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I've been playing Dwarf Fortress for a long time now but I never know how to decide if building a fortress out in the open is worth the higher resource cost.

What are the pros and cons of each method?

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    What you're asking for is certainly opinion based. Please put more effort into asking a good question, instead of just telling us not to close it. – Frank May 20 '15 at 12:17
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    "I know it is mostly an opinionated question", and yet you've posted it here. This will probably lead to a open discussion and is basically the same as asking for a tutorial. I believe that /r/dwarffortress is actually better suited for this question. – Zeta May 20 '15 at 12:17
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    Besides, everyone knows a proper fort is built into the mountain. – Shadur May 20 '15 at 12:18
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    I have proposed an edit which rewords it to be more "what are the pros and cons of each method in order to help me make my decision?" rather than "tell me what the best method is", which should hopefully bring it back on topic and allow a non-opinion-based answer. – starsplusplus May 20 '15 at 12:43
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    @DJPirtu With this edit, we should give him an edge here and reopen. We have similar questions that are kind of broad that stay open and are answered. – user28015 May 20 '15 at 13:55
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The pros and cons of various starting locations can be loosely categorized into, access to raw materials, and defence, with a few left over. We will look at it from the perspective of a surface fortress.

Pros:

Easier access to an number of resources:

  • Wood and grazing land before breaching the caves.

  • Water without digging pipes.

  • Surface plants.

  • Above ground soil for farming surface plants.

  • Above ground spaces needed for things like beehives.

  • Your grazing fields could be closer to your animal workshops.

  • Potentially easier trader access.

There are also a few positive defence considerations:

  • Once your walls are set up your pasture land can be within them easily.

  • The same goes for above ground farms.

A few considerations don't fit so easily:

  • You won't have to worry about cave adaptation.

  • You can build workshops and stockpiles anywhere without worrying about needing to dig out a space for them.

Cons:

More difficult access to many resources:

  • Any mineral resource must be dragged out of you mines before it can be used. Unless you put the workshops in the mines, and then you really have an underground fortress. Also mineral resources tend to be heavier, and thus slower to move than surface resources.

  • Room quality is much more difficult to create. No smoothing and engraving the walls above ground.

  • The staple dwarven crops all grow underground. Specifically you can only embark with seeds for underground crops. (Although a few of the garden plants produce seeds when eaten) Any farm for these plants will be farther from your main fortress activity.

  • Area vs. Volume. On the surface you are basically building everything on just one Z-level, unless you build multi story buildings, which takes a lot of resources. Fortresses built on multiple Z-levels can be more compact, which saves work dragging resources to workshops.

  • Building surface constructions takes more time and attention, because dwarves are not always smart about the order in which they build their walls. You have to make sure things are built in the correct order far more often than when digging underground.

  • Resource usage: Surface forts will need walls, and building walls takes resources.

  • Magma is often not easy to access, but it is even further from a surface for than an underground fort, unless there is an open magma pipe.

Defence of a surface fort is much more difficult:

  • In order to restrict access to the fort you must build walls, whereas with an underground fort you can just seal off the entrance.

  • Some creatures can climb trees. This means you need to keep any trees cut back away from your walls.

  • Walls still don't protect you from flying creatures. For that you need a roof. Which will negate some of the advantages of an above ground fortress, as well as taking a vast quantity of resources to build. Windmills, surface pasture, and beehives all require no roof above them.

  • Because controlling invader's movement is more difficult, traps are much less effective.

  • Getting a surface defence set up before being invaded is more difficult.

There are some other concerns:

  • Some dwarves hate being outside no matter what.

  • Things like being rained or snowed on can cause unhappy thoughts.

  • Extreme cold or heat can cause injury or death for dwarves and livestock. This only occurs outside in some biomes.

All in all the game was designed around the idea of subterranean mountain fastnesses. It is possible to make an effective surface fort, but it is much harder. There are several challenges relating to it. However, if hard is what you want, go for it. After all the game's motto is "losing is fun."

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