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The Shrinking Potions are potions available in the Knothole Island downloadable content. You can buy them from Greta after completion of the quest known as Knothole Island's Big Freeze. They shrink the Hero, but will add corruption points. If the player so wishes, the character can grow again through the usage of Height Potions.
These are useful for people with high level skill abilities who do not want to be tall, which occurs due to the morphing system.