So you might have a dynamic indicator that tells how to modulate the daily expansion, but you still haven't solved the basic problem, how should that long term monetary expansion look like: asymptotically decreasing, constant, exponential etc.
There's no fixed long term expansion curve, that's the whole premise. It's supposed to adapt to the economy on the go.
I haven't made myself sufficiently clear. Eventually all coins are spent (or almost all), so a temporary drop in the CDD value corresponds to an increase later on, in a constant sum game
. Let CDD=(# of coins sent)*(# of confirmations on sent coins at the time that they are sent) in a week. Let's say we have a simple inversely proportional algorithm for the block bonus in a given week:
CDD = 1000 -> Block bonus = 50
CDD = 1100 -> Block bonus = 45
CDD = 900 -> Block bonus = 55
So a high velocity corresponds to a reduced block bonus to stem inflation, and vice-versa. Well then, in this situation although the block bonus depends on the CDD value in a given week, the total long term monetary expansion is roughly the same as if the block reward is constant 50
because of the tendency of the CDD value to even itself out on the long run. So while it might achieve some degree of price stability, the long time value is still governed by the average reward of 50/block.
On the other hand, an exponential system like this:
CDD = 1000 -> block bonus = 0.0001% of the outstanding monetary base
CDD = 1100 -> block bonus = 0.00009% of the outstanding monetary base
etc. will lead to an entirely different long term shape of the monetary base (exponential) although both systems modulate their block reward based on CDD.
You are telling me you have gas pedal with which to control the car's speed; I'm asking you where you want to go.
I've found an error in our initial assumption, the idea that holders of wealth could create hyperinflation by manipulating speed. In fact when the velocity is high that's a sign of inflation, so the system should react by cutting the block reward. This create a dangerous pro-cyclical situation: the holders of wealth have a vested interest to minimize the block reward, thus they will simulate a high velocity even during deflation.