Medals are awarded based on how much renown you have. Depending on your realism setting you receive a percentage of points when you sink an enemy vessel or destroy a plane (ie. if you play at 100% realism then you get 100% of the point value for each enemy ship/plane destroyed). Renown is deducted each time you suffer crew casualties or hull damage, sink a friendly or neutral vessel, upgrade your boat or "buy" more experienced crew.
The game also has some medal quirks: like skipping over medals. For example it's possible to win the "Fried Egg" (German Cross in Gold) before winning the Iron Cross 1st class. In real life you had to have been awarded both the 1st & 2nd classes of the Iron Cross before you would be considered for the German Cross.
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