The essence of experience is what YOU and YOUR CHARACTER gain from everything you do, including losing fights.
To be correct, you should go UP in experience when losing fights.
I can't really see what's wrong with the way things are, tbh. Levels are hard to obtain on higher levels - you need to be active a lot to keep up with everyone around you. To be losing xp all of a sudden would make it really, really, REALLY hard to level up for most people at my level, for example, but be a breeze to people like Haldol, Mehdi and Nukdog (and NUTS and Vic Vega and the Pho Viet-gang and most of Pyro and DARKVIPER and...well, you get my point.)
//Formidable - DeathWish MGS
your points should be increased a little for losing, cuz its still experience! If a player hits you and they gain 6xp you should gain 2-3 for losing
Losing XP / LEVEL DOWN doesn't fit with the current game structure.