Both players discard cards until their current hand size is no more than their maximum hand size, starting with the active player.[source]
Each players maximum hand size is 1 unless a card effect modifies it, like Black Smoothness Drill.
A player may choose to discard additional cards in their hand, below their maximum hand size, if they wish.[source]
Both players are affected by this step each turn whether combat happened or not.
![[source]](/wiki/File:Set_3_Rulings_Part_2.png){kind=link}
![[source]](/wiki/File:Discard_Step.png){kind=link}