Fall damage

Fall damage refers to the damage a player character sustains upon falling a large distance. It is one of the basic game mechanics. Fall damage occurs only if the "fall distance" exceeds a fixed threshold, beyond which the damage amount varies linearly with the distance traveled past said threshold. If the damage amount is greater than or equal to the player's current health, they dies upon impact. It is made less severe by the player's Defense.

Fall damage works the same way for all solid surfaces, but it does not occur when submerged in water, lava or honey. It is also not applied when landing on the surface of a liquid while wearing an accessory such as Lava Waders or landing on Minecart Track in a Minecart. With a Lucky Horseshoe or Wings equipped, the player will take no fall damage under any circumstances (unless being Stoned).

Formula
In the basic case—falling through air directly onto a solid surface, without the use of special accessories or buffs—fall damage is affected by exactly two variables: fall distance and Defense. No damage is sustained if the fall distance is less than or equal to 25 blocks (50 feet). Beyond this distance, 10 additional damage is sustained for each block traveled (or 5 damage for every foot). Thus, assuming a distance greater than 25 blocks (and no Defense), the formula for calculating fall damage is: damage = 10(h - 25) where h is the total fall distance (in blocks).

When Stoned, the fall damage seems to use the following formula: damage= 20(h-2) where h is the total fall distance (in blocks). To factor in the player's Defense rating, simply apply it in the normal way: damage = MAX( 1, 10(h - 25) - ROUND_UP(d/2) ) or damage = MAX( 1, 10(h - 25) - ROUND_UP(d*0.75) ) in expert. where d is the Defense rating. Note that the MAX function clamps the result to a minimum value of 1, because an injury always causes at least 1 damage, regardless of Defense.

The 25-block height is increased to 40 if a Frog Leg is equipped.

Negation/strategies
There are four major ways of negating fall damage and three minor.

Stopping the fall
The first and most obvious is to "break" the fall before hitting the ground. Using items such as Cloud in a Bottle, Rocket Boots, Grappling Hook, Ivy Whip, Dual Hook, Climbing Claws or similar items will cause the fall distance counter to reset upon use, negating the damage. A Magic Mirror (and related items) may be handy should you have the enough time before reaching the ground during the fall. You can also make a pool at the bottom of your descent, useful for Hellevators, or place a Cobweb. Cobwebs slow you down, so if you put it right before you land, you will not suffer any damage. Be aware that enemies do not break your fall even if they slow you down.

Preparing the terrain
Another alternative is to prepare the terrain in such a way as to not take fall damage at all: Placing platforms inside shafts so that the fall distance never exceeds 25 blocks. Other alternatives include cushioning the ground: Cobwebs or a depth of 2 of Water will stop the player's fall, without damage. As of version 1.0.6, Cobwebs will break off after pushing them. This makes water the more desirable choice as the player wouldn't need to take the cobwebs with them. Pink Slime Blocks will negate fall damage, with the side effect of causing the player to bounce. However, they have been known to lose these properties when the player uses tools or mounts, such as the Portal Gun or Unicorn Mount, to increase their max speed. While lava does break a fall, it also inflicts heavy damage, and it is only recommended to use a lava pool as a fall breaker if the player has an item such as the lava charm or something else that gives immunity to this damage.

Accessories
The Lucky Horseshoe is an accessory that negates fall damage. It can be found in Floating Island chests. They can be very handy when exploring chasms. It can also be combined with an Obsidian Skull to make the Obsidian Horseshoe, which has the benefits of both the Skull and the Horseshoe while taking up only one accessory slot.

Once the player has found a Grappling Hook and/or a Cloud in a Bottle, the Lucky Horseshoe loses some of its usefulness, and can potentially be swapped out, although preventing damage with these requires using them at the right moment, so still having a Lucky Horseshoe equipped is always a good safeguard.

All Wings and the Jetpack also offer complete fall damage immunity on top of their flight, slowfall, and stacking with Spectre Boots, effectively rendering the Lucky Horseshoe obsolete once obtained.

If wearing Climbing Claws, Shoe Spikes, Tiger Climbing Gear or Master Ninja Gear, you can press up against a wall while falling to slow your descent.

If wearing a Frog Leg, the damage-free fall distance is increased from 25 blocks to 40. If you still fall far enough to take damage, the damage will be 150 less than it would have been without it.

Featherfall
The Featherfall Potion and Djinn's Curse make players fall more slowly and negate fall damage, even when their slowing effect is temporarily canceled by holding the down key. This is the only effect (excluding liquids and cobwebs) that can protect from fall damage when stoned.

Umbrella
The Umbrella when held will slow the character's descent, allowing for safe landings.

Cobweb parachute
By falling next to a wall and placing a Cobweb under you before you land, you can negate all of the fall distance above the cobweb you placed. This is almost never used because cobwebs can only be placed over a background wall piece or by a block, but cobwebs are easier to come by than other items so that makes them good to start with.

Bucket parachute
By using a Bucket to pick up Water or Honey and then drop it below you during a fall, you will find that you are falling almost as slow as the water, thus not "actually" falling. This can be good for spelunking into large caves and the corrupted area due to many of these places often having water on the bottom and you can often salvage the water you drop. (You could do this with lava too but if you don't have the Obsidian Skin buff active or Lava Charm during the whole thing, you would take lava damage and would probably die.)

Sand ladder
If there is an area with a large drop or may be hazardous (such as a lava pool), gather a lot of Sand, Silt, or Slush (the number of blocks you want to avoid falling or more). When you reach an area you want to go down, drop sand down there until it has stacked up to a desirable level, jump onto the pile of sand and then mine the sand blocks you're standing on.

Mount
Several mounts can negate fall damage, including all flying mounts and the Bunny. Also, the Scutlix can reduce all fall damage to 1.

The Slime Mount will reduce the damage by half, and the Unicorn Mount will reduce it by 80%.

Also, all fall damage will be canceled if a player riding a Minecart falls on a Minecart Track.

Bubble blocks
Using Bubble blocks with water inside is also a way to negate fall damage, since Bubbles with a liquid inside them act just as if they were their respective liquid.