I have earlier talked about how digital money can increase velocity of money and as a result lead to hyper-inflation. The gist of the argument is that as transaction speeds increase, there is no incentive for anyone to hold money as people will immediately move the money to more productive investments (like debt or equities). Central banks avoid this for fiat money through different measures: mandating banks to hold some amount as reserves, incentivizing people to hold money through interest rates.

The velocity problem is beautifully avoided in crypto-currencies through the concept of Proof of Work. Although, proof-of-work (PoW) is introduced in Blockchains for arriving at a consensus, it has an unintentional consequence: PoW ensures that transaction speeds are bounded and velocity of money does not sky-rocket. This ensures the value of the currency that is tied to blockchain is maintained. Ofcourse, the problem is that there could be off-chain transactions that increase the velocity. For example someone can create a centralized bitcoin wallet to increase transaction velocity. This can put pressure on the currency, although a single wallet cannot increase the velocity of the whole ecosystem. Another way the velocity problem is avoided is through staking incentives either through PoS (like Ethereum PoS) mechanisms or Vaults (like Maker DAI).

The amazing coincidence is the mechanisms that allow for security of consensus are actually the mechanisms that allow for stability of the currency. May be this is not a coincidence. May be some one can prove Security = Value, mathematically.