Essentially, the saga switches main characters each time. The previous main character takes a side role after each part of the sidestory saga. (The first sidestory is the second game).
As for how I have it set up... Here is an example early on of a power swap (not weaker necessarily, but different):
You can change your battle mode. You have several battle modes to choose from, each are introduced at different points (some are difficulty locked and only available on the easiest or most difficult difficulty).
The first battle mode allows you to have four party members plus one support member who gives your party various effects depending on who is the support (one support member prevents game overs, one makes you immune to instant death style attacks (super high damage, instant death effect, petrify, etc.), and so on).
Then, you get put into a battle where your party is restricted and the MC must fight alone. After this, you have the option to switch to the duel battle mode. This mode forces all battles to be 1 vs 1, but makes it so you can only have one party member and no supporters. Choosing this option will remove one of your party members as a party member and adds them to your inventory as equipment (there are other ways to do this as well).
However, there are also choices that will straight out make you weaker.
You have a skill that once used, gives you a permanent debuff. However, when the skill is used, for that battle, your stats are raised to an absurdly high point. The skill can only be used once. This means you can essentially ensure that you win a battle that may otherwise be very difficult, but in exchange, you make later battles harder.
You also have points in the story where you have to make choices. For example, after beating various storyline enemies, you could choose to give up some of your power in order to form a contract with that enemy. This could mean that the enemy gives you some benefits every now and then (perhaps regular donations of wealth), a new weapon, or even a new party member. However, in exchange, you lose some ability. Perhaps you lose your ability to auto-res once per battle? Perhaps it is your automatic mana regeneration? Not doing so may have consequences. Perhaps the enemy was keeping a group of people under control and if you kill them, that group will be free? Perhaps if you let them go, they may later cause problems for you? Thus, you must weigh the benefits of keeping your powers versus restricting yourself.
There are also critical points where you must make a sacrifice or you will end up towards a bad end. For example, you are given the choice to flee or use yourself to block an attack designed to wipe out that world. If you flee, it will lead to a bad end (you are supposed to be protecting the world in exchange for the safety of your own world). If you use yourself to block the attack, you permanently lose your ability to prevent game overs.
The thing about the game is that there is a 'canon' proper ending. However, to see that ending, you must first see a few endings. Each time you reach a different end, it goes back to the start with you keeping part of your progress. Each ending you see changes the story in some way. First ending you obtain, regardless of which one, unlocks certain in-battle abilities (that you can sacrifice or use). Certain endings unlock different abilities. Seeing the 'canon' ending will result in a few new elements to the story as well. Each ending also reveals some secret. Even the bad ends have secrets, though more minor (unless you meet certain conditions such as seeing every bad end or seeing various bad ends a set number of times). Every ending is canon except the happy ending.
There is a point where you have to sacrifice a party member. In the "happy" ending, you are given the choice to sacrifice the person who in canon, could not have been there (having them there would have required the sacrifice to have already happened). That person happening to be the one who could auto-revive.
There is also the note where later battles get harder if you choose not to make any sacrifices. Especially one particular battle mid-late game.
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Also, I swear that the playtesters of my game's original version were losing on purpose just to collect all the bad ends... I probably shouldn't have made a book in the inventory that shows you which bad ends you've obtained... I think someone really did get the bad end for seeing all the other non-secret bad ends (there were a few bad ends that required you to really go out of your way to see).