Level Goal
The password for the next level is stored in the file data.txt, which is a hexdump of a file that has been repeatedly compressed. For this level it may be useful to create a directory under /tmp in which you can work using mkdir. For example: mkdir /tmp/myname123. Then copy the datafile using cp, and rename it using mv (read the manpages!)

So this challange suggets us to make an new folder in the /tmp folder. Lets make a folder called kadeeli and lets move the data.txt file to there.
mkdir /tmp/kadeeli
cp data.txt /tmp/kadeeli

Lets see what this file is with the file command. It is an ASCII text.

I dont know what extinction gzip uses, so lets touch a textfile and compress this to see what the extinction will be.
touch text.txt
gzip text.txt

It is an .gz format, lets change the data.txt file to data.gz and unzip it
mv data.txt data.gz

but wait, it was an hexdump first, what am i trying to decompress.
xxd -r data.txt > bandit12

Lets see what this file is.
file bandit12

And gzip compressed data format. Lets change the file extension and unzip it
mv bandit12 bandit12.gz && gunzip bandit12.gz

Lets check what this file is again, an bzip cmpressed file. Lets keep checking what the file is and decompressing it with the program it is compressed with.

So after several decompressions with bunzip2, tar, gunzip we got a file called data8 which is ASCII text and contains the password. See the screenshot below for the exact commands.