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Obito Uchiha clashed with Naruto and many prominent characters of the franchise both on the battlefield and on an ideological plane. After suffering tremendous emotional shock, Obito forsook his principles and worked in the shadows to reshape the ninja world.
Ashura and Indra Otsutsuki represented the two opposing shinobi ways, and Obito walked them both. He acted as a friend, sacrificing himself for Kakashi, and later did the same for Naruto. He also took a road of violence, which directly caused the death of Naruto's parents and also led to the murder of Sasuke's.
Considering the countless deaths Obito caused through the Akatsuki and during the Fourth Ninja War, fans often criticize Naruto's praise for the former. Still, while allegedly improper, those words have some context to them.
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One of the most complex characters in the Naruto franchise, Obito is a very unique antagonist
Obito Uchiha's childhood
An orphan who never knew his parents, Obito worked hard since childhood, intending to become the Hokage. Obito fell in love with Rin Nohara and started a one-sided rivalry with Kakashi Hatake, whose natural talent as a fighter he was jealous of.
One day, the three went on a mission together, with Kakashi leading the team in place of their master, Minato Namikaze. Kakashi recently became a Jonin. As Kakashi was fending off a Hidden Rock Village Jonin, another sneaked behind Obito and Rin, capturing the latter.
Kakashi wanted to prioritize the mission's completion. Obito scorned him, saying those who abandon their friends are worse than scum, and left to look for her. As an enemy was about to kill Obito, Kakashi arrived out of nowhere and intercepted him. While protecting his teammate, the future "Copy Ninja" left himself open and injured his left eye.
Shocked by the event, Obito awakened his Sharingan, helping him kill the enemy. Briefly after, he teamed up with Kakashi to rescue Rin. However, Obito sacrificed himself to protect Kakashi and entrusted his left Sharingan eye before being crushed by rocks. In truth, Madara Uchiha and his two minions, Tobi and White Zetsu, save Obito.
Trained by Madara, Obito honed all his capabilities. He witnesses the death of Rin at Kakashi's hands. Unbeknownst to Obito, Madara staged everything to bring him on his side.
The Masked Man who terrorized the world
Disillusioned, Obito unleashed his Mangekyo Sharingan and went on a killing spree on the battlefield. Owing to his newly awakened Kamui jutsu, Obito could warp his body into another dimension, phasing through any attack as if he were intangible.
Over time, he also learned to use the space-time technique to capture his enemies in the Kamui dimension and freely teleport himself. Having enhanced his body with Hashirama Senju's DNA, which also enabled him to use Wood Release, Obito had become a beastly fighter.
Using his Sharingan to control the Nine-Tails, at just 14 years old, Obito single-handedly assaulted the Hidden Leaf. Minato thwarted the attack at the cost of his and his wife's lives. Many inhabitants of the village also lost their lives in the incident.
Under the alias of "Masked Man," Obito then took control of the Akatsuki organization, leading to the surge of many atrocities in the ninja world. To complete Madara's "Eye of the Moon Plan," Obito impersonated the former, who had been dead for years, and declared the Fourth Ninja War. He also gained additional powers by implanting a Rinnegan in his left eye.
Obito had the upper hand against Naruto and Killer B, so Kakashi and Might Guy came to their aid, overturning the tides of the battle. Eventually, Kakashi used his Kamui powers to overcome Obito's, enabling Naruto to land a decisive hit on him.
With his identity fully revealed, Obito allied with the resurrected Madara to take on the entire Shinobi Alliance. Obito gained the strength of the Ten-Tails for himself, which allowed him to achieve power higher than even the legendary Hashirama Senju's.
Despite his overwhelming strength, Obito couldn't break Naruto's will, which remained firm in opposing him. Due to his inability to eliminate Minato's son, the last remains of Obito's old personality resurfaced, and he realized that the orange-clad shinobi's way of thinking was right all along.
Understanding that he had been lying, projecting the mask of an emotionless killer to escape the painful truths of reality, Obito felt guilty for his actions, which he decided to atone for. He sacrificed himself to save Naruto and passed all his Six Paths chakra and eye powers to Kakashi.
Naruto didn't praise Obito's actions, but his final atonement
Obito suffered a fatal wound while protecting Naruto from Kaguya Otsutsuki's attack. Black Zetsu mocked the Obito, calling him a failure who couldn't achieve anything. On his last breaths, Obito told him that, as a kid, he also dreamt of becoming Hokage but lost his way.
Years later, looking at Naruto caused Obito to regret the person he had become. With his dying words, Obito, as a person who had the same desire, cheered on the young ninja's dream to become the Hokage. Zetsu's insult toward his sacrifice angered Naruto.
The future Seventh Hokage then uttered words that many fans called inappropriate, as calling Obito "the coolest guy" seemed out of place. Obito's actions caused the death of Naruto's parents, condemning him to the life of an orphan and making him endure terrible hardships.
The attack on Konoha caused many other deaths, indirectly causing the massacre of the Uchiha clan a few years later. Moreover, he provoked appalling bloodshed in the Hidden Mist Village. The fact that he started the Fourth Ninja War also speaks for itself.
Whether at his hands or as a result of his actions, tens of thousands of people died. However, Naruto did not praise Obito for his murders. He acknowledged that Obito died while being true to the person he used to be. Furthermore, the "coolest guy" is just a fanmade translation.
The official version is very different, as it has Naruto saying that "As a person who wanted to become Hokage, Obito is nothing but awesome to me", referencing the Uchiha having the same dream as him, and cheering up on that with his final words.
Official translations come after the fanmade ones, which spread first, often causing misunderstandings, as in this case. Naruto's words need proper contextualization. After meeting Obito, he started arguing about the importance of being his true self.
Naruto metaphorically separated the Hidden Leaf's Obito, who wanted to become Hokage, from the Masked Man, who caused many atrocities. Admittedly, Kakashi did the same, differentiating between "the Obito from the past" and "the current Obito." So did Madara.
Obito himself, while still evil, rejected his name, which he reclaimed when he decided to make amends for what he did. His entire character is built around physical and metaphorical masks to hide his true self, the pure-hearted young kid, not the cold-blooded leader of Akatsuki.
Admittedly, Obito never acted out of malice, as he sincerely felt he did what was best for the world. With his mind broken by Rin's death, Obito fell prey to Madara's schemes, freeing himself only several years later.
Besides, Naruto had already done something similar with Nagato, who murdered Jiraiya, Fukasaku, and countless villagers, caused Kakashi's death, and seemingly killed Hinata. The former didn't fully forgive Nagato but accepted his last deed of redemption, which showed his sincere attempt to atone for his misdoings.
Likewise, Naruto never praised Obito's Masked Man persona and instead said he should receive punishment for his crimes. He just acknowledged the "real" Obito's efforts at redeeming himself under the same principles that inspired him as a kid. Which, again, was what he asked him to do when he told him to stop fleeing reality and return to be the Hidden Leaf's Obito Uchiha.
In the end, Obito rediscovered his true self
On the dreadful night of Rin's death, Obito's hopes for the world fell asleep forever. The good boy died, reborn as a merciless man who aimed to erase the cruel world that destroyed his kind soul.To create an eternal dream that would reassemble the shattered pieces of his ideal world, bringing an artificial, mendacious peace, Obito caused death and mayhem.
Through Kakashi and Naruto's words, he understood the foolishness of trying to replace the real word with an illusory one. As the latter went beyond Obito's evil deeds, understanding his misery, the Uchiha saw him as the person to whom leave his most sincere dream, which he had allegedly buried in the depths of his wounded soul.
Seeing Naruto as the reflection of the person he could have been, Obito willingly gave his life for him and died while entrusting his powers to his former comrade, Kakashi.
Obito himself admitted that he was beyond redemption and deserved to die, with Naruto appreciating his sincere attempt to atone for his sins. Happily reuniting with Rin in the afterlife, Obito's soul would watch Kakashi and Naruto save the world from Kaguya's evil plan.
