The drop function (and the per-biome parameters) control how terrain drops to the ground below (usually as gravel). with the drop function itself providing a scaling of the required depth (so if drop function is a constant -1, then terrain will ‘always’ drop when below the required depth).
The shrink function provides a little bit of noise onto how the height of the dropped terrain is shrunk down towards 0 (so if you had a constant plateau of thickness 10 which all dropped to the ground, the actual height of the columns of terrain resulting from the drop would vary based on the shrink noise).
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