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The death status is, naturally, reached by reducing a player or monster's HP to 0. Once the character dies, the avatar becomes grayscale in coloration, falls to the ground, and fades away. A slain monster may leave behind a treasure chest once it fades.
When a player dies in The World R:1, they become a ghost. A ghost is a translucent model of the character that is capable of speaking and moving, but nothing else.
If the whole party turns into ghosts, then they are disconnected, causing them to lose anything they had gained since they had last saved. Ghosts can be returned to normal status by using a Resurrect item or the Rip Maen spell. They come back with full HP, but 0 SP.
This status is not to be confused with the ghost/spirit class of monsters from R:1. Monsters themselves do not generate ghosts. Instead, a monster with Rip Maen must use the spell on its ally before said ally fades away. Other than that, the other rules of death apply, with a battle ending once all monsters have been killed.