[palmer]

Because everyone else can easily verify the pool's work. First there is the 17 million trillion hashes they do each second; to verify the winnner you do it once every 8 minutes. Your work is 8 times 60 times 17 million trillion times easier.

Verifying transactions is harder but since I run a full node I get all of them just like the miners. It would be easy to run tests to make sure my transactions are getting through but not free (I would have to pay for each transaction). But verification can be done by any large non-mining player (e.g. any exhange).

So far nobody has been able to cheat, despite billion dollar incentives to do so.

[No.6]

I kinda didn’t make clear that I didn’t mean they could cheat the hashing algorithm — the pool participants are trusting that the proceeds of a bitcoin ‘win’ are fairly distributed to all the people who contribute CPU or GPU cycles. How do we verify that someone’s 0.003 BTC is the correct distribution?

The hash itself is pretty secure given that 512 bit RSA is currently uncrackable in the lifetime of our sun (currently...), and as you said everyone can have and confirm the block chain itself.