Found in the Gamemaster's Companion (pg. 37), Smoke is a Thread Item first introduced in Arcane Mysteries of Barsaive (pg. 85). Part of a item set that is also a terrible pun. Or awesome pun. I'm not here to judge that part.
There will be an analysis of how the 3E Thread Item stacks up to the proposed guidelines (pg. 46 of the Gamemaster's Companion) and what it looked like in its original release.
Smoke
Spell Defense: 15
Legend Point Cost: Journeyman
With only four ranks, this is two shy of what would be expected for a Journeyman Thread Item. The Spell Defense is within expectations, though perhaps a bit on the low side (depending which entry you want to follow for Journeyman tier items - so unhelpful). Also, this is the exact same setup as its companion, Mirror.
Thread Rank One
Effect: Damage Step 8.
Standard Rank One effect, nothing notable here.
Thread Rank Two
Effect: Damage Step 9 and +1 bonus to Attack tests with the sword.
That's two effects at Rank Two and this is only a Journeyman tier item, meaning that it's inexpensive to improve. What this means is that this is quite the bonus to find so early.
Thread Rank Three
Effect: Damage Step 10 and +2 bonus to Attack tests with the sword.
Exactly the same as before - very good for the rank and tier.
Thread Rank Four
Effect: 2 Strain, the next attack ignores Physical Armor.
Yes, you read that correctly. For a mere 2 Strain, you can have an Armor-Defeating Hit every time. The previous bonuses were already above par and this is... probably the best ability ever. All of those thread shields and armors that give you big bonuses to protection? They just became irrelevant. I will pay that every. single. attack. It's really hard to put to words just how powerful this is. Certainly, you need to have Mirror to get here, but what kind of cruel game would introduce one without the other? This ability is only Rank Four and costs a mere 800 Legend Points.
How does it all stack up? Well, it's cheap and gives at least above average returns at every rank, except for Rank Four where... yeah. It's pretty much the best combat ability ever. This is, of course, in addition to the good damage and attack bonuses it already provides. And there is still growth potential in this!
It can certainly be noted that Mirror has to be introduced for this to be relevant, but without Mirror this is... a broadsword with three ranks. They are good, but the wielder cannot even improve it without getting Rank Four first. It's a cruel joke at best and willfully malicious at worst.
What this all means is it should not be introduced into any game as written. Even changing it to affect Mystic Armor is still an incredibly powerful ability for the Rank (as seen below). There is almost certainly a way to salvage this ability, but with such a shallow progression, it's tricky.
So this isn't such a great place to look for inspiration. It has good flavor and the connection to Mirror is neat (even if I like Mirror significantly more), but the mechanics as presented are a mess. It would do significantly better having six ranks with Mystic Strike as the capstone to that progression. Possibly targeting Spell Defense instead of Physical Defense.
How does the 3E version compare to the 1E version? Let's find out:
Smoke
Spell Defense: 15
Legend Point Cost: (Journeyman)
No changes to note.
Thread Rank One
Effect: Damage Step 6.
This is a one step increase, which is more typical of 1E.
Thread Rank Two
Effect: Damage Step 7 and +1 bonus to Attack tests with the sword.
Effectively the same improvement.
Thread Rank Three
Effect: Damage Step 9 and +2 bonus to Attack tests with the sword.
And that is three improvements. Which is quite a thing, as this is already quite good.
Thread Rank Four
Effect: 2 Strain on a successful attack, the attack affects Mystic Armor instead of Physical Armor.
There are two changes between 1E and 3E to be found. The first is that in 3E, the Strain is paid up front, while in 1E it is paid after you hit. This is significantly better in 1E. The second is how armor is affected. Clearly, 1E actually has it interact with armor, so that is way, way more powerful in 3E. Overall, they are both way too good. Just, incredibly, stupidly powerful. If they found them early enough, a Fourth Circle character can be walking around with this. It's certainly not too expensive.