Direct from the paper–> “We highlight the main results that are relevant for DeFi and PoS protocol designers. First, the results of §3 show that one can reduce inequality amongst stakers by adding staking derivatives. However, the portfolio returns estimated in §4.5.2 show that this inequality comes at the cost of burning a significant fraction of the money supply. These two results describe a trade-off between the number of liquidations of a derivative position and the amount of inequality in the system.”
I don’t know that there is a live case where a protocol designer has taken this body of work and explicitly used it to inform the design of a staking derivatives system.
What this means is that one of the drawbacks of these staking derivatives can be excessive liquidation of derivative positions. If there is excessive liquidation, then there would be significant 1) gas cost, 2) token burn, 3) Gini coefficient redistribution. For different reasons, each of these can present security risks for a PoS system.