The possibilities are enormous. There are items that allow you to see and manipulate the wires layer and that's what is used in all traps an contraptions. You then can scrounge enough pressure plates and with enough wires connecting two pumps you can set a defense system to automatically pump magma onto trespassers.
Unlocked by rescuing certain damsel from certain distress
On the other hand, drowning them in magma is stupid, it destroys everything they drop. To farm you'd better make a depression 6..7 blocks wide and pour a single bucket of magma into it. It will spread thin enough not to destroy any items will still be deadly. Do that in any dungeon with active Water candles (increase spawn rate) and you're set for life
Health is upgraded using artifacts found at certain depth range (the deeper, the tougher the mosnsters are)
Mana is upgraded by collecting fallen stars (fall at night when zombies rampage) to craft mana crystals.
Magic wands follow the formula "metal + precious gem", ask the guide for recipes. Gems are friggingly rare.
There are certain spells, enemies and weapons that ignore blocks, shooting/moving straight through. A pain if you don't have one of your own.
You can move items between worlds, as much as your character can carry -- which seems a lot... at first... until you fill your first dozen of chests...
Pickaxe - removes blocks
Axe - cuts trees (entire tree above the cut shatters into mats)
Hammer - removes walls (the background layer) and ALSO shapes blocks, required for turning platforms into stairs and making smooth slopes.