When the sprocket teeth are worn and there is a little slack in the chain, the chain climbs up on the teeth when you decelerate. So, if the chain was a wide one, like an O-ring or X-ring type, it will find that little plug mighty tasty.
It looks like your oil seal on the shifter shaft is starting to weep, too? It's easy to change, once the grit is all cleaned out of the area. When they get old and stiff, they can't wiggle up & down when you shift (as the rod goes several directions, not just around).