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The Obsidian Local Dev Loop skill is designed to eliminate the friction of plugin creation by setting up a high-velocity development environment. It automates the creation of dedicated development vaults, establishes symbolic links for instant updates, and provides optimized esbuild configurations for watch-mode builds. By integrating tools like BRAT and custom debug utilities, it enables developers to see code changes reflected instantly within the Obsidian app, making it an essential tool for rapid prototyping and testing of Obsidian extensions.