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CHANGELOG.md

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+# Changelog
+
+## Latest Update - Box Physics & Combat System
+
+### ✨ New Features
+
+#### 1. **Z-Axis Physics for Boxes**
+- Boxes now fly in realistic arcs when thrown (just like players)
+- Added `position_z`, `velocity_z`, `gravity_z` simulation
+- Visual feedback with sprite offset and scaling based on height
+- Smooth landing animation with squash-and-stretch effect
+
+#### 2. **Dynamic Shadow System**
+- Added shadow sprites to both players and boxes
+- Shadows scale down and fade as objects get higher
+- Real-time shadow updates based on Z-position
+- Helps visualize height in the 2D top-down view
+
+#### 3. **Box Breaking Mechanic**
+- Boxes shatter into 4 smaller pieces on impact
+- Pieces fly outward in random directions
+- Fade out animation before disappearing
+- Triggered when hitting players or other boxes mid-air
+
+#### 4. **Combat System**
+- Players take 10 damage when hit by thrown boxes
+- Knockback effect pushes players away from impact
+- Flash red visual feedback on damage
+- Health system with respawn at origin on death
+- Damage synced across network
+
+#### 5. **Mid-Air Collision Detection**
+- Boxes detect collisions while airborne
+- Separate handling for player vs box collisions
+- Chain reactions: thrown box breaks target box too
+- Network-synchronized breaking effects
+
+### 🔧 Technical Improvements
+
+#### CharacterBody2D Migration
+- Converted boxes from RigidBody2D to CharacterBody2D
+- Deterministic physics for better network sync
+- Direct velocity control instead of forces/impulses
+- Eliminated non-deterministic physics simulation issues
+
+#### Helper Functions
+- Added `_is_box()` and `_is_player()` helper functions
+- Simplified collision detection logic
+- Easier to maintain and extend
+
+#### Network Synchronization
+- Added `_sync_damage()` RPC for player damage
+- All breaking effects visible on all clients
+- Proper authority checks for damage dealing
+
+### 🎨 Visual Enhancements
+- Shadow sprites with dynamic opacity
+- Height-based sprite scaling
+- Landing squash-and-stretch animation
+- Breaking particle effects
+
+### 📝 Documentation Updates
+- Updated README with new features
+- Added combat system details
+- Documented box breaking mechanics
+- Updated interaction system description
+
+---
+
+## Previous Updates
+
+### Multiplayer Foundation
+- Host/Join system with ENet
+- Local + Online multiplayer support
+- Command-line arguments (`--host`, `--join`)
+- Player synchronization
+
+### Interaction System
+- Tap vs Hold grab mechanics
+- Lift, push, pull, throw
+- Player-on-player interactions
+- Smart placement system
+- Z-axis simulation for thrown players
+
+### Network Improvements
+- Fixed player spawning on clients
+- Proper authority management
+- RPC synchronization for all interactions
+- Collision state syncing
+