When ATOMs are burned via stake slashing, the ATOMs bonded under PHOTONs get slashed pro-rata as explained in the constitution.
When PHOTONs are burned via ICS2 slashing, or even tx fee burn, I believe they can simply burn and disappear, making the ATOM tokens more valuable in comparison. In other words, the invariant that there will always be 1 billion PHOTONs can always be preserved, for as long as there is one iota of an ATOM.
When ATOMs are burned via stake slashing, the ATOMs bonded under PHOTONs get slashed pro-rata as explained in the constitution. When PHOTONs are burned via ICS2 slashing, or even tx fee burn, I believe they can simply burn and disappear, making the ATOM tokens more valuable in comparison. In other words, the invariant that there will always be 1 billion PHOTONs can always be preserved, for as long as there is one iota of an ATOM.