Damage reduction

Damage reduction is a percentage, it is hidden, and it only works against the world. It has no effect in PvP at all. Where defense subtracts a fixed number, reduction scales with the size of the hit, so it is the stat that matters against the biggest attacks in the game while defense is the stat that matters against a swarm of small ones. Neither replaces the other.

Most sources apply after defense has already come off. Three do not. A banner for the enemy you are fighting, the Warmth Potion against cold themed attackers, and the Dead Man's Sweater against trap projectiles all cut the raw hit before defense is subtracted, which makes each of them far stronger than its printed percentage suggests. The sweater also caps a single trap hit outright, no matter how large the incoming number was.

The full chain is: the pre-defense multipliers, then defense, then everything in the additive pool applied once, then the Solar Blaze and Beetle Endurance buffs, then a teammate's Paladin's Shield. Every step floors the running value and none of them can drop it under 1.

The additive pool is where most gear lives. A Worm Scarf, a Frozen Turtle Shell while you are low on health, an Endurance Potion, the Solar Flare set passive: those percentages are summed and taken off in one step, so the fourth source is worth exactly as much as the first and none of them compound with each other.

The multiplicative group is the opposite. A banner, the Warmth Potion, the sweater, the Beetle shell bonus and Paladin's Shield each take their share of whatever is left after the previous one, so they gain value as you pile them up. The practical rule is to pick up one thing from every multiplicative bucket before you go hunting for a bigger number in the additive pool.

Fully stacked on Expert or higher, the ceiling sits a little above 90 percent, rising to roughly 93 against cold themed enemies where the Warmth Potion applies, and falling to about 82 against trap projectiles where you swap the Beetle shell for the sweater. Every one of those figures assumes a banner is hung, which is doing an enormous share of the work: halving the hit before defense touches it beats any two accessories on the list.

Because the chain floors after each step, large and small hits do not scale down proportionally. A small hit loses most of its reduction to rounding and bottoms out at 1 damage anyway. Build for this stat when you know what is going to hit you for a third of your health, not to shave points off contact damage.