It wouldn't be too bad for a minigame. If the minigame owner controls which weapons they have, then a Shrink Ray would only be used in that sort of deathmatch. It's like the Horse Ray, effectively - fun weapon, if obscure enough to not be used often.
Make it shrink by 0.2 scale every time you are hit, when you reach 0.2 or below you die. Somewhat like the Horse Ray, except non-bouncing and a different colour/effect.