Wool

Wool is a block derived from sheep that can be dyed in any of the 16 different colors. Wool blocks are weak, very flammable, and offer little resistance against explosions. Wool is harvested by right-clicking a sheep with Shears (2 - 5 wool) or killing it (1 wool). White, light gray, gray, black, brown, and pink wool can be found naturally by harvesting it from the respective sheep. Before the 1.7 update, wool could be obtained by hitting sheep without a tool.

Uses
Wool is a key component of Beds and Paintings and suitable for docks, as wool blocks will stop boats and absorb some impact from collisions in a manner similar to Soul Sand.

Due to the variety of colors in which wool is available, many players use wool to build colorful buildings, however, this only works when peaceful is turned on and, in survival mode, the amount of wool and colored dye needed for this is impractical, which resigns wool structures to creative mode. Wool is also commonly used as decoration, as carpeting in houses or large 'beds'. It can also be used to color-code a cave system by placing blocks at intervals so you don't get lost and know which cave you are in.

Painting sheep (right-clicking while holding dye) is a highly recommended method of obtaining colored wool, as the sheep will drop 1 - 3 blocks of wool when shorn - a significantly larger yield vs. crafting wool with dye or killing a dyed sheep. Non-white sheep (brown, pink, black, grey, and light grey) can be dyed just as easily as white sheep, with no need to 'bleach' them back to white using Bone Meal before re-coloring them with another dye.

Wild Wolves can be located by looking for randomly dropped blocks of wool on the ground (especially in Forest or Taiga biomes) as wolves will kill sheep while roaming.

Occurrence
Aside from sheep, black wool blocks can also be found naturally in NPC Villages where they lie on top of a fence post, surrounded by 4 torches.

Crafting
Wool can be crafted from string if required. However, as sheep are much easier to collect from than spiders are to kill, doing so may be a waste of resources. But with the Adventure update, string can be collected very easily for bows and beds (and perhaps even fishing rods, if low on food) for use underground.

As a Crafting Ingredient
Note: Any color of wool may be used, but it has no effect on the product's final appearance.

Colored Wool
The placement of the wool block and dye doesn't matter as long as they are both in the crafting grid.

Data Values for Colored Wool
Different colors of wool can also be obtained by adjusting the "damage" values in the inventory. * = Turns to white wool when placed.

History
Wool was added for the creation of carpeting, colorful structures, and in-game pixel art. Before leather was available, wool was also used to craft leather armour.

In Creative Classic mode, wool blocks were known as cloth blocks that came in a set of 16 colors, although the palette was slightly different from the one available in Beta. Three shades of gray were added in Classic 0.0.20a.

Colored wool blocks were unobtainable during Classic's Survival Test and Indev unless they were pre-placed into the map file. Colored wool blocks were completely removed from the code in Infdev. Placing these blocks on the map would cause the game client to crash, since the blocks no longer existed.

Wool could first be used to craft Paintings in Indev.

In Beta 1.2, cloth blocks were renamed wool blocks and could be 16 different colors. White sheep could be painted by right-clicking on them while holding any dye. Light gray, gray, and black sheep could now appear alongside white ones in the environment.

As of Beta 1.4, brown and pink were added to the naturally occurring palette of colored sheep.

After Beta 1.6.6, the crafting recipe for a block of wool was changed, reducing the amount of string required from 9 to 4 units.

Prior to Beta 1.7, punching a sheep would give you wool.

Trivia

 * Sheep have a 5% chance to be black, 5% chance to be gray, 5% chance to be light gray, 3% chance to be brown, and a 0.174% chance to be pink. The remaining 81.826% are white.
 * As of the 1.7 update, wool will release particles of its respective color when being mined. In previous versions, no matter what color the wool was, the particles released while being mined would be white. However, when sprinting on wool, the particles released are white regardless of the wool's color.
 * The damage values for wool and their respective dyes are the inverse of each other.
 * The only way to get the purple error block is to use an inventory hack. It does not have the same texture as a normal wool block when held, but if placed will turn into normal white wool. This was probably meant to be a seventeenth color that Jeb never implemented, as the texture it uses is right next to the grey wool block texture.
 * As of 1.9 pre-release 1, the purple error block now looks like the first stage of growing Nether Wart. This is due to the pink block that it used being replaced with the texture for Nether Wart.
 * Shears do not take damage from destroying wool blocks.
 * Caution is advised when building structures made entirely out of wool in open air, as lightning from a Thunderstorm can set wool on fire.

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