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BUT they are operating within Bitcoin's rules so we need the devs and the pools working together to resolve this issue I feel.
I'm glad you closed with that line.
I can understand Luke-Jr's frustration, but strongly do not approve if, as you say, Satoshi-Dice is following the rules.
Transaction handling is the reason for existence of the 'bitcoin network' / pool miners / solo miners (if any left), et al. Coins for miners is a by-product. If that priority gets inverted, then Bitcoin as a currency has failed.
I have no wish to continue/prolong this somewhat off-topic tangent, but thought I'd chime in on this. I do not use the SatoshiDice service but, like most of us here, have been (negatively) affected by its effects on the network.
However, I agree with Graet and LazyOtto in that SatoshiDice is playing by the rules. They shouldn't be penalized for that. Moreover they are paying a transaction fee (0.0005/trans I believe) for every transaction they generate. Yes, they can operate more efficiently than they are now, but that is a separate discussion.
The main point is that the bitcoin protocol has been designed such that early mining would be encouraged by large rewards (50BTC/block). A 'carrot' if you wish. As time progresses, this 'carrot' will slowly be taken away by design. Come December, the reward will drop in half to 25BTC/block. The intention is to eventually replace the block reward with transaction fees as the miners' primary income stream. For that to happen smoothly, we need 2 things: (1) we need an
increased # of transactions, and (2) we need more of those transaction to
include transaction fees.
SatoshiDice is exactly the type of client the network needs. It is generating a large amount of transactions, and those transactions are paying fees.
Someone doesn't like the fact that a paying sender (SatoshiDice) gets a higher priority in getting their transactions into a block than freeloaders (most of us) who pay no transaction fees? Wondering why your 'no-fee' freeloading transaction doesn't get confirmed for 9 blocks when a paying client gets confirmed right away? Time to wake up!
If someone wants a transaction included in a block, just set your fee to 0.02 (1 penny!) and you will get priority over any SatoshiDice transaction. Transaction fees may not be common at all now, but they will have to be over the coming years. We're still in the very early stages of the bitcoin network.