2) An essential property of hashing algorithm is uniform distribution. Future block hashes depend on past block hashes. In PoW this implies compute difficulty scales dynamically. If a block provider gets to choose their hashing algorithm arbitrarily, they could pick a non-uniform hashing algorithm that is easy for themselves and hard for others. In PoS this often affects who gets picked as the next block provider; having control over the hashing function in either case means you can pick yourself again.
If your claim is to let market forces pick the most trusted hashing algorithms, why not just settle on a fixed-but-extensible list of hashing algorithms that are known to work well today?
Making governance a part of the protocol is all the hype.
But there has to exist a protocol with boundaries.
Otherwise, your blockchain is just the internet.
You can download my block now.
It works really well, FPGAs and ASICs seem to have been stopped in their tracks.
Getting back to your question, I have no idea if the scaling functions will stabilize on a singular chain or not. However, I think it would be a Pareto improvement over the status quo. Indeed, you could embed BTC and ETH into DCC (with the proviso that all users must use the core-developer-chosen hash functions and scaling functions), and both chains could live side-by-side.
