I think it works the opposite of what you're thinking. The more masternodes there are on the Phore network, the larger staking ROI becomes, because every masternode takes 10,000 PHR away from the potential staking pool. They each have a fixed, separate pool of rewards, so if half of Phore is locked in masternodes as collateral, that means at most only half of the remaining supply of Phore could be staked, and that's before taking out any Phore in exchange wallets or other cold wallets that are not being staked.
Observationally, given the way the Phore masternode population has been growing, I think the Phore staking ROI has increased and is approaching masternode ROI.
You might be wrong!
More active masternodes, less rewards for each one. And, of course, less rewards for each staker due to side-effects of more weights from masternodes.
More active masternodes does mean less rewards for each one--each masternode, that is. Each block has both a staking and a masternode reward--currently 2.8 PHR for staking and 4.2 PHR for masternodes. That makes each reward pool separate and distinct, so when a masternode is added, each existing masternode will be rewarded slightly less frequently. However it also means that 10,000 more PHR have been locked as masternode collateral, which means that amount is no longer available to be staked, so staking ROI will tend to go up as the masternode population goes up.
This is intentionally designed to have a self-balancing effect, because we need a good number of nodes staking and running masternodes for the Phore network to be decentralized and healthy. If hypothetically the Phore masternode population was ever cut in half, the ROI for the remaining masternodes would double, and the higher ROI would attract more people to set up masternodes for that higher ROI. The same dynamic is true for staking--if for example we had 1,000 Phore Masternodes, the staking ROI would be much larger than the masternode ROI, and some people would likely stop their masternode and stake their PHR instead. Masternodes also have the benefit of voting rights over the Phore community governance process, and also allows you to keep your Phore in a cold wallet. Each person would have to decide how much value to place on those things. This mix of rewards and benefits gives the Phore network resilience by providing natural incentives for people to run both staking wallets and masternodes.
