*releases such a huge amount of chi/chakra/ren combined that nobody can help but be consumed in the blazing ball of plasma that is his wrath*
I would like to suggest, instead, a sort of 'battle tower' as in Hunter X Hunter where new players are assigned to floor 1 with a small participation prize, then earn their way up to higher floors by spectacular battles with other people. Martial arts and other potentially nonlethal activities/gadgets would be encouraged, and some sort of psychological, physiological, and/or physically-sound equivalent of psionics/chakra/powers can develop as a result.
People on higher floors would be assigned living quarters, and nearing the top, high-ranking positions in the army would be offered.
Again, just a suggestion. Feel free to take any part of it and twiddle it to your liking.
Also, some sort of RPG-esque battle system could be implemented. That'd be kind of sweet.