Obsidian can be made very, *very* sharp; however, it’s not particularly durable. It doesn’t last long as tool but it’s very effective while it lasts.
As to why you can easily knock off a chunk to turn into a tool but not have it immediately break when you try to use: obsidian breaks in certain specific ways. If you understand what those ways are you can use it to your advantage to break off a nice, big flake. That nice, big flake will easily break if you apply pressure across it but not so easily if you apply pressure head-on. So it works pretty well for stabbing into things, not so great as like a lever or something.
It’s worth noting that it’s still used for tools today. Surgical scalpels are sometimes made of obsidian because of that sharpness. I don’t know how often those need to be replaced.
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