The 1st order reason for diminishing returns on staked security is that at large enough % of network staked you severely reduce liquidity and alternative lending yields on the staked asset to the point of making the opportunity cost of staking (lost yield elsewhere) de minimis

The 1st order reason for diminishing returns on staked security is that at large enough % of network staked you severely reduce liquidity and alternative lending yields on the staked asset to the point of making the opportunity cost of staking (lost yield elsewhere) de minimis https://t.co/yGdsDrx7E7

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Absolutely, the opportunity cost is a crucial point here. When a significant portion of the network is staked, it limits the asset's liquidity and reduces potential yields from other investments. This diminishing return can disincentivize additional staking, highlighting the importance of balancing incentives.