I'm somewhat divided about item degradation. Imho it works somewhat fine in early and mid game. "Somewhat" because you usually get upgrades in loot before any serious degradation happens, so I wouldn't say it has a big impact, but I like the idea. But I really dislike it in the endgame. If I remember correctly, back in A16 we could onehit 500 HP stone (so the most common block when mining) with a maxed out tool and skills. After the first repair we still needed one hit, so even though we had degradation in theory nothing changed at all. The same were true after the second repair. But then after the third repair we suddenly needed two hits and thus double the time and stamina. Maybe I remember badly and it was two hits maxed out and three hits after the third repair, but that's still 50% more time/stamina per block. In my opinion that's a way too big step. If each repair had a 5% (or similar) loss in efficiency I'd probably like degradation. It was a bit better with axes where we went from 4(?) to 5(?) hits per 1200 hp tree, but that's still a 25% efficiency loss. Luckily that late in the game you usually don't chop that many trees anymore, so the overall impact wasn't that big anyway. Shovels on the other hand were onehitting dirt and sand even after tons of repairs, so the only real impact degradation had was removing the neat purple color.
Degradation works better with a system similar to Minecraft where it doesn't matter how often you hit a block, but how long. With such a system you can have a smooth curve on how degradation impacts your gameplay. In the early to mid game we have that to some degree, since we have a higher amounts hits we need to destroy a block.
Of course, we kinda have it in the endgame too thanks to the auger and chainsaw, but I really despise the auger. I like doing exact work and it always damages blocks I don't want it to damage. I rather work slower and don't have to correct my work afterwards than being fast.
So in conclusion I do like the concept of item degradation, I just don't like the way it worked in the past. Maybe instead of making the tool less powerful it could make the tool slower, so degradation could work more gradually.
Also that's why I hate that you can't craft maxed out tools. If T6 and T5 picks each need two hits (I think that's the best in A20) for a 500 hp stone block than what's the point of not being able to craft T6? But if T6 allows for two hits, while T5 only allows for three hits than crafted gear isn't just a bit worse, but a lot worse.