Going through the rulebook, the only source of Challenge dice I can see is Story point or Opposed checks.

This means effect like Despair seems to be extremely rare. Am I missing something or this is as intended?

Check out the Adversary talent on page 131!

I usually upgrade difficulty once or twice if the action performed can go REALLY wrong.

Rope walking at 2 feet high ? 4 purple

Rope walking between 2 skyscrapers ?? 2 red and 2 purple

Auto-Upgrade the difficulty if you think the check is truely terrifying or added danger - or if you want something truely spectacular to happen.

I upgrade difficulties for all sorts of things as a gut feeling. The party is fighting a caster? You BET any spell checks against them are getting upgraded.

4 hours ago, Bohun242 said:

Going through the rulebook, the only source of Challenge dice I can see is Story point or Opposed checks.

This means effect like Despair seems to be extremely rare. Am I missing something or this is as intended?

Could be less common than Triumphs, but not rare at all.

They would appear in opposed checks.

In the checks vs the environment it could appear if the GM want to create something very hard, but usually these moments are there just to create more failure and threats, preparing to a more dramatic scene after that. Or it's something easy enought to be a real threat.

Like everything in Genesys, they want to create that feeling of cinematic action movie. The biggest problems would appear between the action.