This is correct. Pooled mining works by everyone proving they are working on the problem. They don't submit all their shares, the difficulty is set so that you only submit some of your shares. That way you can prove you are working on the puzzle and you can proportion the effort by working out the percentage of everyone's submissions. The problem with a high difficulty for a fast coin is that some people might be working on the puzzle, but never get to submit any shares, therefor they never get to prove they were working on the puzzles - so for some blocks, they will actually miss out on a piece of the pie for that block.
But then the reverse is true because when you do have submitted shares, they will represent a much greater % of the pie than they should be, so in the end although it may appear that high diff is hurting it may not be.
My gut further up this thread was that low diff for the fast coins would help, but now I'm not so sure.
If the block is being solved in minutes or less and the miner has not submitted a share they get nothing and that work or coins are gone forever, its a closed block now. However the miner has still spent the electricity for a block they worked on but recorded no share for
I see your saying but what if everyone lost shares but that assumes all miners are equally submitting shares at the same rate. Some are fast, some are on slow links, bad pings or whatever so its not equal and the system favours whoever is sitting closest to the server with the highest hash rate.
So its very unequal. It is what it is, people can always leave but its obviously a biased system. Im just looking at two LTC pools and one has a worse ping or something because its accepting 50% less shares per hour, middle is just the same except exaggerated by this 512diff so it can record absolute zero shares for some or extremely low
620kh, 4 shares in 14 mins which is comparatively better today [R:5 Reject ratio 56% discarded due to new blocks 144]
