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Demons are vulnerable to banishment and the smite demon spell. There are also certain types of weapons that do increased (2x or 3x) damage against demons, but they are not too common. Demons die just like any other units when they are whacked with pointy things, except they are generally tougher than a regular infantry unit.

Demons are best used in fairly large groups so that you can get the momentum going. Using them piecemeal among other units just gets them killed. If you want to try a blood nation, Lanka can give you a good primer on demons, since they can recruit some demons (palankasha, anusara, asara) right off the bat. Abysia is good for a basic blood nation, especially middle or late era.