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Every 50th kill of this enemy drops Shark Banner.where they turn up
Sharks live in the Ocean and only in the outer part of it, roughly the last 250 tiles before the world ends, so head for the far edge of the map rather than the shallows by the beach. They show up less often than crabs and jellyfish but they are not rare. If you want more of them, one Chum Bucket thrown into the water multiplies the rate several times over. A second one adds nothing, unlike the way chum stacks for fishing power.
it can only reach you in the water
A shark ignores anyone who is not submerged. Stand on the surface with a Water Walking Potion or the boots and one will cruise past without ever turning your way. That single rule is the whole safety plan: dip in to pull one over, kill it, get back up. A Flipper or the matching potion keeps you from sinking while you do it. One that has washed up on sand is also harmless, since it does not thrash about the way beached fish enemies usually do.
fighting one properly
It charges, it swims faster than you do, and it barely reacts to being hit, so backing away is not an option once it has committed. Volume of hits is what works. Fast autoswing weapons and anything that strikes several times per swing will at least stall a charge even when they cannot stop it outright.
The other answer is geometry. Dig a shallow hollow into the sea floor and roof it one tile above your head without joining the roof to the ground. The shark will keep trying to reach you through a space it cannot fit into while you attack freely. A stack of Gills Potions covers you if you have no swim gear. The same idea works at the surface: stand half submerged behind a short wall of blocks and fire something with an arc, or something that passes through the wall, over the top of it.
farming them
A Shark Statue wired to a fast timer over a thin strip of lava is the usual setup, with one catch that quietly ruins it. A statue shark killed purely by lava, traps, or an NPC leaves nothing behind at all. Some damage of yours has to be in the mix before the kill lands. Minions are the easy fix, since they count and need no attention while the statue keeps firing.