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With no prejudice to anything else you've written, here's a concept for "how people think that":
Punishment is never "reparations". Those are separate concepts in legal systems for a reason. The punishment you inflict by turning them corrupt is the vindictive payback of "Fuck you. You wanna kill me?
I
may not be able to beat you, but I can get your ass killed by some professional red hunters." Reparations are not offered by the system, for better or for worse, and that's intended. Steven wants you to have to fight for your resources back.
The other important thing to consider though, is that Corruption is not intended as a punishment for PKing at all. It is intended as a deterrent. The difference is subtle but these too are separate concepts. The goal of corruption is specifically not to stop PK ganking. It's to stop PK ganking
streaks
. If someone comes and beats you up and takes your stuff, that's supposed to happen. If someone harasses you and constantly tries to take your stuff, you're supposed to be able to call them an asshole and put a bounty on their head. That bounty is Corruption, and the payout is "the mats they took from you". (Or, you know, didn't, if you're baiting a particular gank-happy pest with a relatively empty inventory.) Someone has to pay out bounties even IRL right?
The reason corruption penalties increase progressively is so that they specifically do not prevent ganking, but so that they instead make it harder to gank a lot, against people who can't stand up to you.
Will this work as a whole? That's a separate question. But "having your mats stolen by a stronger player from time to time, if you can't manage to fight back" is the intended gameplay of Ashes of Creation, and the intended "satisfying outcome" is killing the attacker yourself, and your mats they're now holding are your payment to a bounty hunter to do it for you. Corruption is a Slow, not a Stun.