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The flag activates a Badass Mode that seems like it was supposed to function like Hardcore mode in Diablo, where death = permanent death, which is why the game goes into free-roam camera when you fail to revive, and your character goes away and the game creates a [graveyard.sav] (like the bones file in NetHack). Either Gearbox scrapped this to put into DLC for later, or they just abandoned the idea, because the code in the save file is probably incomplete because it spreads to other save files (probably because Badass characters weren't meant to mingle with normal characters) and because there's nothing to say that you're in badass mode and whatnot unless you look in the save file code, and there's no safeguards against it.

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