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Me and a friend are playing a game right now.  I have [c/]Krenko, Mob Boss[/c], [c/]Goblin Fireslinger[/c] and three 1/1 Goblin tokens. 

My friend played a [c/]Taunting Elf[c/] and buffed him to make him a 3/4. 

So all of my creatures must block his elf, but how is the order of the blockers chosen?  Also, how would the assigned damage be determined?  My friend believes that he can chose how much damage his creature does to each of mine.  In other words, he's trying to assign no damage to any of my token creatures, so that he can use the full damage of his elf to kill Krenko.

To be more specific, I believe that I chose the order of my blockers.  So I block the 3/4 elf with a 1/1 Goblin, it destroys the Goblin and the elf becomes a 2/3, correct? So I throw my 3 1/1 tokens at it, which would make it a 0/1 and then I would kill it with Krenko.

Only put the slashes in the second brackets.

Krenko, Mob Boss
Goblin Fireslinger
Taunting Elf

First, you are able to activate abilities before blocking. If your creatures are tapped, they cannot block. You should be able to save Krenko and Fireslinger this way (unless they still have summoning sickness)

Your opponent chooses a damage assignment order during the declare blockers step, after blockers are declared. Basically, he picks an order to do damage to the creatures blocking taunting elf. Think of it as trample but for creatures. He has to kill the first creature in the damage assignment order to get to the second, etc. In this way, he will be able to do 0 damage to some of your creatures (if you block with enough toughness worth of blockers).

 

To Autocard: [c]Taunting Elf[/c] = Taunting Elf  

  The attacking player chooses the damage assignment order for their attacking creatures.  So if all of your creatures block his taunting elf he chooses which creatures the elf damages first, second, third, etc.  Lethal damage must be assigned to a creature before it moves on to the next creature in the assignment order, and so on and so forth.  So your opponent is correct, he could choose to put krenko the first creature in the damage assignment order and deal the elf's 3 damage to it.

Just to piggy back on this thread, what if only one of the blockers has banding. Is that enough to allow the defender to choose damage direction, or do they all have to have banding?

702.20j. During the combat damage step, if an attacking creature is being blocked by a creature with banding, or by both a [quality] creature with "bands with other [quality]" and another [quality] creature, the defending player (rather than the active player) chooses how the attacking creature's damage is assigned. That player can divide that creature's combat damage as he or she chooses among any number of creatures blocking it. This is an exception to the procedure described in rule 510.1c.