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Multiplayer works, but it's currently treated as a separate file with pretty big limitations. For example, the server owner has to be online for the other 3 people to play their characters on said server. And if you're planning on joining someone else's multiplayer server, you don't get to bring your Pals/Equipment over and have to create a new character.
I read somewhere in Reddit that they've made announcements to improve this and get to a point where you can at least take your equipped items and current Pal team when you join other servers/worlds. I've yet to see a screenshot or an official statement though, so take that with a grain of salt.
I am hoping that it happens. Major bummer for my friends and I that played solo the first couple of days thinking to prepare for later exploration together.
Kind of makes the solo/multiplayer toggle a bit useless in the current version, but yeah, hope to see it implemented better on the 26th.
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Edit: Read a bit about their launch FAQs and here are some helpful bits.
[How does multiplayer work in Palworld?]
You can play Palworld with up to 3 friends by simply starting a multiplayer game and inviting them (4-player co-op). Beyond this, you can create a dedicated server, which will allow for up to 32 players to play in the same world and create guilds together.
We will provide the tools to create these servers yourself at launch.
[Can I use my single-player character in multiplayer too?]
At the moment, partially yes. Your character is bound to your world and is not shared across servers or single-player. However, if you are the host of a co-op game then you can switch between single-player or multiplayer freely, but your guests will not be able to do this.
We plan to provide a server/save transfer method later on during development.
If not, basically you have a friend host the game (and they have the save file on their local machine/cloud), but can only play when they play. Characters created are currently world-specific, so no bringing solo characters to co-op worlds or vice versa.
So there are three modes of play. You play solo, not multiplayer. That mode can then be converted to multiplayer and you send a code to a friend. They can play with you, but the game is only online when you are playing. They also have to start a new character from scratch, so this mode of play is not all that useful.
Your only option for a persistent world where you friends can play anytime is the true multiplayer mode. This could be an official server (they suck in my opinion). Or you could play on a community server that is a hosted server you rent or a dedicated server you or a community create.
You want this last option above so anyone that joins can keep playing without you. You can find one of these randomly or look for ads on the Palworld discord or ask around and find one that will be fun to play on with your friends and others.
Set up a Dedicated server and you can run it 24/7 and the world will go on without you. Buddy goes off to work with tons of eggs set to hatch and at least 2 breeding pens popping out eggs. Also great if you set up pals to collect resources then you get home from work you can do the things needed to advance and not sit waiting.
May need to use Steam CMD to do this but that is really easy to set up. Google will guide you to a guide. Steam CMD is a small install and a simple bat file will install the server to where you want it.
That sounds like a really high ping to the server which means bad connection. Often because the server you are joining is too far from you. Could also be your Internet is not fast enough for online gameplay.
If SP works fine then definitely connection or internet issue. If SP is the same then your PC does not meet requirements.