Damage exists as conditions that affect you, not as hit points.

It works like this:

In a Simple Contest: You and I roll -- let's say we *both* succeed, but I roll lower than you... that's called a marginal success -- really about the lowest level of success you can get. Consequently, the results minor: you'll have a -1 to related activities for an appropriate amount of time. Physically, maybe you got your bell rung... in a debate, you were embarrassed or shown up. The penalties get worse (and last longer) the better the success is, until we hit the other end of the spectrum where one of us Crits and the other Fumbles, which can be pretty deadly. (One of the reasons to keep Hero Points handy is to turn your Fumble into a simple Failure and avoid the worst kind of fallout from conflicts.)

In an Extended Contest: you bid from your pool of 'advantage points' until one side or the other is out -- the amount that you go in the hole determines how badly off you are afterwards (But they aren't hit points -- the pool simply measures who has the "advantage" in the conflict at that point, and vanishes at the end of the conflict no matter what.)

So, Damage is expressed as ongoing conditions affecting you: wounds, embarrassment, confusion, poison, et cetera, ranging from a piddling -1 to a few abilities, to a -5 to a larger group of abilities, to a 50% drop in all abilites across the board, to an inability to act at all.