A soft magic system is one in which the mechanics of magic and how it works are not explained.
It’s a bit intuitive to say that a soft magic system works best when magic is not truly a main focus of the story. But that’s indeed the case.
“The Lord of the Rings” is the best example of a soft magic system that I am familiar with. We understand that Gandalf is a wizard. We see him work magic here and there. We intuit that, generally, his staff is an integral part in some way of how he works magic.
But we never get a real explanation of how his magic works. (It turns out he is an embodied Maia, a kind of angelic being, of the same kind as Sauron, Saruman, and the Balrog of Moria.)
Of course, this magic system works wonderfully, not only because Gandalf’s magic is not the focus of the story–neither is Galadriel’s nor Sauron’s, for that matter. Tolkien’s soft magic system works because not giving us all the details adds to the sense of mystery, wonder, and at times fear that Middle Earth evokes.
Like Frodo, we are amazed at what Gandalf can do precisely because we don’t know how he’s doing it. He looms larger than life in our eyes. This makes Gandalf’s fall into the darkness staggeringly awful–especially before we know he will return as Gandalf the White.
Of course, you can bet Tolkien understood how magic worked more than the reader does. He knew the differences between Gandalf as a Maia and Galadriel as an elf, and what the sources of their magic were.
The writer needs to know these things. The reader, maybe not so much. It depends on the story you’re telling. But don’t let using a soft magic system be the result of laziness on your part. Make it a deliberate choice because of what it can add to story, or because of what unnecessary excess it prevents.
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