As you and Shifty seem to be concluding, the issue seems to be the need of refining the codework and software efficiency than the lack of raw power. The polygons needed doesn't seem to be enough to strain current-gen consoles.
Yes, at least that's one of my points. However, I'm not saying that with current hardware we can achieve CG quality hair nor strand by strand hair solutions, but there are other methods, such as this one (tressfx), that could be more used (and better) in the videogames industry. I honestly think that we haven't evolved because developers didn't give enough importance (nor effort) to this.
The way tressfx does hair simulation is not mind blowing to me, although it looks pretty in a static image. I still think that if AMD tweaks the code a bit, the results would highly improve.
I think we should have seen similar solutions for a while in almost every game that features long hair characters.
EDIT: I still remember how I loved the physics for Lara's low polygon ponytail in PS1 games.
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