As a new player who's currently looking seriously at the awesome potential of smithing here (given the huge effort involved just in prep work, gathering materials and leveling...) I have to say some kind of blacksmith point decay is essential to keep a fluid supply and encouraging new blacksmiths to go for it. Given how many items you'd have to make before you get anything resembling ideal there should be a huge supply of mid-power stuff that would probably outstrip most of my best looted weapons, yet not one vendor has smithed weapons for sale in the two weeks or so I've been playing - not even unranked weapons. Considering how useful zeny is compared to most versions you'd think BS's would be super keen on making as much money as possible by selling anything they make. That tells me blacksmiths probably are no longer active outside of perhaps logging in when asked by a friend - or they're literally breaking every non-god level item they make in an effort to reach +10 and get a huge ranking score boost when players would likely pay good zeny for what they consider as low-tier crafts.
I believe the smithing points system would benefit from being more focused on making items than getting them upgraded to +10, which seems a crazy goal for the blacksmith to worry about. Giving huge bonus points for sinking zeny into max upgrading is fine but crafting should be the main source of ranking points in my view. Getting more stuff produced should be a blacksmiths priority, not having to save tens (if not hundreds) of millions of zeny for ores in order to have a decent chance to get into the top 5 THEN attempting to craft items until your content - or far more likely out of resources, since Nuffle is rarely that generous!
How and when the point reduction happens can be anything, personally I'd say -10% per week if you have not crafted anything since that would let semi-active smiths just log in once, make something for +1 point and easily maintain their hard-earned ranking without getting KO'd if they miss a couple weeks due to vacation etc - although I'd take a -10% per week/month or reset every few months too if logging craft times is not viable. The mechanics of it are pretty unimportant, since active smiths will adapt to it by stockpiling or smithing as req'd.