Supply dilution and yield equilibrium
When early stakers earn 100% APY, the protocol's annual emissions are 100% of the staked supply. As more capital stakes to chase that yield, the total supply staked grows and emissions must be split across more tokens, lowering the APY for everyone. Eventually yield drops to an equilibrium point where new stakers are indifferent between staking and not staking.
The floor of organic demand
Once yield falls below the protocol's security budget (the cost to run validators or maintain the network), staking rewards can no longer be supported by incentives alone. What remains is only the value accrued to stakers from transaction fees, assuming the protocol generates any. Many projects overestimate their fee potential and face a yield cliff when emissions end.