The Blacksmith at Sanctuaries allows you to upgrade your weapons and armor using various crafting materials. Upgrading increases their base damage/defense and often improves their scaling. Materials like Iron, Steel, Gold, and Shimmering materials are used for standard upgrades. Beyond basic upgrades, the Transmutation system allows you to transform certain weapons into entirely new, often more powerful, unique weapons. This requires specific rare materials, often dropped by bosses or found in hidden areas, and a base weapon. For example, a Dagger can be transmuted into a powerful unique Dagger. Transmutation is crucial for obtaining some of the best weapons in the game. Always check the Blacksmith's menu to see available upgrades and transmutations. Prioritize upgrading your main weapon and armor pieces to stay competitive with enemy difficulty.
