The coming of Proof Of Stake Method of consensus has presented use cases for projects built on its. Investors enjoy the opportunity of earning rewards by staking their tokens with Validators. Projects that are built on other blockchains that do not run on POS adopted staking as a way of fighting competition from POS projects. The difference is clear here because staking with validators on POS network is aimed at securing the network while staking tokens of projects that do not run on POS is for keeping investors from leaving and/or selling the tokens.
The question then is thus, how healthy is staking features for projects that do not run on POS?
Considering the fact that staking from such projects is a way of incentivizing the investors, one can see amidst the reward, the possible dangers it will have on both the project and the investors.
As we know, APR drops with more participants entering the pool. When the APR gets too low or to a point where most investors do not see much value in staking the coin, they will dump all their tokens and move for a better farming opportunity. This is how most Defi investors think.
In Order to convince more people to stay in the pool, the project will have to increase the APR. This they will do by allocating more tokens to the pool outside their initial budget or buying back the tokens. Whichever method they use, the project will feel the weight of the whole scenario, and in some cases they end up having more tokens in circulation. If the number of tokens dumped by the investors were much, you will see the project facing attacks from other investors due to dip in price from the dumped tokens. They will be forced to add more liquidity due to price impact experienced by other users because the pool now contains more of the project's tokens than the other pair.
This is not possible in POS projects because every dip is an opportunity for Validators and investors to buy more and increasing their voting rights and rewards respectively.
They can only profit with staking features if they continuously maintain the APR at a moderate range, thereby giving people virtual profit, while they make their money by dumping some of the tokens on those carried away by the reward they receive.
For me, staking my coin with such a project lasts only a while because you may be left out when the other investors will dump their tokens or you will be carried away by huge APR while the project dumps the governance token on you.
In conclusion, in the game of cryptocurrency, the smart ones always survive. Projects that go into staking their token as a way of rewarding investors without having a good strategy always suffers in the end.