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Persistent consequences for failure, most commonly losing items you had before the try, are a concept present in a lot of games with a reputation for being "hardcore", like Dark Souls. I'm disappointed that more people don't rail against it, so I'll list several downsides and debunk all alleged benefits of the practice that are brought to my attention.
In a well-designed game, every time you fail at a hard section you can at least think "Well I got some practice. It wasn't a waste" (Dark Souls is actually a very good demonstration of this effect whenever the persistent consequences don't apply; Jedi: Fallen Order is a purer example). But that's not true of games that punish you for failure. It's very often the case that you'll have truly moved yourself farther away from being able to beat it.
* Your game only does this up to a certain point, at which point all alleged benefits of the practice are nullified.
* Your game allows some sort of grinding or any way to undo the persistent consequences by repeating some disinteresting task (Dark Souls does), and the player just resorts to that. Any alleged benefit is lost as it all boils down to wasting the player's time.
* If you don't do either of the above things, the challenge can become effectively impossible and the player is forced to drop the game.
As of now, the only defense of the practice I'm aware of is "consequences are necessary to raise the stakes; games aren't as engaging when there are no consequences for failure". This defense, like the similar defense of randomness, simply misconstrues how fun works.
A little bit of randomness is not okay
Being afraid of being punished is not fun; being excited to win is. But that excitement scales with the magnitude of the enjoyment of winning, which of course is based on the degree of challenge you overcome. In other words, the real way to make a fight more exciting is not to make it longer or impose consequences for failure but to make it harder. The fear of loss on the other hand scales not with the magnitude of the challenge but with how much you stand to lose. So punishing players for loss actually raises the fear of losing *without* raising the excitement of winning.