There are many problems with your hypothesis.
1) For short or mid term investment, just about every coin is inflating at a rapid pace currently. It's the equivalent of living in Zimbabwe, and that's the nature of non-linear block reward. Doge will actually be inflating less than many other coins for short term interval, and negligible difference for mid term. The dogeflation will be 3% inflation in 2029.
True, but people aren't hoarding bitcoin for it's short or mid term investment- they are hoarding it for it's long term value, a value that is more or less pinned on the idea it's a limited supply. Gold wouldn't be so valuable if it were infinite in supply. Neither are the equivalent of living in Zimbabwe- in Zimbabwe you have no idea how many units of your currency will exist next year, let alone tomorrow. So it's a totally different thing.
2) Coins lost per year in crypto is a pretty high number. I think even NXT, which has a user base of what? 50 people? that bought an IPO managed to lose 5% already, when the thing hasn't even been out a few months. If you gave a conservative number of 1% lost per year, then dogeflation is only at 2% in 2029, and 1% in 2045. Things like car accidents, deaths, or natural disasters will also cause many coins to disappear from the economy. This is a variable most people just don't comprehend, and it might even be larger than most people think. Think about it, when a person dies and has a wallet laying on the bed, someone will eventually pick it up. If someone dies with an encrypted wallet, that thing is going nowhere. It's hard to believe, but it's possible the dogeflation might not even cover lost coins.
There is a lot of talk about lost coins, but there's no way to prove a coin is lost unless someone verifiably destroys it. Just because it hasn't moved since the beginning of Bitcoin doesn't mean it's for sure lost. Even gold in sunken civil war ships gets brought back into circulation now and then. I don't think lost coins are really relevant.
3) Broken PoW system - If your market cap isn't high enough, you can't keep a block chain up with transaction fees only. Doge has now placed itself in a position where it's going to exist forever even if it slips to #20 market cap, while other coins that some might consider "better", are going to fail without enough mining incentive. I was pushing for an infinite, non-zero block reward (1%) on Vertcoin for this reason, which would probably be completely canceled out by coins lost anyway, resulting in the coin having more security through higher mining incentive, while still remaining hyper deflationary.
Interesting, but the blockchain, even if only supported by transaction fee's will always be supported to the level equal to the coins utility. The market cap doesn't really matter- bitcoins are mined at an enormous loss to miners, yet the fear of being 'too late' and 'running out of bitcoins' keeps the pace of mining rocketing forward. Bitcoin's market cap is far below the investment in mining and supporting the blockchain, yet it still works, and it works primarily because of the speculative value of it. Transaction fees will always cost a 'fair market value', so there will always be some incentive to do it.
4) In general terms, a hyper deflationary currency does not create a lot of economic activity because you can just horde money to make money, rather than invest it into a business or other venture. The Doge liquidity will now be through the roof since it has a small demurrage fee. Increased liquidity may lead to increased adoption, which then completely negates the demurrage, increasing it's value over competitors. It's the equivalent of AOL sending out millions of dollars in AOL CDs to everyone on the planet. Yes, it cost them money to do so (same thing as demurrage), but they probably made money from the investment. Doge is now the AOL of crypto.
So, a flash in the pan of internet history? If they made so much money from the investment- where are they now?
I really could go on for days here. As for 0% vs 1% inflation, the %1 choice has literally no downfall whatsoever, since like I said, the currency would still remain deflationary due to lost coins, and it would only increase block chain security through mining incentive, but the seemingly much larger Doge number may cause it to outperform my safe, 1% choice through some of the not so obvious means I listed.
I still don't buy the lost coins argument, if only because coins are currently lost because our bitcoin developed tools are not sufficiently advanced at the moment to protect users from their own errors. No reason to assume that in the future bitcoin software wont be so smart as to prevent lost coins and keep that lost-coin rate at a very low minimum.
Anyway though, you didn't really respond to the key part of my argument- if the coin supply is infinite: there is no need to actually purchase coins. For any number of coins you might want to posses- you need only need to mine long enough, regardless of your mining power, and eventually you will mine that number of coins. Imagine for example the bitcoin block reward was fixed at 50BTC forever: I wouldn't have to worry about my ASIC ROI, right? Because eventually if I wait long enough, it will always ROI. The only way it could NOT ROI would be if the value of BTC steadily decreased, so that despite the number of BTC I mined I never make enough to cover the initial cost of my ASIC.
With doge then, maintaining the value of your coin will require maintaining your relative percentage of all existing coins. It's not enough to have a billion coins out of ten billion today if in 100 years my 1 billion coins will be only 1 billion out of 100 billion. Over a long enough time frame, whatever percentage of dogecoins you own today, they will eventually be worth nothing. With bitcoins, large and powerful miners can come in an claim a vast portion of the mining power, thus mining the bulk of the coins. However if they were to start today with a massive mining operation, we already know they can never mine more then 50% of the coins, as more then 50% have already been mined. With dodgecoin however, a large entity, powerful enough, could eventually have mined 99% of all dogecoins. Gaining total monopolisation over dogecoin is only a question of time and patience, if you have the resources, you could technically mine, at some point in the future, 99% of all the dogecoins in existence. However with bitcoin, this is already impossible to do.
In the long run, it's infinite inflation. I don't see what sort of argument can counter infinite inflation making each individual unit of money worthless.
