Well i don't particularly like the idea of "losing" an item you spend hours and hours of grinding and farming, however i do agree that there must be a penalty for trying and not succeeding.
My problem with the idea is the "randomness" behind it, i mean, it's not part of the player skill or build or anything at all whether you fail or not, it's simply a number between "x" and "y" to obtain what you wish.
If a system can somehow be implemented where you can control whether you destroy your item because you failed at doing something then i agree, otherwise i wouldn't wish for the penalty to be so excessively harsh, because an NPC didn't want to give me a number (if some NPCs are better at enchanting than others that probably would be cool too), so let's say, losing only the money (which should be a considerable amount if you take into consideration you won't lose the base item) AND losing the enchanting material you were trying to imbue.
Also enchanting and upgrading cap depending on the item level would be ideal too; take Ragnarok Online for example, simple weapons can be safely upgraded to a higher point with a simple material (i don't remember very well but for level 1 weapon you can get +7 with a simple to find material without any risk at all), after that it's your own risk if you over upgrade and if you fail the item is broken, however for level 4 weapons you can only get it to +4 and a difficult to find item, same rule for over upgrading
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