a versatile phrase that could mean any of the following: "fuck yeah", "nice", "sweet", "awesome"
It can almost never be used incorrectly.
Additionally, sick damage is most used in-game. (See Example #2)
Example #1 (every-day use): "Dude they're fucking serving tacos today!"
"SICK DAMAGE!"
Example #2 (in-game): "Dude you should have PVPed with us last night. It was fucking sick damage."
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