I've faced xp loss only in Lineage 2, when the game had a 4% xp loss. When those 4% started to mean a full week of farming mobs, I started to be much more carefully and dedicated into not dieing uselessly by staying in healers range and keep my healer alive at all costs. Obviously bad players will remain bad players, that will happen with or without penaltys. But medium players will fell more motivated to learn how to properly do things when they start deleveling instead of leveling. My point of view...
Do you know what happens in real life when you die? You guessed it, you die.
In my perfect concept of a game, death penalty would include the real chance of losing your character.
Does it seams too much for you? Diablo 2 have the Hardcore system where if u died it would be permanently, no second chances. And it still had an huge player base. But I'm not so rigid, I don't think that losing your character over death would be beneficial to a game (unless some very strict rigid conditions apply).
In final fantasy, saying I don't my "effort be taken away" finds a great solution in a death penalty system, and the solution is simply play better.
Also, thumbs up for Mugiwara. "Im tired of my hand being held" is exactly my thoughts, had enough of that in wow.


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