scenario, the bitcoins that the first recipient thought he had received will simply vanish from existence.
At least now we are getting into some of the "sense of what could happen", where you got some things sort of correct.
The attacker will also be able to prevent transactions from being confirmed and prevent other miners from generating new Bitcoins.
This is generally correct. There are a few other things that an attacker could do that would be disruptive to the system, but you've covered some of the more well known effects here.
But more on double spending and confirmations will be reviewed in later videos.
I suppose this is probably true as well (assuming those "later videos" are eventually created).
For now, here’s a real live example of the 51% attack. In January of 2014 one of the mining pools got so big it neared 51% of the total mining power. This of course created some panic in the Bitcoin community but was fixed shortly after by miners who left the pool in order to balance things out.
Where's the "real live example of the 51% attack"? Where in this description did transactions get reversed, or miners get prevented from earning bitcoins, or did transactions not get confirmed? You said you were going to provide "a real live example of the 51% attack", and yet I don't see anything in there about an attack at all?
One of the things to keep in mind is that someone with so much mining power would probably make more money using this power to mine legitimately than by actually blocking transactions or double spending.
Perhaps. That depends on how carefully they manipulate the system.
This reduces the risk for such an attack substantially.
That depends of course on whether the attacker is trying to acquire additional bitocoins at a profitable value, or if they are simply trying to destroy the bitcoin system.
