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The spawn point/spawn tower acts as the 'North Pole' for the compass as the red needle representing 'North' on the compass will always point towards the spawn point. As said before, the compass isn't really necessary, as players also can rely on the distance meter on the HUD of a player's avatar, which can be used to navigate a player safely back to the spawn point, as it decreases when the player gets closer to the spawn point, however, it can be useful. For example, if you built a house to the south of the spawn tower, then died, you could easily find your house again.