Daggers

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Daggers are a Finesse weapon, one of two designed for close-range combat (the other being the Faeblade). These weapons rely on high critical hit and multiplier modifiers to do damage, making Finesse gear highly advisable if the player intends to make use of them. This requirement may diminish, however, if the player chooses to make use of a hybrid build, as stealth attacks produce guaranteed critical hits and, therefore, would only benefit from the crit multiplier generally found on Finesse gear.

Advantages and disadvantages

Daggers and Faeblades both have distinct advantages and disadvantages. Generally speaking, Daggers have slightly superior attack speed and critical hit rates or multipliers. Faeblades are slower, but have a higher base damage. Ultimately, however, these stat differences are generally small, and the distinctions come from usage.

Daggers and Faeblades may both be used from Stealth, earning a guaranteed critical hit with an increased critical multiplier (if the relevant Finesse ability, Assassin's Art, is taken).

However, Daggers are vastly superior to Faeblades for assassinations. Unlike their double-bladed counterparts, Daggers will produce an assassination animation when the player strikes from stealth, leading to a silent kill (or, at least, a massive critical hit). If the target dies, as is likely if the weapon is up-to-date, other enemies in the area will remain unaware of the player's presence. This allows dagger users to assassinate multiple (or all) targets before they are detected.

Faeblades will produce a large critical whilst in stealth, but it is far smaller than that produced by Daggers and unlikely to lead to a one-hit kill. Furthermore, regardless of if the target dies or not, the player will return to a non-stealth mode after a Faeblade assassination; failure to return to stealth mode immediately after almost guarantees detection by other enemies in the vicinity. Contrary to popular belief, Faeblade assassinations do not cause instant enemy detection. At high stealth and crit levels, it is possible to perform multiple assassinations if the player continually returns to stealth mode after Faeblade assassinations - just not as easily as with daggers.

Daggers do have their weaknesses, however. Due to their smaller base stats, they are generally weaker in combat once the player is exposed. More importantly, they have distinct disadvantages when dealing with multiple enemies, having only single-target attack options. The standard attack of a Dagger is therefore more focused, but their increased speed allows the player to change target mid-combo - something that is considerably more difficult with Faeblades. In addition, a charged attack with Daggers, Shadow Strike, allows the player to dash rapidly across the battlefield, spreading their damage to multiple enemies (you need to press the attack button when the screen flashes to chain multiple kills). Faeblades do however produce superior damage in combat, and give the player Area of Effect attack options.

Secondary weapon and gear suggestions

Given that a primary and secondary weapon may both be equipped, it is wise to specialize in two combat forms, if you choose to make use of daggers. Some examples include:

For full Finesse players, investing in both Faeblades and Daggers will give the player solid options. Using the daggers to dispatch as many enemies as possible whilst hidden, then using your Faeblades to dispatch the rest will leave few holes in your offense. Such builds will rely on Finesse gear—crit multipliers will buff both Daggers and Faeblades, and increased rates will benefit Faeblades.
For Might/Finesse players, rely on daggers the same way the aforementioned Finesse build does. However, once detected, it would be wise to switch to a Might-based weapon, using your shield to outlast the targets. Such players will prefer Might-based armor, if Daggers are producing one-hit kills, as critical hit chance will not be important compared to shield chance and armor.
For Sorcery/Finesse players, the player has more utility and specific needs will depend on what sorts of spells the player chooses to take. Using Chakrams and Daggers is a popular build—Daggers allow for short-range combat, and Chakrams are a ranged weapon option. Gear will be deeply dependent on the player's choices, with Finesse or Sorcery gear being desired in various ratios accordingly. If spells are being used purely for support, for instance, Finesse gear may prove superior. Players who intend to assassinate targets, then use spells for their main offense, will likely prefer Sorcery gear.
Jack of All Trades characters are, unsurprisingly, facing many effective usages. What gear you prefer will heavily depend on your personal combat style and spec choices. As always, however, if Daggers are going to be used solely for stealth-kills, and Faeblades/Bows will not be used, then Might or Finesse gear will likely be superior (again, assuming the player is still scoring one-hit kills).

Dagger abilities

Abilities that increase the effectiveness of daggers are found in the Finesse tree.

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Moves

Shadow Strike: Hold and release the Daggers to begin a dashing combo that can be chained up to 5 times.
Crossfire: A delayed attack with the Daggers that stabs and slices. Timing the second attack perfectly guarantees a critical hit.
Cross Slash: Attack with the Daggers while dodging to perform a launching attack.
Punishment: After a timed Parry, attack with the Daggers to perform a series of rapid strikes.

List of Known Unique Daggers

List of Quest Item Daggers

Draug's Toothpicks

Notes

The Daggers are made for people who prefer speed and precision over strength, focusing on a single enemy rather than a large mass of enemies that surround you.
Daggers can be used for hit and run, but one of their greatest strengths is their ability to land a continuous flurry of blows with varying, player-controlled speed. This makes it relatively easy to switch targets mid-combo and continue the attack chain on a separate enemy for stuns. Since the dagger's attack chain is so many hits and they can be intentionally slowed by the player, the player's ability to dodge at any time is left open for the vast majority of battles, and some dagger special attacks are designed to work with dodges and launches, also allowing the player to entwine their defense with their offense. Some dagger special attacks can guarantee criticals if timed precisely, increasing damage output when only a single target matters.
In the Finesse abilities tree, daggers will also proc things such as Envenomed Edge, Paralytic Poisons, and Execution more frequently. This allows for a devastating string of critical hits that can drop an enemy quickly.