I was talking to a friend of mine who is an economics major, and we had some conflicting ideas about this.
Let's say there is a crypto that has a fixed size of 20 million coins, and that it linearly increases in network hash rate.
This would mean that the difficulty increases at a similar rate. With that being said, to stabilize the coin's emission, would it make more sense to:
* Lower the reward when the hash rate is low
* Decreases rate of emission, stabilizing price of coin (as there is less being generated, pushing back date until all coins are mined)
* Short term stabilization, because as soon as the hash rate increases, the reward will go up (causing rate of emission to increase, devaluing currency)
OR
* Raise the reward when the hash rate is low
* Thereby incentivizing new miners to come and mine and stabilize hash rate
* More miners = more difficulty = more value of coin
* Does not stabilize price, because if reward decreases with higher hash rates, miners will have less of an incentive
* Long run: can possibly hurt price because, like most coins, is not profitable unless difficulty is low
I obviously argued for the first, because if a coin with that structure is added to a multi pool, or profit-switching pool, it will maintain being profitable (via jacking up rewards in relation to difficulty).
What are your thoughts?