Why would doing the "outlet challenge" cause notable damage to outlet and wiring?
If there is a bad connection (loose wire connection to outlet or dirty coin) instead of full short circuit, there is enough resistance that a lot of current flows but not enough to trip the breaker. And when power goes into resistance, it heats up. And the heating happens at the outlet, melting the plastic. The circuit breaker could be faulty too, passing much more current than intended before breaking, or fails to break at all.