Satoshi Dice is a "blockchain-based betting game" operating since 2012. In 2014, off chain session based bets were also made available.
Some consider it to be DDoS attack against the Bitcoin network since it is bypassing the built-in anti-DDoS features of Bitcoin (transaction fees). Others see it as proof that the incentives created by the bitcoin transaction fee scheme do not produce the results originally expected.
Unlike traditional online gaming software, wagers with Satoshi Dice can be sent without access to the website nor running any client software. To play, a Bitcoin transaction is made to one of the static addresses operated by the service, each having differing payouts. The service determines if the wager wins or loses and sends a transaction in response with the payout to a winning bet or it returns a tiny fraction of the house's gain to a losing bet. As a result, the game spams the p2p network and blockchain with useless data. Satoshi Dice forces players to pay a transaction fee on each result so the spam will successfully flood both the p2p relay network and the blockchain.
There has been the suggestion that the service might be also be used as a mixing service, as the composition of a wallet can be materially changed after running wagers through Satoshi Dice. Though this approach could change the makeup of the wallet, it does not sufficiently serve the mixing purpose as the coins returned in winning bets are tied to the coins from the wager transaction. The new session based game may send back a balance from unrelated addresses that are not tainted to the deposit address. However taint can still be applied at a later stage if change from the untainted withdrawal is later used together with the original deposit transaction.
There is no reason to believe that Satoshi Nakamoto has anything to do with this attack, other than the service choosing to include the noun Satoshi in the brand.
Satoshi Dice.com was announced on bitcointalk on April 24th, 2012, by its operator, Eric Voorhees. A user of this wiki claimed that it is currently operated by and licensed under Costa Rica-based Blockchain Limitada. It is unclear whether Mr. Voorhees controls Blockchain Limitada. A google search for "Blockchain Limitada" yields no hits.
Satoshi Dice permanently blocked US players in May 2013 citing potential legal concern.
Random Number Generation
To determine if a wager is a winner or loser, the site uses a method to produce a number between 0 and 65,535, similar to how a random number generator (RNG) would be used. The service uses a combination of the transaction hash from the wager transaction from the blockchain and performs a 512-bit SHA2 hash for that transaction hash using a secret unknown to the player. The first four bytes of that hash become the lucky number in determining winner or loser.
Each wager address has different odds, and each gives the house an edge of 1.90% (i.e., payouts are 98.1% when including the payout to the losing bets). The website shows the full list of wager addresses and odds.
Some gamblers have built automated betting bot scripts employing the Martingale betting system and variants thereof.
Satoshi Dice was the brand given the service initially created by BitcoinTalk forum user FireDuck before selling the system to another operator. The service was announced on April 24, 2012. Within weeks, the site became responsible for more Bitcoin transactions than all other uses of Bitcoin combined.
1dice1e6pdhLzzWQq7yMidf6j8eAg7pkY, is a version-0 Bitcoin address. By sending coins to this address, one participates in Satoshi Dice's "lessthan 1" gambling game, which offers a 0.0015% chance to win 64000× the original bet. As Satoshi Dice is fully automatic, transactions sent to this address will receive payment almost immediately after it is broadcast.
As with all Satoshi Dice betting addresses, this address is a vanity one, specially generated to have a "1dice" prefix. The address that holds the "1dice" firstbits, however, is 1DicEcEgURmiRqfunhFWgUjd4HZZLkzyWQ, an insignificant address likely unrelated to Satoshi Dice.
Thus far, Satoshi Dice's appeal has caused this address to be among the most-used addresses.
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