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The Way the Words Work (Lite)

The lite version is just as compatible with modded/custom civs (I've loaded one of mine in without issue) as the full version. The split is moreso intended for if you wanted to use a mod that used CUT to change the default entities.
There are reasons why you'd want to do this, for example if you wanted to edit a noble position you'd have to redefine the whole entity. Adding new ones is fine, but there's not any ability to remove or go to entity tags in a lightweight manner.

It's also useful for if you want a world without the default civs, as the lite version doesn't have to add its own version of the default entities.

The dwarf names will be generated differently than the full version. They'll use the ARTIFICE and EARTH symbols, as specified in the vanilla entity description, rather than the unique ones hand-made for them. They will be affected by the changes made to these symbols (word lists), as well as the changes to word assembly.
ARTIFICE has been changed pretty heavily in this, since I split it from the dwarven name list it's now more focused on gods of craft. There are a lot of the same words in it (axes, hammers, metals), but you won't see an Urist, as "dagger" is now only associated with the VIOLENT symbol.

So I'm dumb-does this make it more compatible with modded/custom civs? Does it still have the same affect on dwarf names?

This doesn't cut the default entities.

So does this not CUT the default entities? i was hesitant to install TWTWW because of that