As for the amount of RAM minecraft uses shouldn't a version update lower the need for it due too taking shit code and streamlining it? Or is that just a misconception on my part
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There are many factors that determine Ram requirements. One is the number of "products" being updated:
1). Java has recently been updated to version 8. I'm not sure what changes were involved but, optimistically speaking, should take advantage of new hardware capabilities and hopefully clean up older code fragments. Mod makers advise caution when upgrading, until things are thoroughly tested. I've seen no issues but YMMV.
2). Minecraft is going through some major revision right now, starting with ver. 1.6.x... I read that some 200,000+ lines of code changed for 1.6. 1.7.x introduced named blockIDs while retaining numeric IDs... the numeric IDs will be removed completely in 1.8, streamlining the code somewhat. Data structures are undergoing a fairly major overhaul in 1.8 as well, and I've heard that each "dimension" (overworld, nether, end, etc.) will be running it's own thread to reduce lag.
3). Mods themselves are having to update to retain compatibility with 1.7, and will have to do so to a lesser extent again for 1.8. Hopefully as MC cleans things up it will become simpler, therefore easier and cleaner to function.
Another RAM drain is the number of additional tasks being used in addition to MC, such as web browsers, social media and even the operating system.