For the multiplayer game I'm writing now, I'm creating the concept of a cheaters purgatory. If you get caught cheating a single time in a competitive multiplayer game you're forever sent to purgatory where everyone who gets caught cheating goes. Here you can cheat against other cheaters to your heart's content. You'll never play against honest players again. You're stats aren't kept, you're never ranked but you can still physically play the game. Trust is absolutely essential in competitive multiplayer games and if honest players don't feel that trust then the game and the entire community suffers.
I think people should be able to cheat as much as they want in single player games. This is actually how I got started down the programming and game development road. I learned how to hex-edit save files in an old Might and Magic game and gave myself all the gold and experience I wanted. Respect for writing your own code, no respect for using other people's cheats.
I don't think there should be a single rule for all cheating in all games. As long as the developer is up front about the rules, I support those rules.
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