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I did look at your example. I also noticed that your uncompressed PNG, your compressed PNG, and your Jpeg are wildly different. I used the version posted in your thread and compressed it to Jpeg to show that the loss isn't as striking as your example. Since you posted your example as one large image I can't tell the differences in file sizes and couldn't work with it. If you want to post your original PNG I can certainly compress it to Jpeg if you want to see the differences I come up with.
Anyway, I've had this argument before, but ultimately it is much easier to ensure signatures follow forum rules. It discourages people from using the larger file as a normal signature and receiving a warning/infraction, and it adds to the challenge of creating the signature.
I will admit, as I did back when I had my first argument over this, that there is an obvious loss from uncompressed PNG to Jpeg. However most users here have no issues with creating quality signatures that fit under the limit. The biggest complaint against file size on the forums is against animation, which is understandable but even then creative users have managed to work with it and shine.
It might seem silly that the contest restricts the file size when many other similar contests on other sites do not. However, consider it an additional challenge instead of a restriction and you might find yourself learning some new tips and tricks. There's always the tutorial thread for some helpful pointers.
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