This proposal appears to be flawed, unless I am missing something. I have only read the first 4 pages thus far.
1. You propose to decrease the coin rewards as coin-days-destroyed volume increases, so this makes it less costly for an attacker to obtain > 50% of the hash rate assuming the attacker includes all the transactions. You apparently are attempting to imply there is no useful attack to do if the attacker is including the most coin-days-destroyed? Please confirm or deny then I will dig into more analysis of this vector.
2. Also how do you choose between someone who generates a proof-of-work hash with lower coin-days-destroyed several times sooner than the network propagation delay versus another who generates it that much delayed with a higher coin-days-destroyed? If you choose the latter, then you've killed the proof-of-work incentive because it means it will always pay to be later and wait for more transactions to arrive.
#2 seems like an important concern. And I'm still a bit confused as to how difficulty/block rewards are calculated, an example would be helpful with that.
The most significant flaw of any proof-of-stake system and any system that diminishes coin rewards, is it can't distribute currency from the hoarders to the users of the currency, thus it will end up with the hoarders (the banksters) accumulating all the coin and the currency usage dying.
This is because the wealthy spend a much lower % of their net worth than the masses do.
This I disagree with. Do you think bitcoin is flawed in this regard as well? It also has diminishing rewards. Even if it didn't, the coin rewards go to people who can afford mining hardware. Even freicoin's demurrage goes straight back to the miners. Poor people that spend most of their income on consumption aren't going to be saving up for ASICs, so their is not necessarily distribution of currency from the hoarders to the users as you describe. Precious metals have this characteristic as well.
I don't think a large amount of hoarding necessarily leads to the currency usage dying, just as gold and bitcoin haven't died. Where a currency has advantages over other mediums of exchange, its use has value..