To Utautho's point, I would state for my goal - there should be an underpinning of even-ish footing for PVP so that its threat doesn't go anywhere and players across sides lose the kind of 'oh that's cute, little buddy' vibe if someone makes threats. I think getting things a bit more level would be enough. It's kind of empty to RP some evil tropes without the ability to back it up in any threatening way. I think Crucible is so underpowered or nebulous in its purpose and doesn't work for something like 5 classes, whereas the kinda coin-flip side of them in the FIST is only absolutely useless(ish) for sorcs, and even then not entirely. I'm okay dumping gear on Crucible to make them appealing.
I try to model the change I want to see in the (SK) world. I try to support the RP that would be enticing, but it takes a critical mass of willing/interesting RP + game knowledge to help break leveling + feel like you're not losing opportunity cost by playing on a side that's weaker + ability to set yourself up to be risk-averse if you want to (via being able to hold your own in PVP and have a crew) + enough people to do 'end game' content.
We're missing a few aspects of that, and I think we can address the risk-aversion and opportunity cost with ideas in this thread.
As far as the area thing - I agree there needs to be a home for bat#$&* crazy cultists and tribes and the Empire isn't it. I think the current Empire could likely support settling the uncertainty in whatever way the north sees fit to help create easier silos to conquer later when everything else is done. I do like the idea of Ayamao being an unsettled tension between eco-terrorists and fae, and the NW being an unsettled tension between blood cults and the tribes. I think the unsettled tension would promote a "we'll agree on 'high murder' being a law and that's about it, the rest is in negotiations' or something like that but know that's not practical.
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Might as well remove them altogether then. Would you ever fight with a weapon made of dragonscale or leather? Plus, like you said, you gain acc (that you would already have from a weapon) but you lose all the possible AC and AP you'd get from a shield plus a good deal of MP that you lose from the gloves that you can no longer wear. I'd say it's a fair trade.
To get access to the most powerful all-attack parry (inc. arrow) in the game to stack with dodge, a formation breaker skill that doesn't have a resist attached to it (in a world where bash now does), the ability to destroy any enemy's gear, and unparryable attacks that have an additional enhanced damage put on them (unlike any other weapon in the game) - that you can now enchant enough with acc to also not get dodged?
The fair trade was ki straps existing, because in the pre-ki-strap, post-weapon-subtype world the inability to enchant your fists made them soft in the inflation of weapon stats. Accuracy runes are enough to fix that softness. Dragonscale would be enough and you 100% bet your backside they'd be used, it's just everyone's context has been realigned to just default expect fist to be OP. I was one of the most vocal advocates to put them
in the game as Ithorim, and I still advocate for their existence - but we have an entire game to think about. It's absolutely mind-blowing to me that people are so accustomed to ki straps existing that the bar for conversation has been set so far away from that as a starting position. Old AF apparently. Even without them you're ruining a lot of people's days, it just didn't scale into end-game without enchants.
Special attack types are absolutely bananas and it shows time and again - who else gets extra enhanced damage post-nerf, let alone the chance to stack that extra buff with overpowered damage types? Someone's been sleeping at the gates of item balance. There should be 0 'end-game' ki-straps (I think I define that as special attack type), as the entire skillset is end game. I can be moved off the mountain of material type, but it'd take an irresistable [insert name of secret room movement skill here]
edit: wanted to qualify this with the fact I'm not trying to completely dunk on something to kill it, I like the 'buff everyone' approach - but it doesn't make reasonable sense to raise every cabal up to the standard something like fist sets so some part of the peak has to come down. this change would absolutely not prevent the cabal's ability to steamroll endgame content.