Duping is now impossible.

Yay!

Well bar that item dupe glitch when you drop certain items...

What is a server side inventory exactly?

Alpha inventory was handled both client-side and server-side. This is what made a few things happen:
1. Minecarts did not display contents for other players.
2. Inventories could be hacked on the client.
3. You could drop items with damage bars, pick them back up, and they would be repaired.
4. You could duplicate items using a chest.

The reason those things happened was because the server-side inventory was handled for items on the ground and items inside a chest or furnace. All other inventory was client-side.

So, if I was to drop a tool on the ground that had damage, the server said 'oh I have a new pickaxe on the ground. Since it's new, it must have no damage'. Then I would pick it back up and it was automatically fixed.

Another example: Because chests are server-side, I could put an item in the chest (without going into explicit detail on how to do it exactly) and if I was careful and quick, by removing and re-adding items in quick succession I could trick the server into thinking that I added the same item into a chest in two slots at the same time, which caused an item dupe.

Final example: Because minecarts with chests were client-side, I could put a lump of coal into a cart, send it down the track to a friend at the end. If the friend opened it, nothing would be in it, but if I ran to the end and opened the cart, the lump of coal would still be visible to me.

So, in theory, server-side inventory fixes all of the inventory-related issues that SMP had. In addition, it should make it much more difficult (but probably not impossible) to hack in new items.

And this is why we're excited about Beta. Dupers will almost completely disappear. Although, without the tool fix glitch, I imagine diamonds will be in VERY high demand now.

The only thing I don't like about that is fixing the damage glitch. But I guess it makes the game better otherwise.

I think the only real use for a diamond besides armour would have to be a pickaxe, since currently we don't have any pvp or mobs besides farm animals I don't see much use in a sword, diamond hoe is next to useless and while a spade gets plenty of use in, there's not all that much difference between steel and diamond digging up sand/dirt/gravel. Same can be said for the axes, steel's really fine for gathering wood, diamond's just overkill.

Also remember we still have presents, and at a present/restart you'll probably be fine with what diamonds you scavenge in mines and the present tools (at least for the next few days).