Damon felt so low that he thought everyone would be better off without him, in the past as well as in the future. He didn't want to live any sort of life anymore, and he didn't want anyone else to have to deal with the consequences of his existence. Unfortunately, that's not entirely possible for himself or the genie.
Genies, you see, are bound by a couple of rules. One is that they cannot create or destroy life. The genie told Damon he couldn't kill anyone, and that includes Damon. Damon must still be alive at the end of a wish. Another problem is that Damon's wish would create a paradox: if Damon were entirely erased from existence, then how could he have wished for his own erasure in the first place? The reason for Damon's nonexistence would not exist. It's like trying to use a time machine to prevent your own birth.
And yet, the genie has promised to grant any wish, and he always tries his best to do so. The solution is that there will be no evidence of Damon in his original reality, as far as anyone else can tell. The genie will rearrange the world as necessary and erase other people's minds, but the genie will still remember what happened. As for Damon, he will live on in another reality. He will experience a new world full of things that were not real where he came from, because he himself wished to be unreal where he came from. The genie has not really killed Damon, but has rather sent him to another space and time.
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Damon slowly discovers thoughts and feelings simmering back into himself out of the nothingness. He starts to see himself fading back into view, and thinks he can hear other people talking. Where is he? Who or what has he become? And what will his life be like from now on?