Difficulty

The Difficulty mode is a character setting selected during character creation. There are, in, and , 3 options: Softcore, Mediumcore and Hardcore, all changing the penalty upon death. Once a character has been created, its difficulty cannot be changed. There are no options in and.

In and, there is also a choice between Normal and Expert mode when creating a new world. This is a separate setting that applies to the world, rather than the character, and similarly can't be changed once the world has begun generating.

A third form of difficulty is the transition from pre-hardmode to hardmode. This is a gameplay advancement and thus cannot be changed.

Softcore
Softcore is the default / only character  mode and also the easiest.

Softcore characters drop half their coins when killed by an enemy, which can be retrieved upon respawning, but may also be collected by other players in Multiplayer. Softcore characters respawn at their spawn point, 7 / 15 seconds after death.

Mediumcore
Mediumcore characters drop all of their items upon death, including all coins and ammo. These can be retrieved upon respawning, but any items may also be collected by other players in Multiplayer. Mediumcore characters still respawn at their spawn point, 7 / 15 seconds after death.

Hardcore
Hardcore characters die permanently, and drop all of their items upon death, including coins and ammo, which other players can then collect in multiplayer.

Death causes a Hardcore character to become a Ghost that can continue to observe the world but not affect it. Ghosts can fly, pass through walls, and continue to chat with other multiplayer users, but cannot interact with the environment in any way and cannot open a world. Other players are not able to see Ghosts.

Once a dead Hardcore character quits the current world, that character is permanently deleted. Items the character placed in Chests will not be deleted, but items the character had in portable storage (Piggy Bank, Safe, Defender's Forge) will be deleted.

World modes
''Expert mode brings numerous other changes. See Expert mode for a more complete list.''
 * Normal mode: This is the normal world mode, as the name suggests.
 *  Expert mode: Intended for experienced players, Expert mode worlds contain the same enemies, but with increased stats, and some have altered behavior patterns that make them more difficult to defeat. Loot drops are more frequent, however. As a special reward, bosses drop Treasure Bags which, in addition to the normal boss loot, also contain special items only available in Expert mode.

Tips
If a hardcore player is killed, they can float around the sky to find sky islands, then float down to mark on another player's screen.
 * New players may want to use softcore mode characters until they become more familiar with the game.
 * Mediumcore characters may want to keep their second-best equipment in a chest in case of death.
 * Hardcore mode can be utilized to freely explore a world by dying and flying through the ground and sky as a Ghost.
 * In an Expert mode world, enemies can steal your coins and despawn, which can be a huge setback for the player.
 * A dead hardcore character could be used to explore a world, although it may be dark, as a ghost gives off no light.