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I think the point of the challenger isnt to be a challenge, but to be an easy win once you have the proper kit. My novice ranked guy in full leather armor regularly stomps all over the lower ranks for easy money/heals

I think i've discovered what does it. When i lost my saved data, i tried to "switch" characters in the continue screen of the arena to see if one of my people stayed. whenever i did that, i lost all other characters and items.

i've just gotten one and my game froze :(

and it once again has not saved my progress. back to square one.

With a bit of experimentation i was able to solve my own problem. By killing off this character and starting a new save I seem to keep my items now. I'm not entirely sure how this came about, but I'm glad it isn't bothering me anymore.

After 3 hours of the new arena I felt like I needed a well deserved break, went to exit out of the game and watch some youtube. After coming back, my progress was not saved, All that was saved was the original character JUST after the customization screen.