The dangers of automatic GC mode

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Your assumptions are correct.

I don't rely on GC to free entities themselves because their relationships with each other are far too complicated for the default GC. Parents reference children, children reference parents, each entity is stored in a global list, as well as scene graph lists.

The whole point of what I wrote is that the bullet ISN'T going out of scope during the entity loop. It goes out of scope at some point before that, and the GC just happens to collect it sometimes during that loop, causing the crash. But you don't really know when the GC will collect something.