This is an excellent piece of research! I can imagine this kind of analysis becoming table stakes over time for large basket changes. Really cool to see.
I think 61% is too much for any single token. It makes it hard to present ETH+ as a diversification option. This is made worse by the small overcollateralization layer.
Maybe 49/50% is the upper limit that any single token should have, generally? I don’t know, I’m just spitballing. I admit I’m using aesthetics here to inform this number, but I think other people will too so it’s not entirely ungrounded.
Here’s the slippery slope I worry about:
- Premise 1: The LST market has winner-take-all / power-law dynamics
- Premise 2: Liquidity (for the most part) follows market share
- Therefore: if the ETH+ basket optimizes for liquidity it will also have a power-law distribution
My guess is that the “liquidity optimized” basket is the right starting place but it should be discounted by some amount. Maybe that’s already how the 61% number was produced?