I just realized an interesting conclusion based on the proof-of-work reward mechanism implemented in PPCoin.
here is the relevant part from the source
static const int64 MAX_MINT_PROOF_OF_WORK = 9999 * COIN;
CBigNum bnSubsidyLimit = MAX_MINT_PROOF_OF_WORK;
// ppcoin: subsidy is cut in half every 16x multiply of difficulty
// A reasonably continuous curve is used to avoid shock to market
// (nSubsidyLimit / nSubsidy) ** 4 == bnProofOfWorkLimit / bnTarget
CBigNum bnLowerBound = CENT;
CBigNum bnUpperBound = bnSubsidyLimit;
while (bnLowerBound + CENT <= bnUpperBound)
{
// changes bnLowerBound and bnUpperBound to converge against bnMidValue
// exists when bnUpperBound is within 1 CENT of bnLowerBound
}
int64 nSubsidy = bnUpperBound.getuint64();
nSubsidy = (nSubsidy / CENT) * CENT;
which translates into this behavior: (difficulty, POWreward)
10 5,622
100 3,161
1K 1,778
10K 999.9
100K 562
1M 316
10M 177
100M 99.99
1G 56
10G 31
100G 17
Which means that inflation is high when the difficulty is low. Thus, people with huge STAKES have an incentive to keep the POW difficulty high! Why? Because a high inflation rate devalues stake (more stake available -> proof of stake difficulty rises).
However, every 10-fold decrease in subsidy is accompanied with a 10000-fold increase in difficulty. Thus people who accumulate stake early on, CAN NOT easily decrease the POW reward.
With current difficulty at 10K, the expected supply is 51M/year. If difficulty goes up 100-fold the supply drops to 16M/year.
However, on the other side, keeping the reward below a certain level (and thus prevent high inflation rates) is also cheaper. If you own 0.01% of the mining power (1/10000) you can limit the MAXIMUM supply of new coins to 510M/year!
conclusion:
=======
The difficulty dependent POW reward scheme introduces some very interesting incentives, especially for stake holders. Its steep relationship suggests that limiting the money supply is CHEAP, but throttling the money supply is EXPENSIVE, causing the expected inflation rate to stay within a healthy region. I don't know whether this was the original intent when the reward mechanism was designed, but it's certainly a feature.