In Terraria 1.0.6 Tiki Torches have been added, which can be crafted using a torch + 3 wood.
How exactly do they differ from the standard torches?
The main difference between the Tiki Torch and the regular Torch is that the Tiki Torch cannot be held in your hand and carried. You have to place it on the ground to use it.
As you can see from these screenshots, they give off the same level of luminescence.
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I kinda fail to see the point of them then, apart perhaps from aesthetics. – user821 Aug 10 '11 at 12:08
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2@FallenAngelEyes That's not their only use. They can replace the Table and Chair for NPC houses, respectively. The Tiki Torch is also a valid light source. – a cat Aug 10 '11 at 13:11
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2@Raven It's actually the same, if not slightly less. The reason is simply because it's off the ground, instead of being directly on it like the other torch. – Xkeeper Aug 10 '11 at 17:47
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According to the official Terraria wiki, it cannot be held like a normal torch.
Besides not being able to hold a tiki torch, there is another difference. Tiki torches can be placed on wooden platforms, regular torches can't.
You can place tiki torches on wooden platforms, which you cannot do with normal torches. I found this helpful when fighting bosses at night.
