Drop rates seem to be working as you would think. If it's 1% drop rate then each time you kill the mob you have a 1 in 100 chance at getting it. Meaning its possible to get one every time, just highly improbable.
I've taken a break from the game for this last month or so, has it improved any? Been thinking about trying the honor system and getting my char to 60 (hes 52 right now I think).
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