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Exploring the Tech and Design of Noita
GDC Festival of Gaming

In this 2019 GDC session, Petri Purho of Nolla Games explains the technical side of Noita's physics engine, including scaling a falling-sand simulation to large continuous worlds and adding destructible rigid bodies. It also shows how the emergent physics drives the gameplay.
It is the go-to talk for anyone building falling-sand or pixel-physics simulations, and several commenters say they modeled their own engines on it.
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