If one currency has been widely adopted, then the money supply must follow the increase in total amount of traded goods/services in the whole economy, so a constant increase in money supply is required to maintain price stability
But what if this currency has not been widely adopted (like bitcoin) or maybe never will be? Then I think defaltion nature tends to keep it's economy scale limited, not the other way around (economy scale getting bigger and the currency get more valuable)
As far as my understanding goes, that's accurate. If the economy and currency are growing at the same pace, prices remain stable and everyone goes about with business as usual.
With a deflationary money, it's like Gresham's law again. Assume the economy as the bad money and the deflationary money as good. The good is held more because it appreciates in value relative to the economy. Eventually, there's no money to circulate, so the economy grinds to a halt. Altcoin provides a
translation layer between the deflationary currency and the broader economy.
So long as the different facets remain freely tradeable, the economy functions smoothly. Without a central human authority mucking around with the money supply, the two forms of money won't be able to get so out of whack as precious metals and fiat currencies are today.