Reference — The Damage Formula

The skeleton

damage = BASE
        × (1 + INCREASED)
        × MORE₁ × MORE₂ × …
        × SPEED
        × CRIT
        × ENEMY

Term	Behaviour	Where it comes from
Base	The number everything multiplies. Zero base = zero damage, whatever else you own.	Attacks: the weapon. Spells: gem level + flat added spell damage. Minions: the minion's own base.
Increased	One shared additive total per stat. Dilutes as it grows.	Passive tree, most gear affixes.
More / less	Each its own multiplier. Never dilutes. Immune to what you already own.	Mostly support gems. Some ascendancy and unique effects.
Speed	Its own additive total, separate from damage. Has practical ceilings.	Gloves, boots, weapons, tree.
Crit	Two totals — chance and damage bonus — that multiply each other. One without the other is close to wasted.	Weapon base crit for attacks; skill base crit for spells; tree and gear scale both.
Enemy	Multiplicative and most often neglected. Endgame monsters have real resistances.	Penetration, exposure, resistance reduction, curses, shock, wither, intimidate.

real gain = added ÷ (100 + current total)

Applies to every increased total independently. Does not apply to more multipliers — those are worth their printed value always.

Two sources of 20%	Result	Effective second source
Both `increased`	1 + 0.2 + 0.2 = 1.40	16.7% (20 ÷ 120)
Both `more`	1.2 × 1.2 = 1.44	20.0%

Worked example and figures verified against Maxroll — Damage Scaling (PoE2).

Both are layer-one effects — they alter the base before any multiplier runs. Full treatment in the glossary and lesson 3.

	Conversion	Gain
Reads	#% of X	#% of X
Source	removed	left intact
Scaled by	the destination type only, never the source
Ceiling	normalised at 100%	none

gain's effective value = gain% × (destination mult ÷ source mult)

Equal on both sides, and it behaves like a more multiplier. Destination unscaled, and it is worth a fraction of its printed value.

of Damage reads the whole hit; of Physical reads one type. Check which.
Skill-inherent gain resolves before item and passive gain, and the two steps are not additive.
Flat damage on a weapon adds to the weapon's base and does nothing for spells.
Increased Physical Damage on a weapon scales that weapon only. Increased Global Physical Damage scales attacks and spells.
Minions do not scale with your damage modifiers. Totems are not minions and do scale with yours.