Some of my thoughts on this topic (not necessarily reflecting the rest of Chorus):
First of all, I do think that long term PoS will need to approach 100% slashing. But 100% should only be slashed if there is a highly coordinated, clearly malicious attack on the network, e.g. a large % of VP double signing. Some proportional slashing algorithm (as discussed on Cosmos/Ethereum) seems like a good direction from the network’s perspective.
On the other hand, I do also agree with points made earlier that it will stop token holders to engage with staking, especially in this early phase. A higher slashing ratio does wildly impact the risk/reward calculation. Once software and validator setups are more mature, the risk of slashing should go down. Then, token holders are likely willing to accept a higher slashing penalty as the expected reward outweighs the risk.
IMO this will likely take several years, but then there will be better tooling to run a secure validator, a large pool of historical data, audits, stable demand for blockchain transactions that make it possible to value staking tokens using some type of DCF methodology, etc. So overall having 100% slashing then sounds reasonable to me (i.e. ramping up over time).
Regarding the question of whether 100% slashings deters staking derivatives:
I don’t think 100% slashing will deter that any more than 5% does. There’s still value for a staked token holder to be able to liquidate his stake or to use his staking collateral for other purposes. With only 5% really at stake, staking derivatives are much more powerful obviously.
One interesting discussion to have (I think Erik also mentioned this at some earlier point) is the idea of “leveraged staking”, i.e. enabling the token holder/delegator to choose his slashing degree w/ higher degrees resulting in higher VP + associated higher reward. Haven’t thought about the impact on staking derivatives for that so far tho.