Is it possible to create a crypto based on the equation of the quantity theory of money MV = PQ?
the quantity is a red herring. Historically, people incorrectly believed that commodity money was valuable because it was scarce hence the accounting identity MV = PQ, or money supply x velocity of money = prices of all goods x quantity of all goods. The problem is the velocity measure is so hard to accurately measure that it essentially becomes a plug value to balance the equation - meaning that M may not influence much.
And in fact, M doesn't really matter - to a degree. At any given point in time there is enough money circulating to satisfy all consumption and investment. If the demand for money increases, interest rates rise to adjust the 'price' of money.
**What matters instead, is the RATE OF MONEY CREATION. The more quickly money is created, the less valuable is. It is a function of time. In crypto terms it's a function of block reward and difficulty.
There can be a coin with 21M, or 100M or infinity ultimate coins, but the rate of unit creation will regulate its day to day price. It is cash flows that matter not the stock of money.
So if you want a coin with stable value, create it to regulate the rate of unit formation. Crypto does already to some degree by adjusting the difficulty given more or less hashing power directed at mining it. But that is kind of a blunt tool. A coin that can nimbly adjust block creation to accomodate demand for those coins - i.e. increase them quickly when they are really wanted and used (lots of transactions) and have them trickle out slowly when there is low demand and low transactions. This, rather than a set 10 or 1 minute interval between blocks.
Central banks kind of do this - they regulate the rate of money creation via interest rates and open market operations.
